Why It’s Not Smart to Get a Big Tax Refund Each Year

Why let the government hold your money throughout the year when you can put that money to work today?

If you’re expecting a big tax refund this year, you’ve probably already decided what you’re going to do with that money. Whether it’s a vacation, a new jet ski or a nice boost to your retirement savings, you’re probably pretty excited about the extra cash. But here’s the deal: Getting a big tax refund each year isn’t necessarily a good thing. It means you haven’t been putting that money to work for you all year long.

“If you are receiving a refund this year, it means that you overpaid your taxes during the course of the year. Instead of giving the government your hard-earned money, think about all of the great things you could have done with that money,” says Ron Weber, a senior marketing manager with Quicken Inc. “You could have paid off credit accounts, invested it in your future, and/or spent it as you earned it. Money is always better in your pocket than in someone else’s — even if that someone else is the government.”

Here’s how you can make sure you boost your bottom line this year by not overpaying your taxes and also not getting a refund.

Review Your Withholdings

Sit down and review your paycheck withholdings and see if you can break even when it comes to the taxes you pay. You’re looking for your Goldilocks zone. Not too little, not too much, but just right.

“If you are unsure what to do, experiment until you get it right,” Weber advises. “Most people are unaware that you can change your number of payroll exemptions as many times as you wish.”

You can also try using a tool to help you find your Goldilocks zone. The Internal Revenue Service has a withholdings calculator that can help you see how much difference a change in your withholdings will make. Certainly, you don’t want to owe taxes next year if you can avoid it, but getting your tax refund as close to zero as possible means you can invest or spend the additional income on a regular basis instead of letting the Treasury Department store it for you.

As you review your withholdings, you’ll want to be sure you …

Don’t Forget Your House …

If you own your own home, you probably know you can claim mortgage interest and property tax deductions, so take into account how much that will reduce your tax burden.

… Or Your Investments

If you own investment property, you’ll also want to consider any expenses you can deduct that might affect your taxes for next year.

… Or Big Life Events

“There are certain life events that you want to keep in mind when changing your exemptions such as marriage, having children or any situation where you decrease the number of dependents, such as divorce,” Weber says. “Also, keep in mind that while you are able to change the number of withholdings as often as you wish, your employer doesn’t have to apply it until the first payroll ending 30 days after you submit the change, effectively limiting the number of times you actually can change. Other than these considerations, the ultimate goal each year is to get your refund close to zero. Make it a game and see how close you can come.”

But You’re Terrible at Saving Money, You Say?

Of course, if saving isn’t your forte and you’re going to just end up spending whatever additional income you get throughout the year, letting Uncle Sam hold it for you might not be such a bad idea if you plan to put your refund directly into a retirement account like an IRA. The IRS will even help you keep your promise to invest the money by direct depositing all or part of your refund into savings, an IRA or even toward buying savings bonds.

If that’s your situation, you can read our guide on how to maximize your tax refund. But investing that money into a 401K throughout the year could be a better alternative, especially if your employer provides matching funds.

Those savings can pile up, especially if you start young. If you’re planning to turn your refund into the start of a lifetime of saving, check out our list of 50 things young people can do to make sure they’re set when it’s time to retire.

Also remember that keeping your credit in good standing helps you save money throughout the year, on everything from loan and credit card interest rates to mortgages. A good way to check on how your credit is faring is by getting credit your two free credit scores, updated every 14 days, on Credit.com.

Image: RapidEye

 

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Top 25 Cities for the Millennial Homebuyer

Borrowers under age 35 are starting to buy homes again. Here are the top 25 cities where they're doing it.

Image: monkeybusinessimages

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32 Ways to Leave Your High-Interest Credit Card

credit card with high apr

Sure, there were the good times — back when you and your credit card first got together. Maybe your card was giving you a 0% introductory APR. Maybe you went everywhere together, bought everything together … but things changed. Today you feel like you’re giving a lot more than you’re getting, and now you’re wondering how you can leave your high-interest credit card behind.

