How I use my Bank of America Customized Cash Rewards card
The Customized Cash Rewards card offers great benefits and perks, including cash back on groceries, wholesale clubs and other categories.
The Customized Cash Rewards card offers great benefits and perks, including cash back on groceries, wholesale clubs and other categories.
I used a secured credit card to get my credit up from the lowest point itâd been. Hereâs how you can do the same.
If you haven’t considered your home equity as a resource, you might need to. Many of us have a lot of our net worth tied up in our homes. Indeed, the equity that is built up in a home can be a source of funding when needed. If you have equity in your home, you […]
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Credit score won’t budge over that 700 hump? These moves just might be the kickstart you need to finally get your credit score moving in the right direction.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.
If you’re thinking about getting paid in cryptocurrency, there are a few things that you’ll want to keep in mind.
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The post WTFinance: What to Know About Getting Paid in Cryptocurrency appeared first on MintLife Blog.
As we head toward March, one of most dreaded times of the year approaches: tax season. Right now is the time when youâre inundated with tax documents, including a W-2 from your employer, 1099s from your side gigs, 1099-MISC statements from your online brokers, 1099-Rs for retirement income and more.
There isnât much you can do now to reduce your 2021 tax obligations outside of contributing more to tax-deferred retirement accounts. Thatâs why the beginning of the year is the perfect time to adopt new strategies to minimize your tax obligations for 2022.
All too often, your focus is on the rearview mirror â what youâve already done and what youâll have to pay. Instead, when you shift your focus to a proactive stance, youâll reap the rewards throughout this year and into 2023, when youâll file your taxes for this year.
As an enrolled agent â a professional who has earned the privilege of representing taxpayers before the Internal Revenue Service (IRS) â and a financial adviser, there are three strategies that Iâll share with you that have the potential to reduce your taxes in coming years. Of course, every situation is different and you may have other factors that cause your taxes to increase even if you adopt these and other tax mitigation suggestions.
One of the most effective ways to reduce your tax liabilities is to increase your contributions to tax-deferred retirement vehicles, such as company-sponsored 401(k) or 403(b) accounts, government-sponsored Thrift Savings Plans (TSPs) or individual retirement accounts (IRAs). If youâre like many people, youâve got room to increase your contributions before you hit the maximum allowable contribution.
If youâre in a 401(k) or 403(b) account, that limit is $20,500 for 2022. If you have a SIMPLE account, the limit is $14,000, while the limit for a SEP IRA is $61,000. If you are turning 50 in 2022 or are already older than 50, you can sock away more due to catch-up contributions, which are $6,500 for 401(k)s and 403(b)s and $3,000 for SIMPLE IRAs. There are no catch-up contributions allowed for SEP IRAs, because contributions can only be made by employers not employees.
For traditional tax-deductible IRAs, which are accounts that you establish for yourself, contribution limits are $6,000 a year with $1,000 extra allowed for catch-up contributions for those turning 50 and older in 2022.
Approaching your tax-deductible retirement plan contributions for the entire year in a strategic manner allows you to maximize your contributions while minimizing the impact on your budget. Hereâs an example illustrated in Figure 1: Letâs say you want to increase your 401(k)contribution by 50%. If you can divide that over 26 pay periods, those additional contributions will be spread over a longer period of time, meaning that each contribution will be smaller than if you decided to take this action in the summer or in the fall, when youâd have fewer weeks remaining in the year.
Initial contribution | Additional contribution | Total new contribution | 26 Pay Periods | 13 Pay Periods | 7 Pay Periods |
---|---|---|---|---|---|
$5,000 | $2,500 | $7,500 | $96.15 | $192.31 | $357.14 |
$7,500 | $3,750 | $11,250 | $144.23 | $288.46 | $535.71 |
$10,000 | $5,000 | $15,000 | $192.30 | $384.62 | $714.29 |
$12,500 | $6,250 | $18,750 | $240.38 | $480.77 | $892.86 |
You can see how starting early in the year offers a considerable advantage. In this case, increasing your contribution by $2,500 a year would only take additional payroll deductions of $96.15, assuming youâre paid every other week. Even if you wanted to increase your contributions by $5,000, youâd be left with a manageable deduction of $192.30 a week. However, the longer you wait, the higher the hill that youâll have to climb in terms of the amount you have to contribute per pay period.
