10 Bizarre Claims People Make to Avoid Paying Taxes

how to avoid paying taxes

Resistance to taxes is baked into Americans’ DNA. After all, it was cries of “taxation without representation” that spurred the American Revolution. Tax protests have continued on and off ever since, from the Whiskey Rebellion to Vietnam War-era tax resisters to the “sovereign citizen” movement.

People object to paying taxes for all kinds of reasons, from opposition to certain policies to not recognizing the government’s authority to collect taxes in the first place, but the IRS isn’t having it. No matter what you read on the internet or your weird Uncle Bob says, you can’t get out of paying taxes without suffering consequences.

“The IRS and the courts hear many outlandish arguments from people trying to avoid their legal filing and tax obligations,” IRS Commissioner John Koskinen said in a statement. “Taxpayers should avoid unscrupulous promoters of false tax-avoidance arguments because taxpayers end up paying what they owe plus potential penalties and interest mandated by law.”

Now, that doesn’t mean there aren’t things you can do to legally avoid taxes. Taking all your deductions or moving money into tax-sheltered accounts like a 401K are perfectly acceptable ways to lower your tax bill. It’s when you get into weirder tax avoidance strategies that you run into problems. (Note: Not paying your taxes can have serious implications for your credit. Check out our quick guide for keeping your taxes from messing with your credit. While you’re at it, you can also get your two free credit scores, updated every 14 days.)

Trying to claim that filing a tax return is optional, that you aren’t really a citizen of the U.S., or that only certain types of income are taxable will backfire. When you submit a frivolous return or slam the IRS with other off-the-wall requests the result may be a fine of $5,000 to $25,000. Plus, you could also be prosecuted for tax evasion, a felony punishable by prison time and penalties of up to $250,000.

The IRS spends a lot of time and energy debunking various convoluted anti-tax arguments, and it’s collected dozens of them in a document titled “The Truth About Frivolous Tax Arguments.”

Below, we’ve highlighted 10 of the more bizarre reasons why people say they shouldn’t have to pay taxes.

1. Filing a Return & Paying Taxes Is Voluntary

The first and perhaps most direct argument against the U.S. tax system is the idea that filing a return and paying taxes is voluntary. Primary points include court cases like Flora v. United States, in which the term “voluntary” is used to describe how the tax system is based on “voluntary assessment and payment, not upon distraint.”

But when the IRS says filing a return or paying taxes is “voluntary” what it really means is that a taxpayer has the right to determine his or her tax liability by completing the appropriate forms, as opposed to having the government complete the forms and determine the bill. It doesn’t mean you have the option to opt out of the system entirely.

2. The Money They Earned Isn’t Really Income

According to this anti-tax argument, the money you receive for working isn’t technically income. Rather, you’re engaged in an equal exchange of your labor for fair market wages, and thus there’s no “gain” to be taxed. In this view, the government only has the right to tax gains or profit, not wages.

In reality, the IRS is allowed to tax virtually all your income, whether it’s dividend income from stocks or wages you receive from your employer. Exceptions include gifts and inheritances (though large estates may have to pay an estate tax), child support, life insurance benefits, and welfare payments.

3. Taxes Are Against Their Religion

You may not believe in paying taxes, but the IRS isn’t buying it. Though churches and other religious institutions are exempt from taxes, the same does not apply to individual taxpayers.

Allowing people to opt out of taxes on religious grounds would cripple the tax system. In the United States v. Lee, the U.S. Supreme Court ruled that “[t]he tax system could not function if denominations were allowed to challenge the tax system because tax payments were spent in a manner that violates their religious belief.”

4. Paying Taxes Violates the Fifth Amendment

Some argue that including financial information on a return may bring unlawful or illegal activity to light, thereby forcing a taxpayer to forego their Fifth Amendment protections.

The IRS calls this a “blanket assertion” of constitutional privilege. The agency asserts that there are no constitutional grounds for the refusal to file a tax return based on the Fifth Amendment. In cases like the United States v. Sullivan and the United States v. Neff, the courts back the IRS’s position.

5. Paying Taxes Is a Form of Slavery

The U.S. has prohibited involuntary servitude (except as punishment for a crime) since 1865, when the 13th Amendment was ratified. Since then, some anti-tax protestors have tried to equate paying taxes to slavery, arguing that having to send some of their money to the IRS is a constitutional violation. Even prominent politicians have evoked this absurd anti-tax argument. “If we tax you at 50% you are half slave, half free,” Rand Paul said in 2015. But the IRS and the courts have declared the “taxes equals slavery” claim bogus.