While there aren’t as many options for leaving your credit card as there are ways to leave your lover (Paul Simon famously notes there must be 50 of those), it doesn’t mean you’re stuck. No, you’re probably not going to be able to slip out the back, Jack (that debt’s not going away even if you run!), but you most definitely can make a new plan, Stan. So don’t be coy, Roy, just listen to me …

1. Negotiate a Lower Rate

Most people don’t bother to ask their credit card issuer for a lower rate, but sometimes lowering your current APR can be as simple as that, so …

2. Don’t Be Afraid to Ask

Before you storm out on your credit card, try communicating. It could be worth your time to see if your card issuer will lower your interest rate, especially if your relationship is a long one. Keep in mind, they might pull your credit to see if you’re deserving of a lower APR. That’s why you’ll want to …

3. Check Your Credit Score …

You’ll want to get an idea of whether you’re likely to qualify for a lower APR, lest you incur a hard inquiry on your credit report only to get rejected. (You can view two of your free credit scores, along with some recommendations for credit cards it could help you qualify for, on Credit.com.)

4. … Fix it Up Before Inquiring

If your scores are less than stellar, you may want to try brushing them up before you call up your issuer. You can find 11 ways to improve your credit here.

5. Do Some Research

Are there other cards out there you qualify for that can offer you a better APR? If so, you can use this information to your advantage while negotiating with your current issuer.

6. Begin Negotiating With Your Oldest Card

Like we said before, your issuer might be willing to work with you, especially if you’ve been a cardholder for several years, so start negotiating with whichever card issuer you’ve been with longest to see if you can reduce your interest rate there.

7. Keep It Simple

It’s not a difficult process to ask for a decrease in your APR. In fact, it’s as simple as a call to the customer service line listed on the back of your card. Yes, they could say no, but that’s where your research will come in handy and you can …

8. Leverage Your Loyalty

If they say they can’t reduce your rate, remind them of how long you’ve been with the company, how you’ve never had a late payment or maxed out your card’s balance. Whatever positives you can cite can be helpful. If that doesn’t work, tell them what the other cards you’ve researched are offering. But most importantly …

9. Don’t Give Up Right Away

The old adage “if at first you don’t succeed, try, try again” is especially important here. Your issuer may say no, but that doesn’t mean you should give up. Call them multiple times, and ask to speak to a supervisor if their answer continues to be no. Of course, you’ll want to be polite throughout the process. If all of this doesn’t work, it’s time to …

10. Consider an Upgrade

A lot of card issuers have tiered credit card offerings, so you could potentially upgrade to a new card with the same issuer that offers a lower interest rate and transfer your current balance to that card.

11. Keep Watching Your Credit …

Just like when an issuer considers lowering your interest rate, which we mentioned above, they’ll likely check your credit as part of your application for a card upgrade. So, if you think there’s a better credit card available elsewhere, you might not want to ask them to upgrade you.

12. … & Limit Your Card Applications

In fact, every time you apply for new credit you’re going to have a hard inquiry and a ding to your credit scores. These can add up if you have too many in a short span of time and even impact your ability to qualify for a new card, so be very selective or you could end up hurting your credit. (You can read here about how often you can apply for new credit without hurting your credit scores too much.)

If you’ve tried all these steps with your current credit card issuer to no avail, it’s time to look at starting a new relationship with a new issuer.

13. Get a Balance Transfer Card

Let’s say you’ve tried everything to lower your current APR with your card issuer and they just won’t work with you. Perhaps you’ve had some late payments or you just haven’t been with them that long. Getting a balance transfer credit card could make sense for you.

14. Find an Introductory 0% APR

There are lots of options to choose from in the world of balance transfer credit cards with a low or even 0% introductory APR. Here’s how to find the right one for you …

15. Comparison Shop

You can start by checking out some of the best balance transfer credit cards and comparing what they offer.

16. Give Yourself Plenty of Time

There are balance transfer cards that offer as long as 21 months at 0% financing for balance transfers and even new purchases. If you have a lot of current credit card debt, that could be very beneficial to you, as you’ll eliminate your interest while paying down your principal.