The more you contribute, the larger your tax savings, since 401(k), traditional IRAs, SEPs and SIMPLE IRA contributions are made with pre-tax dollars. Think of this strategy as a win-win, because not only do you save money on your taxes today, youâre also building a nest egg for tomorrow, when itâs time for you to retire. Of course, you will have to pay taxes on your contributions when you take money out in retirement.
Qualified dividends are taxed at more favorable capital gains tax rates, in contrast to ordinary or nonqualified dividends, which are taxed at ordinary income tax rates. Capital gains tax rates are 0%, 10%, 15% or 20%, in contrast to ordinary income rates, which can be as high as 37%.
Generally, if you hold dividend-paying stocks in taxable accounts â not retirement accounts â youâll pay taxes at the qualified dividend rate, as long as you hold shares in the company that issues those dividends for more than 60 days during the 121-day period that starts before the day that a companyâs dividend is recorded, which is also known as the ex-dividend date.
While this definition may seem complicated, there is method to the IRSâ madness â the intention of Congress was to reward long-term shareholders with a lower qualified dividend rate. This is why you must hold stock for a period of time to receive the preferential dividend rate.
The definition of an ordinary dividend, in contrast to a qualified dividend, is a dividend from certain types of stocks, such as real estate investment trusts (REITs) and master limited partnerships (MLPs). In practice, those stocks may have dividends that are taxed at lower effective rates, but there are many different factors that play into this distinction that are beyond the scope of this article.
In addition, money market funds and dividends paid by employee stock option plans are also ordinary dividends. Fortunately, you donât have to do the math or know which is which as those will be automatically categorized on your tax statement by type.
To get around these issues and minimize your tax liabilities, it can make sense to hold qualified dividends in taxable accounts and stocks and other instruments with ordinary dividends in tax-deferred accounts, like qualified retirement plans, or in non-taxable accounts, like Roth IRAs.
Frequently overshadowed by other types of annuities, investment-only variable annuities offer an option to save money on a tax-deferred basis beyond other tax-deferred vehicles, such as 401(k)s or traditional IRAs. Unlike many other types of variable annuities, which have gotten a bad rap because of their high fees and complexity, investment-only variable annuities are fairly straightforward, provide a wide variety of investment options and carry reasonable fees.
An advantage of investment-only variable annuities, especially compared to 401(k) funds, is the wide variety of investment options available. These can be used to diversify retirement assets, as many 401(k) plans offer limited options in a few asset classes. You can use an investment-only variable annuity to invest in alternative investments or in asset classes that might not be offered within your company-sponsored retirement plan.
Investment-only annuities arenât suitable for everyone. If you havenât maxed out your company-sponsored retirement accounts, thereâs not much sense in investing in this type of vehicle. However, if you have maxed out your company-sponsored retirement accounts and are looking for another place to stash savings that you can use to get a tax deduction, it might be worthwhile considering an investment-only annuity.
Like other types of annuities, investment-only annuities donât offer liquidity. In other words, if youâre likely to need the money youâve saved before you turn 59½, you shouldnât invest in this type of annuity, because youâll have to pay a penalty of 10% if you take the money out early.
In addition, contract language for annuities is quite complex and some of the provisions can be difficult to understand. Fees vary widely, so be sure to investigate all your options before committing to one of these products.
If you find yourself dining out frequently, it pays to find ways to save money eating out. Here are 25 savvy tips to make your restaurant budget stretch.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.
American Express is offering a sign up bonus of 90,000 points after $4,000 on the Gold card