On the flip side, arguments that African-Americans and Native Americans can claim a tax credit as reparations for slavery and other forms of oppression are invalid. While there have been serious arguments that the U.S. should pay reparations to the descendants of former slaves, the government has not taken any such action.

6. The 16th Amendment Doesn’t Count

The 16th Amendment to the Constitution is short and to the point: “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.”

Yet some tax protestors argue the 16th Amendment is invalid because it was not properly ratified or that Ohio was not properly a state at the time it voted for the amendment. (Ohio has been a state since 1803; the amendment was ratified in 1913.) “Proponents mistakenly believe that courts have refused to address this issue,” the IRS noted. “There were enough states ratifying the Sixteenth Amendment even without Ohio to complete the number needed for ratification. Furthermore, after the Sixteenth Amendment was ratified, the Supreme Court upheld the constitutionality of the income tax laws.”

7. Their State Isn’t Part of the United States

Among the goofier anti-tax arguments is the assertion that only people who live in the District of Columbia, in federal territories, or on Indian reservations or military bases have to pay federal income tax. Everyone else is supposedly a citizen of a “sovereign” state, not the U.S., which means they’re exempt from federal income tax. Not so, says the IRS.

“The Internal Revenue Code imposes a federal income tax upon all United States citizens and residents, not just those who reside in the District of Columbia, federal territories, and federal enclaves,” the IRS explained.

8. The IRS Is Secretly a Private Corporation

Some conspiracy theorists are convinced the IRS isn’t actually part of the federal government at all. Supposedly, it’s a private corporation masquerading as a government agency, and it actually has no authority to enforce the tax code. In the 2002 case Edwards v. Commissioner, the court dismissed the claim as “tax protestor gibberish.”

9. They’ve Rejected Their Citizenship

You can’t reject your U.S. citizenship or claim to be a “free born citizen” of a particular state in order to get out of paying taxes. “Claims that individuals are not citizens of the United States but are solely citizens of a sovereign state and not subject to federal taxation have been uniformly rejected by the courts,” according to the IRS.

Even if you were to formally renounce your U.S. citizenship (which involves appearing in person at a U.S. embassy or consulate in another country), you still may not be able to escape your tax bill. “Persons who wish to renounce U.S. citizenship should be aware of the fact that renunciation of U.S. citizenship may have no effect on their U.S. tax or military service obligations,” the State Department explained.

10. They Aren’t Technically a Person

In various court cases, this argument has been declared “meritless” and “frivolous and requir[ing] no discussion.” Here’s a tip: If the government is willing to consider a corporation a person, they’re definitely going to consider a person a person.

Erika Rawes contributed to this article.

This article originally appeared on The Cheat Sheet.

Image: AndreyPopov

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Your $10,000 Bundle of Joy: How to Budget for Your New Baby

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Having a baby is a life-changing experience. Every aspect of your life will change, especially how you spend and save money. A recent BabyCenter survey found that parents should expect to spend almost $10,000 in their first year with baby.

With some forethought and careful budgeting, you and your family can moderate some of the costs associated with the first year of your baby’s life. While you can’t foresee every cost, being proactive will minimize surprises and increase peace of mind and enjoyment when your beautiful new addition arrives.

Giving Birth

Labor and delivery costs vary wildly. Location is a big factor. Where you are in the country and where you choose to give birth (home, hospital or birthing center) can alter your plans and budget.

According to the U.S. Agency for Healthcare Research and Quality (AHRQ), the average cost of a normal (no C-section or complications) birth in a hospital is around $3,200. Add in the costs of pre- and postnatal care and you’re looking at thousands more added to your hospital bill, and this is after insurance. If there are any kinds of complications, such as low birth weight or jaundice, you can realistically expect to pay more.

When you find out you’re pregnant, it’s a good idea to contact your insurance company to find out what kind of coverage you have, and if you have it, what your health savings account (HSA) or flexible spending account (FSA) will cover. If you’re insured through your work, you may want to talk to your human resources department. You will likely have several conversations in their office, especially if you plan to take parental leave.

