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Tax moves you may want to consider before the end of 2017

Published: Wednesday, December 27, 2017 @ 11:50 AM

You probably already know that big changes in the tax code are going to take effect starting January 1, 2018.

What you may not know is that there are still a number of things you can do over the few couple of days to potentially leverage those changes to your own benefit. And there are other actions you can take over the coming year to take even greater advantage of the new tax payer rules.

Tax moves to consider making before 2017 is over — and some you might want to make in 2018

Alongside other changes, starting tax year 2018, the standard deduction for individuals almost doubles to $12,000 which is up from $6350 in 2017. Married couples will see their standard deduction rise from $12,700 in 2017 to $24,000 in 2018.

This means that even if you itemize in 2017, you may not be able to do so in 2018 unless your deductions exceed these higher thresholds. This isn’t necessarily bad because you’ll be able to take advantage of a larger standard deduction but it still makes sense to look at this further.

RELATED: This new Trump tax calculator shows how much you’ll pay going forward

Let’s take an example to really understand what’s going on:

Let’s say you file as an individual and your current itemized deductions are $7000. Further, let’s assume that you project your itemized deductions will remain at about the same level for the foreseeable future.

That being the case, it makes sense to crowd as many deductions as you can into 2017.

That’s because in 2018 (in this example) and thereafter, your standard deduction ($12,000) will be higher than your actual expenses ($7,000) so you probably won’t itemize after 2017.

You get a greater standard deduction but you won’t be able to take advantage of the expenses you would otherwise itemize unless you find a way to pull them into 2017. Here are a some ways to do that:

State and local taxes, sales tax and property tax

Starting in 2018, the most you’ll be able to deduct for state and local income tax, sales tax and property tax is $10,000.

 The new tax law doesn’t allow you to prepay 2018 state and local income taxes and deduct those expenses on your 2017 return. But you may be able to prepay your 2018 property tax early if your local tax collector allows it.

 And if the $10,000 cap impacts you, this is something to look into. Check with your local tax property tax collection office to find out how to get this done over the next few days.

Also, if you make quarterly estimated payments, you can make your fourth-quarter payment by December 31st rather than January 16th 2018 and deduct those payments in 2017. Talk to your CPA about this if they haven’t already reached out.

Bunch your charitable contributions

The only way you’ll be able to claim a deduction for charitable contributions is if you itemize your deductions. And since the threshold will be higher starting in 2018, it may be more difficult to do.

One smart tactic might be to make greater contributions to charities before December 31, 2017.

Going forward, you might want to bunch up your contributions in years where your total itemized deductions are greater than the standard deduction or simply make a greater charitable contribution every couple of years so you have a shot of meeting the threshold and writing them off.

Call your tax preparer this week

The new tax law does away with a number of deductions and credits but you might be able to still claim them in 2017 depending on your situation.

Ask your tax professional about prepaying unreimbursed job-related expenses and even tax preparation expenses. This is especially critical if you are an employee because deductions for job related spending and tax prep go away after December 31, 2017.

RELATED: Saving for education? The new tax bill changes a few things

Take advantage of lower tax brackets

One of the benefits of the new tax law is that rates are reduced for many tax payers.

If it looks like you are going to be in that situation, pull out all the stops to push as much income as you can into 2018.

This goes for bonuses, commissions and any other income you have the ability to recognize after December 31, 2017. One word of caution: Before doing this, examine your unique situation carefully. Study the old and new tax brackets.

If you’re going to have a banner year in 2018 and expect to land in a higher bracket, you might be better off by reversing this and shifting some of that income to 2017, if possible. Even though the rates are higher now than they will be next year, if you are going to earn significantly more money next year, it might work out better for you to declare some of that income in 2017.

Mortgage interest

If you are currently deducting interest expense on an existing mortgage you have, you’ll be able to continue deducting that cost because you’ll be grandfathered in. But if you take a loan after December 15, 2017 you’ll only be able to deduct the interest on the first $750,000 you borrow. The cap of $750,000 applies to loans on your first and second home – combined.

This means you might reconsider moving if that involves taking out a big mortgage.

Another possible fix would be to use assets to pay down your mortgage to the levels that you can use to write off interest for new loans. With the stock market at all time highs, that might be a good way to reduce your after-tax cost of a big mortgage and reduce your exposure to the market.