17. Don’t Forget the Transfer Fees …

Of course, most balance transfer cards charge you a fee for transferring your balance – typically 3% to 5%, so be sure to compare those amounts as well.

18. … & the Annual Fees

Some cards also charge an annual fee, so you’ll want to consider that cost as well as you compare balance transfer offers.

19. Make Sure You Time it Right

If you’re looking at buying a new house, car or other major purchase anytime soon, you’ll want to time your credit card application with that in mind since your credit scores will be impacted by that aforementioned hard inquiry that takes place during your application process.

20. Include Your Balance Transfer Amount in Your Application

This can help ensure the transfer goes smoothly and quickly. The new issuer will reach out to your current card issuer once you’re approved and get the transfer process started right away, saving you the hassle of doing it later.

21. Pay Off Your Balance

Once you have your new balance transfer card, it’s important to focus your attention on getting that balance paid off before your introductory rate expires. Otherwise, your balance is going to revert to the standard variable rate.

22. Keep Your Old Card

No, keeping your old card isn’t exactly leaving it, but hear us out. You might be tempted to close your old card, particularly if your card issuer refused to reduce your APR when you transferred your balance, but keeping it open can be good for your credit score.

That’s because your credit scores improve the longer you have a credit account in good standing, so if you had a decent payment history, keeping that card open could really help. Moreover, your total credit line will be higher if you keep it open, also helping your scores. (You can find a full explainer on how closing a card can affect your credit here.)

Go ahead and cut it up, though, if it makes you feel better. That will also keep you from using it.

23. Keep Your New Interest Rate Low

Now that you have a card with a lower APR, even if it’s just an introductory rate, there are things you can do to keep your rate as low as possible. You’ll want to …

24. Make Your Payments On Time …

Late payments can send your APR soaring, so make all of your payments on time to avoid a penalty APR.

25. … & Keep Your Balance Low

If you can’t pay off your balance each month, at least try to make payments that keep your balance below 30% of your credit limit, though below 10% is even better if you want to do your credit scores a real favor.

26. Don’t Take Cash Advances

These usually come with a higher variable APR than purchases or balance transfers, so try to avoid them if you want to keep your rates down.

27. Try Some Other Alternatives …

If you’ve had a bad run financially and aren’t going to qualify for a credit card with a lower APR, you still have plenty of money-saving options, so don’t give up just yet. You have some alternatives …

28. Like a Personal Loan …

You may be able to pay off your credit card debt with a personal loan from your bank or credit union, but keep in mind that unless you have excellent credit, you’ll likely need some kind of collateral to secure it. Be sure to ask about the lender’s credit requirements before applying.

29. Or a Home Equity Line of Credit …

If you own a home and have some equity built up, this can be a great option for paying off debt at a lower interest rate. You can save a ton by moving your debt to a HELOC.

30. … But Don’t Spend Your Savings

Use the money you save by refinancing through a HELOC on creating an emergency fund (if you don’t already have one). Once that’s set up, you can use the money as prepayment against your home loan or to boost your retirement savings.

31. Consider a Debt Management Plan …

A debt management plan allows you to turn over all of your debt information to a credit counseling agency. You make one monthly payment to them, and they pay your credit cards and other debts for you. These plans usually last three to five years, and a lot of lenders lower your interest rates when you participate in such a plan. You’ll want to be sure to find a reputable credit counseling agency, so do your research.

32. … Or File for Bankruptcy

As a last-resort option, you can consider getting out from under your high-interest credit card debt by declaring bankruptcy. You’ll lower your debt and have many years to pay it off depending on the type of bankruptcy relief you file for. Just remember you’ll also have a major blemish on your credit reports for up to 10 years that could seriously affect your ability to get credit (in general and at n affordable rate) during that time. Still, if your debt is significant, this could be the right option for you. Talking to a credit counselor or bankruptcy attorney before deciding could help you make the right choice for your circumstances.

Have another question about credit card debt? Leave it in the comments section and one of our credit experts will try to get back to you.

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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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How Unemployment Can Really Drive Up Your Tax Bill

Avoid these mistakes when receiving unemployment benefits.