Taking Time Off

Finding out what kind of family leave your company offers (or doesn’t offer) will affect your budget. It may be surprising, but only about one-third of all working women in the United States are offered any sort of maternity leave. If your company offers leave, find out if you get the full amount or only a percentage of your regular paycheck. This may affect how long you take. If your company doesn’t provide leave, they’re still required to honor 12 weeks, unpaid, under federal law. Fully understanding your own benefits will give you a clear idea of how to create a feasible budget for your growing family.

Budgeting for Baby

Once you have a clear idea of how much money will be coming in, you can begin creating a budget for the months leading up to, and after, giving birth. You may use a “first year” calculator to figure out what you’ll need to save. The numbers may surprise you, so expect to make some adjustments in your spending. Curious about how to start making cuts? Start by figuring out where your money is going now. To do this, you can track your expenses in Excel, or if you’re more comfortable on your phone or the computer, you can try using an app/program like You Need A Budget.

With big purchases on the horizon, it might also be a good time to check your credit score. You can see two of yours free on Credit.com.

Once you’ve figured out where your money is going, you can create a budget with savings in mind. More importantly, start that budget before the baby is born and stick to it. If you’re spending more than you’re earning (or saving), you can start cutting unnecessary expenses like cable or magazine subscriptions. You may also want to consider things like limiting your travel and avoiding eating out too often. Packing a lunch instead of ordering a sandwich can add up quickly. (Want more ideas for smart spending habits? Consider these 50 ways to stay out of debt.)

Buying for Baby

Buying furniture and supplies as you prepare your home for your little one is where a lot of families tend to blow their budgets. First-time parents are often unsure about what and how much they will need to care for their newborn.

Before you build a registry or go on a shopping spree, have an honest conversation with your partner, yourself and other parents about what’s truly necessary.

You may also want to bring a friend or relative who is already a parent on your registry trip – they will give you the lowdown on strategic purchases and can assist your internal debate between that fancy baby Jacuzzi or $10 plastic tub. That doesn’t mean you can’t splurge on something adorable you love. Just call a splurge a splurge, save for it and buy other things more affordably.

Don’t buy anything without seeing what your friends or family members are willing to lend or give you for free. Some babies grow so quickly they never get the chance to wear their newborn outfits or onesies. The same can be said of furniture like gliders or high chairs – parents may discover that their kids prefer their car seats or booster chairs. Buying gently used clothing, furniture and supplies can save you a lot of money over time. Also, consider registering or purchasing gender-neutral clothing and equipment. If you plan on having more children, you won’t feel pressured to buy new things.

Lastly, if you’re planning on using day care or home care, the sooner you can start interviewing centers or home care candidates, the better. Some have an admissions process, waiting lists or deposits so if you have a certain person or location in mind, schedule your visit well before your due date. With this sort of prudence and planning, you’ll feel more confident about bringing your baby home.

Image: KQconcepts

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7 Essential Apps for Small Business Owners

Here are seven apps that can help entrepreneurs focus on running their business and less on the tools they’re using to do it

Chances are, if you ask a business owner or other entrepreneur what apps they rely on to help them stay on top of things you’ll get a response like this: “Apps? I don’t know. I’m too busy running a business to worry about apps” or “Hahahahaha! I’m not on top of things!”

Those are real responses from some highly entrepreneurial business owners to whom I posed the question. And, when you stop and think about it, their responses make sense. After all, most entrepreneurs aren’t going to mention that cup of coffee, their email or their phone as essentials to their daily work because they’re just so much a part of their day-to-day. Like oxygen or sunlight, you only really think about them when they’re suddenly unavailable.

The same holds true for genuinely helpful apps. They become fully ingrained into the user’s daily work and even personal lives. We looked across the spectrum at apps that help users communicate, organize their days, be more productive, keep their data and communications secure, and even help them learn.

The following are seven apps we think can truly help entrepreneurs focus more attention on running their business and less on the tools they’re using to do it.

1. KanbanFlow by CodeKick AB

Platforms: Android and iOS

Price: Free Basic version, $5/user/month Premium version

If you need to manage projects, KanbanFlow can help you do it. This web-based app lets users see the entire workflow, from assigning tasks to uploading documents and scheduling due dates. The Premium version allows for file attachments, revision history and even the ability to analyze your work history.

2. ColorNote by Social & Mobile

Platforms: Android, iOS and Windows

Price: Free

This app essentially functions like digital Post-It notes. It allows you to create text notes, checklists, to-do lists, etc., and you can check off items as you complete them. The notes can also be color-coded to keep them organized, and you can even name the color groups. The notes can be added to your calendar and even be shared.