IRA conversion recharacterization

After December 31st, you won’t be able to recharacterize IRA conversions. That’s too bad but this probably isn’t something you’d consider doing this year anyway. Here’s why:

Normally, people are interested in having a “do-over” when it comes to their IRA conversion when the stock market takes a big hit after they convert. The logic is, if the value was higher when they converted compared to the current value, they would be paying taxes on money they really no longer have.

Having said that, 2017 was pretty good for stock market investors. The odds of you converting some time during the year and now towards the end of the year, the value being much lower are remote. So, it’s good to understand that recharacterizations aren’t going to be available going forward but it probably isn’t a big deal for you right now.

Pack your bags

I mentioned earlier that you will only be able to write off state, local and property taxes up to $10,000 per year. Again, you have to consider your own situation carefully, but this might make it worth your while to move to a state with lower income and/or property taxes.

Even if you don’t take this step, please know that some of your neighbors will. That could end up hurting property values in high tax states long-term. You might want to get ahead of that wave and get out while the getting is good.

Open up your side business

Hands down, there are a lot more goodies for business in this tax bill than there are for individual tax payers. This might be the perfect time to fire up a small business or side gig. Before doing so however, please make sure to seek out professional tax advice. The tax opportunities are potentially great but the tax changes are complex. Professional guidance can be worth its weight in gold.

The tax code is going to change dramatically in 2018. It’s important to understand what’s happening, make the new rules for you next year and take advantage of the old rules while you still can. The smartest thing to do is contact your tax professional, create a tax plan and execute it accordingly.

Understand that the rules could easily change again. The IRS code is not written in stone. That’s why it’s always important to stay well informed of the changes as they occur.

Neal Frankle is a Certified Financial Planner and Editor of WealthPilgrim.com

5 fast facts that will help make filling out FAFSA a breeze

Published: Wednesday, December 13, 2017 @ 10:32 AM

The following points are what you need to know, as well as common mistakes to avoid when filling out the FAFSA Fill it out – you have nothing to lose The sooner you submit your FAFSA, the better Gather the information you'll need Watch out for common mistakes like leaving fields blank Keep an eye out for requests for more information

It's that time of year again when parents and college or college-bound students fill out the FAFSA (Free Application for Federal Student Aid).

The idea of wading through a form – especially one that requires financial information – is definitely not an appealing idea, but the FAFSA could be a tremendous help in getting your student money to attend college.

RELATED: 20 financial aid terms every college student and parent should understand

The following points are what you need to know, as well as common mistakes to avoid when filling out the FAFSA.

Fill it out – you have nothing to lose.

You may think that you don't need to fill out the FAFSA, especially if you believe you might not qualify for need-based aid. But there's no income cut-off point with federal student aid, according to the U.S. Department of Education. In addition, the FAFSA can help you qualify for all kinds of grants, loans and scholarships, including those offered by your state, school or private organizations.

By investing a few minutes of time, you could reap thousands of dollars in potential rewards.

Submit it ASAP.

The sooner you submit your FAFSA, the better, according to consumer adviser Clark Howard. Although the federal deadline isn't until June 30, 2018, you should check with the financial aid administrator at colleges you're interested in to make sure their deadlines aren't earlier.

Submitting earlier will help you plan how you'll pay for college. You'll also have a better chance of getting as much aid or scholarship money as possible since some colleges distribute their available money on a first-come, first-serve basis, Howard says.

Gather the information you'll need.

The FAFSA asks questions about the student as well as his or her parents if the student is a dependent.

You'll need the following information on hand as you fill out the FAFSA:

  • The student's Social Security number
  • The parents' Social Security numbers
  • Driver's license number (if you have one)
  • Alien registration number (if you're not a U.S. citizen)
  • Federal tax information for the student (and his or her spouse, if applicable) and the parents. This can often be imported online, so you may not need your records.
  • Information on the student's and parents' assets, such as money held in bank accounts and real estate holdings (not your primary residence)
  • Records of the student's or parents' untaxed income, such as veterans benefits and interest income

Watch out for common mistakes.