Back in September of 2015, I lost my job and decided to take unemployment benefits for the first time in my life while I looked for a new one. Even the significantly reduced income that the unemployment benefits provided was a needed cushion since we’d closed on a new home the same week I lost my job. I’d crunched the numbers, and taking the benefits was going to be a better alternative than using money from our emergency fund (which was tied to the markets and had fallen significantly just the month before).

What I didn’t account for was taxes, so when I received that 1099-G form from the unemployment commission last spring, I was confused. I owed income tax on the benefits I’d received, which were already just 25% of what my income had been? Seriously? It felt unfair that my employers had been paying into unemployment insurance all these years so I’d have the benefit if I ever needed it, and now the government was going to take a good-sized chunk of that money I needed to keep our family afloat.

After a couple of hours of grumping, I bucked up, talked to our accountant and moved on. Of course it was my fault that I didn’t ask the right questions and do the necessary research to see what the tax consequences of receiving unemployment benefits would be. I was more mad at myself than anything, but the reality was that, instead of getting a refund, I was going to be paying Uncle Sam a couple thousand dollars.

Here’s how you can avoid having to do the same:

1. Get Those Taxes Withheld

If you’re currently unemployed, are receiving benefits and aren’t having taxes withheld, request that they do so now. Yes, your benefit amount will decrease, but it’s easier to cut back a little each week now than it is to come up with a larger lump sum when your taxes come due.

2. Review Your Filing Options

If you received unemployment benefits in 2016 and didn’t have taxes withheld, you’re going to have to pay them. Fortunately, there are some ways to mitigate just how much.

“You do have to claim your unemployment income, but remember your new lower income may make you eligible for tax benefits you couldn’t qualify for before,” said Lisa Greene-Lewis, a CPA and tax expert with TurboTax. “You also may be eligible for tax deductions and credits which can lower your tax liability.”

For example, you could qualify for the Earned Income Tax Credit, which is worth up to $6,269 for a family with three or more children. There’s also the Child Tax Credit of $1,000 for each dependent under 17 years old, and Education Tax Credits like the Lifetime Learning Credit, which can be up to $2,000. (You can find a quick guide to common tax exemptions and deductions here.)

“Credits are great because they lower your tax liability dollar for dollar,” Greene-Lewis said. “Also don’t forget what the IRS calls above-the-line deductions like deductible expenses for educator expenses paid up to $250, student loan interest up to $2,500, moving expenses for a job, and deductible IRA contributions, which can lower your taxable income.

“If you make below the IRS income filing threshold of $10,350 single ($20,700 married filing jointly), you also may not be required to file your taxes, however, you should if you had federal taxes deducted in your paycheck,” she said.

It could be worth your time and effort to get some guidance from a tax professional if you’re feeling uncertain about how all these credits work. If you can’t afford to pay a professional and you made less than $54,000 last year, there are free tax preparation services provided by the IRS. You may have to stand in line for a bit, but it could end up saving you significantly on your taxes.

3. Don’t Avoid Filing or Paying Your Taxes

Getting into trouble with the IRS is the last thing you want to deal with coming off of a stint of unemployment, so if you’ve reviewed all of the above options and find you’re still going to have a hefty tax bill due that you simply can’t afford, don’t panic, and definitely don’t put off dealing with the situation.

First, if you’re once again employed and can qualify for a credit card with a 0% introductory offer for purchases, you could pay your tax bill using that card and pay it off over time without any interest or penalties. It’s a good idea to check your credit scores before applying to ensure you qualify. You can get your two free credit scores, updated every 14 days, here on Credit.com.

If that’s not an option for you, you could consider using a credit card you already have, especially if it has a low APR, but you’ll end up paying significant interest, which will end up just costing you more money and probably isn’t a great idea. Instead, your best bet is likely talking to the IRS and asking for an installment agreement. That, Greene-Lewis said, allows you to pay your tax liability over a six-year period if necessary.

Think you’re going to owe Uncle Sam this year? You can find 7 ways to potentially cut your tax bill here.