3. Evernote

Platforms: Android and iOS

Price: Free with in-app purchase options

It’s like a notebook for your inner creative, allowing you to capture ideas based on pictures, drawings or writing, create project to-do lists around those ideas and also share them across devices and with others.

4. Duolingo

Platforms: Android, iOS and Windows

Price: Free

If you’re an entrepreneur who wants to take your business global (or at least into another country), learning a new language while trying to do it might seem daunting. But Duolingo aims to help you learn a new language in your down time, like on your commute, while exercising, or even while relaxing.

5. CamScanner by INTSIG

Platforms: Android and iOS

Price: Free with in-app purchase options

This app turns your device into a scanner and also allows you to access, edit and manage documents anytime, even on the go.

6. CM Security by Cheetah Mobile

Platforms: Android

Price: Free with in-app purchase options

This security app offers all kinds of nifty features, like AppLock, which stops intruders who try to unlock protected apps on your device and notifies you with the intruder’s photo.

7. Polaris Office

Platforms: Android and iOS

Price: Free Basic version, $3.99/month Smart version, $5.99/month Pro version

This app lets you create, edit and sync Microsoft Office files from your phone or device, and you won’t lose any of the formatting you worked diligently to create.

Small Business Financing 101

Of course, apps aren’t the only things that can help an entrepreneur successfully build and run their business. Having good credit can help tremendously, as well, since many lenders, including business credit card issuers, are going to pull a version of your traditional credit reports to see if they’re willing to extend financing for your business. (You can see how your credit is doing by viewing two of your credit scores, updated every 14 days, for free on Credit.com.)   

If your credit is just fine, there are plenty of solid business credit cards (see our picks here) available that can help you finance some of your business expenses. The Small Business Administration also offers several loan programs designed to help budding and operational entrepreneurs and there’s also conventional financing at your disposal that you can look into. 

Just remember to manage whatever financing you use responsibly, since many business lenders require a personal guarantee and will report a default to the major consumer credit reporting agencies. You can find tips for making sure a business loan doesn’t wreck your credit here.

Image: Geber86

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4 Toy Trends Your Kids Will Love This Year

A look at the upcoming trends and coolest toys featured at Toy Fair New York.

Image: Weekend Images Inc.

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5 Ways to Find Extra Money for a Down Payment

Here's how to find money for a down payment.

In order to buy a home, you need to have a balance of good credit, manageable debt, stable income, and sufficient savings. Maintaining a balance between these four categories is challenging enough on its own, never mind coming up with enough cash to close on your potential new home.

If you’re worried about the credit part, you can see what you can potentially do to improve by viewing your free credit report summary, updated every 14 days, on Credit.com. And, if cash flow is your issue, here are some ways you can find extra money for a down payment.

1. Move in With Family

Having a nearby family member that will let you move in for a little while is a great way to save money on rent. It’s nice to live alone, but saving that $2,500 per month is a financial home run. In exchange for a little less privacy, you can start saving big money in a shorter amount of time than you would have by continuing to pay $2,500 per month. This can yield huge dividends for you in the future and could be the means of collecting the down payment for your new home.

2. Retirement Funds

Did you know that some retirement accounts let you draw from your reserves early in order to pay for your first home? Every retirement account is different, so it is a good idea to contact your human resources department to review your 401K, or a bank/financial adviser to review the terms of withdrawal from your investment account. In most cases, if it is a first home (i.e., you have not owned a home in the last three years), you can borrow from yourself to finance your down payment or cash to close. There can be tax penalties for withdrawing early, so be sure to review your terms.

3. Cash-Out Refinance

If you already own a home, it might be worth considering a cash-out refinance on your current home in order to pay for another one. Fannie Mae and Freddie Mac have recently taken kindly to this approach by changing the equity position in a departure residence to purchase a new primary home. Completing a cash-out refinance on your current home to purchase another is a form of leveraged debt and will allow you to purchase with a stronger offer. Just be sure this makes sense for your finances before you apply.

4. Sell a Home

In a similar scenario, by already owning a home with equity, you can sell your home in order to buy another one. For example, if you have $150,000 of equity in your current home, you can sell and use that equity as a down payment to acquire another. The challenging aspect of this is that these scenarios are contingent upon one house selling. If the buyer backs out of the deal, your ability to secure the house you are in contract for will be at risk.