The National Association of Student Financial Aid Administrators points out some common mistakes that can delay your form's submission or cause you to not get the aid and scholarships you might qualify for. They include the following:

  • Leaving some fields blank – Instead, put in a "0" or "not applicable."
  • Listing an incorrect Social Security or driver's license number – It pays to recheck these numbers.
  • Failing to use your legal name – Use the name on your Social Security card, not a nickname.
  • Forgetting to list colleges – Even if you're not sure of which college you'll be attending, add any reasonable possibilities to the list of colleges that will receive your information. You're under no obligation to apply to or attend these colleges, and they can't see which other colleges you're interested in.

Keep an eye out for requests for more information.

Your FAFSA may be selected for verification, which means you'll have to provide some additional or supporting information, U.S. News & World Report explains. This process doesn't necessarily mean you've done anything wrong. You may have a discrepancy or mistake on your form, but some FAFSAs are just randomly selected for verification (lucky you!).

These requests will often come to the student's personal email account or university email address, so he or she will have to be diligent about checking it and responding to any requests by the stated deadline.

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Is credit monitoring a scam?

Published: Wednesday, November 22, 2017 @ 12:01 PM

Clark Howard explains how to protect yourself.

With the recent massive security breach of Equifax — one of the three credit bureaus with which many may have thought their private information was safer than most — now many people are dealing with more insecurities, wondering where they can entrust their private information, if anywhere.

Here are some options:

Credit freezing

Better and cheaper than credit monitoring, an option for optimal security is freezing your credit through each of the three credit bureaus (Experian, Equifax and TransUnion), according to WSB money expert Clark Howard at Clark.com.

The fee is $3 to $10 per person per bureau, depending on your state, to allow you to seal your credit reports — except now it's free with Equifax from here on out due to the recent data breach.

You will be provided with a personal identification number (PIN) that only you know and can be used to temporarily unfreeze (or "thaw") your credit when legitimate applications for credit and services need to be processed such as when you are buying a car.

This added layer of security means thieves can't establish new credit in your name even if they are able to obtain your personal information.

LifeLock vs. CreditKarma.com

While LifeLock advertises it can help consumers secure their information to guard against identity theft, LifeLock charges monthly services that start at $10 a month.

This kind of credit monitoring is not the same or as effective as a credit freeze, said Craig Johnson for Clark.com.

Instead, he recommends CreditKarma.com for free credit monitoring.

Equifax

If you haven't already frozen your credit, now would be the time since Equifax recently got hacked and the information of possibly 145.5 million people was attained by these hackers.

Information accessed primarily includes names, social security numbers, birth dates, addresses and, in some instances, driver's license numbers.

To try to compensate, Equifax is offering free identity theft protection and credit file monitoring (but only through Jan. 31, 2018) with its TrustedID Premier.

Experian

Another point of confusion is the unsolicited free Dark Web Email Scan offered by Experian to your email, leading to a monthly fee for further scanning.

Experian IdentityWorks also offers a free 30-day trial membership for identity theft protection and resolution, involving a monthly automatic deduction of $9.99 for the plus plan or $19.99 for the premium plan.

It's free to cancel within the 30-day trial period, but the consequences are not revealed up front for those who decide to cancel their membership once the monthly fees begin.

TransUnion

The third credit bureau, TransUnion, also offers credit monitoring at $19.95 monthly. However, TransUnion says it offers free identity protection through its TrueIdentity program.

Free helpline

Those with specific questions about the Equifax breach and how it may impact them may contact Howard's Consumer Action Center — a free helpline open 10 a.m. to 7 p.m. EST Monday through Friday with Team Clark volunteers available to answer concerns at 404-892-8227.

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4 of the best ways to turn your home into a cash cow

Published: Friday, November 17, 2017 @ 4:17 PM

Sites like Airbnb let you rent out your home to make money.
Sites like Airbnb let you rent out your home to make money.

Your house is a large expense with many associated costs like a mortgage payment, insurance, maintenance and more.

RELATED: How to Cash In on Short-Term Rentals Like Airbnb, VRBO

It provides a roof over your head, of course, but since it usually costs you money each month, why not put it to work for you and earn some cash in the process?

The following are four ways your house can make you money:

You can relax on the lake, in the woods or even in the back of a van when you're looking for a staycation in Gwinnett County.(Airbnb)

List your home with Airbnb or VRBO.

If you're planning to be out of town for a few days or don't mind bunking with a friend, you may be able to make some money by renting out your home through sites like Airbnb and VRBO.