This method should be approached with caution and only with a real estate agent who can walk you through the ins and outs. Education is key to a successful dual transaction like this.

5. Sell Personal Property

As much as we like our things, it is nice to have a roof over our heads we can call our own. If you have any toys or big-ticket items like a boat, motorcycle or novelty, those can be sold to generate cash for buying a home. In order to use these funds, you need to keep all documentation while selling the item. If you do not have supporting documentation, the cash cannot be used.

If you are looking to see what it takes to buy a home, we recommend talking to an experienced licensed mortgage professional. If you do not have the necessary means to acquire cash quickly or efficiently, talk to your mortgage professional about programs that require little to no down payments or lenders who have down payment assistance available. And, of course, be sure to determine how much home you can comfortably afford (more on how to do that here).

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Tax Tips for Recent College Graduates

When life changes, so do your taxes, and graduating from college brings several life changes that can affect your tax return. You may go from being claimed as a dependent by your parents to filing on your own for the first time. You may move out of state, collect a paycheck for the first time, and start paying off student loans. All of these events present opportunities to save — and costly pitfalls to avoid. To help you keep more of what you earn in this next phase of life, check out these tax tips for recent college graduates.

Figure out if your parents can still claim you as a dependent

If you just graduated, you may still be eligible to be claimed as a dependent on your parents’ tax return. Dependency rules are complex, but essentially, for your parents to claim you as a dependent:

  • you must be under age 24 at the end of the year,
  • you must be a full-time student (enrolled for the number of credit hours the school considers full time) for at least five months of the year,
  • you must have lived with your parents for more than half the year (you are deemed to live with your parents while you are temporarily living away from home for education), and
  • your parent must have provided more than half of your financial support for the year.

If you meet all of these tests, your parents can still claim you as a dependent and take advantage of the dependency exemptions and education credits.

Even if your parents claim you as a dependent, you may still be required to file your own return if you had more than $2,600 of unearned income (interest, dividends, and capital gains) or more than $7,850 of earned income (wages or self-employment income).

Get reimbursed for moving expenses if you moved in order to take a new job

If you moved for a new job after graduation, you might be able to deduct any unreimbursed moving expenses, as long as the new job is at least 50 miles away from your old home. Those expenses include costs to pack and ship your belongings and lodging expenses along the way, but not meals. You can also take a deduction for 17 cents per mile driven for 2017 (down from 19 cents per mile in 2016).

If you moved out of state, you might have to file two state returns if you had taxable income in both states. Many students have a part-time job while in school and take a full-time job in another state after graduation. Rules vary drastically by state. In some states, you will have to claim 100% of your income on your resident state return, then receive a credit for any taxes paid to another state. In this case, you may be better off working with a professional who can help guide you through filing in both states.

Make sure you’re withholding the right amount from your paycheck

When you start your new job, the human resources department will ask you to complete a Form W-4 to indicate how much of your paycheck you’d like your employer to take out for taxes. Working through the questions on the form is simple enough, but it doesn’t take into account how much of the year you’ll be working.

Most new graduates end up having too much federal tax withheld in their first year, effectively giving the government an interest-free loan, says Bradley Greenberg, a CPA and partner at Kessler Orlean Silver & Co. in Deerfield, Ill.

That’s because graduates rarely start new jobs right at the start of a new year. You may graduate in May and start working in June, or graduate in December but not find a job until February. Yet you are taxed as if you have been earning that pay for the entire year.

“The withholding tables are designed with the assumption that one makes the same amount of money for each pay period of the year, regardless of how many pay periods were worked,” Greenberg says. “For example, a June graduate starting a job on July 1 for $50,000 will have the same taxes withheld per pay period as a colleague with the same salary, marital status, and number of exemptions, but who worked the entire year.”

Greenberg recommends two courses of action for new graduates:

  1. Set up your withholding in your first year of employment so less tax is withheld. Then make sure you adjust it on the following January 1, so you don’t have too little tax withheld in your first full year of employment, or
  2. View this as a savings plan and file your taxes as early as possible next year to get your refund from the IRS.

Take advantage of student tax credits

If your parents can no longer claim you as a dependent, you may be eligible to claim valuable tax credits for any tuition you paid during the year. There are two tax credits for higher education costs: the Lifetime Learning Credit and the American Opportunity Credit.