Before jumping in, you'll need to take time to learn about the market, your expenses and any taxes you may need to pay. And before you list your property, you'll need to understand how to make it stand out with a good listing, including compelling photos and competitive pricing. Airbnb has a series of toolkits to help with this.

RELATED: Atlanta has Airbnb's most desired rental property in the world.

Rent it out to the area's growing TV and film industry.

When TV, film and commercial producers want to depict a home on screen, many times they'll rent the real thing, according to Money. It can be inconvenient for owners, however, since their homes may be taken over by a large crew and be completely rearranged.

On the other hand, homeowners often have fun with the experience while making some extra money. And while you're watching TV or a movie, you may be able to spot your home.

Host a foreign exchange student or faculty member.

Temporarily hosting a foreign exchange student or faculty member who's studying or teaching in this country can help you make some extra cash for anywhere from six weeks to six months at a time. You'll also be exposed to a different culture and language, and the experience could help you form a bond that lasts even when your guest returns home.

The Penny Hoarder suggests contacting student housing offices at local community colleges and universities, asking to be placed on their list of host families. After this, you'll have to apply, be interviewed, and allow your home to be toured. You'll also need to pass background and reference checks.

The 4-bedroom house sits on a corner lot with a concrete driveway that leads up to the two 2-car garages both having rear service doors. CONTRIBUTED PHOTOS BY KATHY TYLER

Rent out your driveway or storage space.

If you have extra space in your driveway, you may be able to make some money by letting others park there, according to Men's Health. This is especially true if you live near a commuter rail line or sports stadium, but you'll need to check to make sure you're not violating any local ordinances. Check out websites like JustPark to get started.

The Balance also suggests renting out any extra storage space you may have. From vehicles to personal items, your garage or home could help you make money through a site like StoreAtMyHouse.

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5 ways to get the most out of your health insurance plan

Published: Tuesday, November 14, 2017 @ 3:15 PM

Here are five ways to ensure you're getting the most out of your health insurance Choose your plan carefully Take advantage of preventative care benefits Work within your formulary Utilize HSAs and FSAs Watch out for surprise out-of-network charges

Health insurance has a large impact on your finances, so it pays to get the most out of your plan.

Understanding its ins and outs can be confusing, but it's worth your time to check on benefits you could be losing out on or mistakes that could cost you money.

Here are five ways to ensure you're getting the most out of your health insurance:

Choose your plan carefully.

When it's time to renew your health care coverage, consumer adviser Clark Howard recommends not just blindly signing up for your current plan, even if you've been happy with it.

Your plan – as well as other options you may be able to sign up for – may have changed. Take a close look at the co-pays, deductibles, in-network providers and other specifics to make sure you're making the best possible choice.

Take advantage of preventative care benefits.

Almost every plan, according to healthcare.gov, offers preventative care benefits that are free. You won't have to pay a co-pay or meet your deductible to get these services at no charge.

Services for adults include age-appropriate vaccinations and colorectal cancer screenings for patients over 50.

RELATED: 8 ways to get the cheapest car insurance possible

Work within your formulary.

Health care plans typically have a formulary, which is a list of medications that they're willing to pay part of or the entire cost of. It may include a list of preferred medications, for which it will pay the highest percentage of the cost.

It pays to be familiar with your formulary before you get an unpleasant surprise at the pharmacy, according to NerdWallet. Print out a copy of the document from your health insurance company's website, or call up an online copy at your doctor's office. Your doctor can work with you to make sure you get an effective medication that you can afford.

Utilize HSAs and FSAs.

If your health insurance plans allow you to put aside tax-free dollars in a Health Savings Account (HSA) or Flexible Spending Account (FSA), you should learn how they can help you. Consumer advisor Clark Howard's website, Clark.com, has a chart that explains the pros and cons of each.

An HSA is usually associated with high-deductible plans, and like an FSA, it helps you save money to pay for health care expenses. These can include everything from prescription eyeglasses to medication.

Watch out for surprise out-of-network charges.

Your insurance plan has a list of network providers, and when you can, you should stay in-network. That's easy enough if you're visiting a single doctor, but if you need to have surgery, things can get more complicated.

For pre-planned surgery, Consumer Reports recommends talking with your doctor's billing department to get a list of everyone who will provide your care, including radiologists and anesthesiologists. Call your health care company to see if they're in-network, and if not, ask your doctor if in-network providers can be used.

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