For 2016, there is also the tuition and fees deduction (Congress failed to renew this deduction, which expired on December 31, 2016, so it is not available for 2017). The rules and income limits for each credit and the deduction vary, but the IRS offers an interactive tool on their website to help you determine which tax break applies to you.

If you used student loans to pay for your education, you can take a deduction for up to $2,500 of interest paid on a qualified student loan. If your parents made loan payments on your behalf, you are in luck. Typically, you can only deduct interest if you actually paid the debt, but when parents pay back student loans, the IRS treats it as if the money was given to the child, who then repaid the debt.

Don’t ignore your 401(k) or health savings account at work

New college graduates may be financially strapped and hesitant to divert part of their paycheck into a retirement plan or health savings account, but opting out means missing out on substantial tax-saving and wealth-building opportunities.

If your employer offers a matching 401(k) contribution, as soon as you’re eligible you should contribute at least enough to get the employer match. Otherwise, you’re missing out on free money. If you select a traditional 401(k), you can save on next year’s taxes. That’s because any contributions you make will be tax free, and they will reduce the amount of your income subject to federal income tax as well as Social Security and Medicare (FICA) taxes.

For better or for worse, many employers now offer high-deductible health insurance plans. These plans often come with health savings accounts (HSAs). Any money you set aside in an HSA can be used for any qualifying medical expense, from co-pays to prescriptions. The best part is that money you put into your HSA is not taxed, so you can potentially save a lot by using your HSA for medical expenses rather than paying out of pocket.

HSA funds stay in the account until you use them and are portable, meaning you can take it with you even if you leave your job. If you have big medical bills down the road, the funds can come in handy. If not, think of them as another tax-advantaged way to save for retirement.

Bring in a professional if you think you need help

If this is your first time filing on your own, you may be wondering whether you should do it yourself or pay someone to prepare your return for you. If you have a simple return with just a Form W-2 and perhaps some interest income, you could save money by buying some tax software and doing it yourself. MagnifyMoney’s guide to the best tax software is a great place to start.

But if you have dependents, investments, or a small business, you may be better off going to a reputable accountant.

Doing your taxes is never fun, but for recent college graduates, they may not be as big a headache as you might have heard. Keep in mind that tax laws often change, and everyone’s situation is a little different. But taking the time to know which tax breaks apply to you can make your post-college life significantly easier.

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How to Earn Extra Income From Your Car (Without Playing Chauffeur)

Here are the details on a couple of car-sharing services that could supplement your regular income.

Most people by now have heard of the ride-sharing giants Uber and Lyft, which have disrupted the taxi industry as we know it, allowing people to make money with their cars.

Far fewer, however, have heard of Turo or Getaround.

If earning extra income with your car, without having to chauffeur strangers, interests you, perhaps it’s time to familiarize yourself with these names.

Both Turo and Getaround were launched with the mission of putting the world’s one billion cars to better use. Yes, you read that right — there are at least one billion cars on the planet, many of which remain idle. Therein lies the opportunity.

Turo and Getaround allow people to make some serious cash by renting out their cars.

How much cash, exactly? Turo spokesman Steve Webb says the average active car owner on the site made $653 in Dec. 2016. Getaround, meanwhile, reports that the average monthly earnings for its users is around $550.

“It’s amazing to think of any asset, especially one costing tens of thousands of dollars, being so idle,” says Webb. “We have been able to flip the car ownership equation on its head, providing people a means to better use this asset.”

Want in on the action? Here’s what you need to know.

Turo

Turo has a presence in 4,500 cities in the U.S., U.K. and Canada.

Here’s how it works. You list your car for rent on Turo for free. You can set your daily minimum rental price and choose a mileage limit for drivers. Turo can also set your car’s rental price, based on market value, location, time of year, and other data designed to boost your listing’s competitiveness.

In addition, Turo covers your vehicle with $1 million in liability insurance while it’s being rented. To give you further peace of mind, Turo screens all its renters. The renter can either pick the car up at your home, or you can deliver it to an agreed-upon location.

People renting their cars through Turo earn enough to cover their monthly car payment, says Webb.

Getaround

Getaround has a somewhat smaller footprint than Turo. It operates in six cities, including San Francisco, Chicago and Washington, D.C.

In each city, Getaround has a core operating area, where your car must be parked. If you live outside Getaround’s operating zone, the vehicle can still be shared if it remains parked in the active area. To facilitate this, Getaround often helps owners find discounted parking in high-traffic locations.

Getaround renters are able to unlock your car using an app, however, you have full control over their car’s daily and hourly rental rate. Getaround can also set a recommended rate when you first launch your rental, based on the car’s make and model, features and location. Also, your car is covered with $1 million in insurance when being rented through Getaround. Renters are screened by the company.

The big difference between Getaround and Turo is that Getaround allows renters to use your car for just a few hours. With Turo, the minimum rental time is one day. When renting your car through Getaround, the vehicle must always be parked in the company’s core operating area, instead of, say, in your driveway, where you could keep an eye on it.

If these differences don’t matter to you, the earning potential may be nothing to sneeze at.

Image: Geber86

The post How to Earn Extra Income From Your Car (Without Playing Chauffeur) appeared first on Credit.com.

Want to Pause Your Student Loan Payments? Here’s What You Need to Know

You might be able to postpone your student loan payments, but make sure you've considered the financial consequences before you do.

If you’re struggling with a medical emergency, unemployment or other financial crisis, making your student loan payments can be impossible. Rather than fall behind, you can opt to put your payments on hold through student loan deferment or forbearance.

Deferment is an option that lets you postpone both your principal and interest payments. If you qualify, you can pause payments for up to three years. Forbearance is more temporary — you can postpone or reduce your monthly payments for up to 12 months.

However, delaying your payments through deferment or forbearance can have serious financial repercussions. Depending on the type of loans you have, your loan balance can continue to grow due to interest and other fees.

Choosing Deferment or Forbearance

Below, find out how your loan type affects deferment and forbearance, and what alternatives you may have.

Deferring Federal Loans

With certain federal loans, you don’t have to worry about interest payments if you enter deferment.

If you have federal Perkins loans, Direct subsidized loans or subsidized Stafford loans, the government will cover the interest that accrues on your loans while your loans are in deferment. With your interest taken care of while you get back on your feet, you will have less to pay back in interest.

If you have unsubsidized federal loans or PLUS loans, the government will not pay for the interest that accrues during deferment. If you defer your loans, they will continue to gain interest, possibly causing your balance to balloon and costing you thousands. Not to mention your debt-to-income ratio will get worse, making it more difficult to qualify for new credit such as a mortgage or car loan. (Not sure where your credit stands? You can view two of your scores, with updates every 14 days, for free on Credit.com.)

Before entering deferment, use a student loan deferment calculator to find out how much interest will accrue on your student loans if you postpone your payments.

Federal Loans and Forbearance

Unlike deferment, your federal loans will continue to accrue interest in forbearance, regardless of the loan type. Because interest continues to build, entering forbearance can be costly, but it’s still better than missing payments and defaulting on your loans.

Is Deferment/Forbearance Available on Private Loans?

Technically, deferment and forbearance are federal loan benefits. Not all private loan servicers offer similar options — but some do. For example, SoFi offers deferment for students who are going back to school. And if you’re facing a financial difficulty, you may be able to enter forbearance for up to a year.

If you’re experiencing financial hardship, it’s worth asking your servicer if deferment or forbearance is an option. Just keep in mind that entering deferment or forbearance with private loans can be more expensive than federal loans. There are often fees you have to pay, and interest will accrue while you postpone your payments.

Alternatives to Deferment or Forbearance

If you want to avoid pausing your student loan payments completely, there are other ways to manage payments when they’re too high:

Income-Driven Repayment Plans

If you have federal student loans, you may be eligible for an income-driven repayment (IDR) plan. There are four IDR plans available today: income-based repayment (IBR), income-contingent repayment (ICR), Pay As You Earn (PAYE), and Revised Pay As You Earn (REPAYE).

Under each plan, the basics are about the same: The federal government extends your repayment term 20 to 25 years and caps your monthly payment at a percentage of your discretionary income. At the end of the term, your remaining balance (if any) is discharged. You still have to pay income taxes on the forgiven amount, however.

Enrolling in an IDR plan can drastically reduce your payments and give your budget more breathing room. Depending on your income and family situation, you may qualify for a payment as low as $0 per month.

Refinancing

Unfortunately, if you have private loans, your options are more limited. But one effective way to reduce your monthly payments is to refinance your debt. By refinancing, you take out a new loan that pays off your old private loans. Your new loan will have completely new terms, including — ideally — a lower interest rate.

Refinancing private loans can help lower your payments and help you pay less in interest over time. It’s a smart way to save money while giving yourself more room in your budget. Be sure to keep in mind that if you refinance federal student loans with a private lender, however, you forfeit federal protections such as IDR and deferment/forbearance eligibility.

Deciding What to Do in a Hardship

Student loan forbearance and deferment are useful options when you experience a financial hardship. If you’re facing an emergency and can’t keep up with your payments, deferment or forbearance can give you a much-needed break while you get back on your feet.

While entering deferment or forbearance is a much wiser option than defaulting on your debt, there are still consequences. Make sure you understand the financial impact of postponing your payments, as putting them off can add thousands to your student loan balance. And in the case of private loans, postponing may not be an option at all.

If you’re struggling to keep up with your loans, the most important thing is to be proactive and talk directly with your servicer to find out what options are available to you.

Image: PeopleImages

The post Want to Pause Your Student Loan Payments? Here’s What You Need to Know appeared first on Credit.com.

6 Travel Apps That Can Help You Have the Best Vacation Ever

These travel apps have your next trip covered.

There’s a lot that goes into traveling, from choosing and saving up for travel expenses to deciding what you need to bring with you. Thankfully, there are a plethora of apps on the market to help simplify the process and make your vacation exactly what it should be: relaxing.

Here are six of those apps.

1. Travel Planning: TripIt

Platforms: iOS, Android, Blackberry, Windows

No longer do you have to store your flight plans in a different spot than your hotel and restaurant reservations — with TripIt, you’ll have all your travel plans in one place. And all these details will automatically sync to your calendars, making everything about your travel easier, whether for business or pleasure. With TripIt Pro, you can add additional features — like notifications for when a better seat or alternate flights are available or the ability to store your reward program points in the app — for $49 a year.

2. Helping You Save: Unsplurge

Platforms: iOS

There are several apps on the market to help you budget, but Unsplurge is a great one to help you focus on saving for a specific item or event. You can upload a photo of your dream destination to help you stay motivated and track your savings toward your goal. The app also offers savings tips to help you achieve your goal. If you decide to put your trip on a low-interest credit card, for example, you can tell this app that your goal is to get your card paid off sooner so you can have a stress-free vacation. (In the meantime, you can keep an eye on how that balance is affecting your credit by viewing your free credit report snapshot, along with two free credit scores, updated every 14 days, on Credit.com.) 

3. Tracking (& Using) Rewards: AwardWallet

Platforms: iOS, Android

If you’re part of several different travel loyalty programs, AwardWallet can make keeping track of those perks easier for you. After all, you don’t want to miss out on using those hard-earned rewards. You may also want to see if you can add to these perks with some of the plastic in your wallet. These stellar credit cards for international travel, for instance, can help you rack up extra points or miles. 

4. Figuring Out What to Bring: PackPoint

Platforms: iOS, Android

Packing for vacation is probably one of the worst parts, but this app can help simplify the process for you. PackPoint checks the weather at your destination so you know what you’ll need to bring. You can also tell it what you plan to do on your trip and receive recommendations on how to pack accordingly. Bonus: PackPoint has its own free travel podcast you can enjoy and garner smart travel insights from.

5. Exploring Your Destination: Time Out

Platforms: iOS, Android

You’ll certainly want to discover the best things your destination has to offer once you arrive, and this app can help you do that. Featuring big cities from all over the world, Time Out can give you suggestions on places to dine, grab drinks or even events to attend while you’re in town. And if you’re out and discover something you’d like to share with other travelers, you can do so right on the app. 

6. Understanding Different Rates: Units Plus

Platforms: iOS, Android

This is great for those trips you take abroad so you understand currency differences, which can help make purchases (and tipping) easier, but it doesn’t end there. If you’re somewhere with different metrics of speed, weight, temperature or almost anything else, this app can convert the unit for you. Best of all: The app frequently updates, so the exchange rate stays very current.

Longing for the day your bank account can fund that dream vacation? We’ve got 28 (mostly) pain-free ways to save for your next big adventure.

Note: It’s important to remember that interest rates, fees and terms for credit cards, loans and other financial products frequently change. As a result, rates, fees and terms for credit cards, loans and other financial products cited in these articles may have changed since the date of publication. Please be sure to verify current rates, fees and terms with credit card issuers, banks or other financial institutions directly.

Image: Pavliha

The post 6 Travel Apps That Can Help You Have the Best Vacation Ever appeared first on Credit.com.