Image: PK-Photos

 

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The Credit Card That Can Help You Save for Retirement

If you’re serious about long-term savings — whether for your retirement, your child’s college fund or both — you already know you need to do more than just save your pennies. You need dollars, and lots of them.

So, what if you could put a percentage of every purchase you make on your credit card into one of those investment funds? Would you do it? If your answer is yes, you may want to take a look at the Fidelity Rewards Visa Signature card from Fidelity Investments, because that’s exactly what this credit card does.

What Is the Fidelity Rewards Visa Signature Card?

The Fidelity Rewards card offers cardholders a very straightforward 2% back on all purchases, simple as that. Your reward is then deposited directly into a Fidelity account. For every $2,500 spent, a deposit of $50 is made into the investment account of your choice, and you can choose from a variety of accounts that meet your savings goals. Want your money deposited directly for retirement? Fidelity can put your 2% right into a traditional, Roth, rollover or SEP IRA. (Not sure what an IRA is? No worries: We have a full explainer on individual retirement accounts right here.) You can’t deposit directly into a 401K, however.

Prefer a brokerage account? No problem. For certain cardholders, there’s also the option of depositing your rewards into a 529 college savings account.

Of course, you can choose to spend your rewards instead of investing them, but the redemption value is lower if you choose to redeem your points for other rewards. The exact redemption rate varies, depending on how you cash in, a Fidelity spokesperson said. For instance, if you redeem rewards for retailer gift cards, the rate is .5% (10,000 points for $50 gift card).

No Spending Categories & No Limits

Not only does the Fidelity Rewards card making saving easy, there are no special spending categories and no limits or caps on the amount of rewards you can earn. Plus, the card’s variable 14.99% annual percentage rate means carrying a small balance every now and then won’t necessarily wipe out the rewards you earn. (Friendly reminder: It’s still important when using a rewards credit card to try your very best not to.)

New cardholders can get a $100 bonus after spending $1,000 in the first 90 days, but the funds must be deposited directly into a qualified Fidelity account. Qualifying accounts for both the regular rewards savings and signup bonus include:

  • Fidelity Cash Management Account
  • Fidelity-managed 529 College Savings plan
  • Retirement account
  • Fidelity Go account 

The Fidelity Rewards card also comes with all the benefits provided through the Visa Signature platform, including:

  • Auto rental collision coverage. Rent your automobile with your Fidelity Rewards card and you can waive the rental agency’s collision coverage.
  • Emergency assistance while traveling. Find the help you need when you’re on the road.
  • Purchase protection. Extra coverage for the things you buy with your card, including reimbursement for damage or theft.
  • Warranty manager service. This service helps you keep track of the warranties on the items you purchase with your card.
  • Lost luggage reimbursement. This service covers lost or stolen baggage.
  • Travel accident insurance. This coverage will help if you’re injured while traveling.
  • Roadside dispatch. Need a tow? Locked yourself out of your car? This pay-per-use service offers many benefits, including emergency roadside assistance.
  • Visa Signature Concierge. Access to 24-hour complimentary assistance with everything from booking travel to getting concert tickets.

Is the Fidelity Rewards Visa Signature Card Right for You?

Even if you like the idea of of a card with no annual fee that lets you earn 2% on every purchase you make and then directly invests that money toward your savings goals, the Fidelity Rewards card isn’t for everyone. Here are a few things to keep in mind as you weigh your decision:

  1. Do you have a Fidelity investment account? If you don’t, you’ll want to keep in mind that you can’t use your rewards as a deposit to establish a new Fidelity account. Rewards can only be deposited into existing accounts.
  2. Do you have excellent credit? To qualify for the Fidelity Rewards card, you’re going to need excellent credit. If you don’t know what your credit score is, you can get your two free credit scores, updated every 14 days, right here on Credit.com using our free credit report snapshot. It provides personalized details on how you can improve your scores, including a timeline of how long it will take to do so, across five key areas affecting your credit scores. It also provides you with a personalized list of some of the credit cards you would qualify for.
  3. Do you prefer investing over perks or cash back? If you travel a lot, whether for work or play, you might prefer some of the benefits that travel rewards cards offer, like free upgrades, free hotel stays, waived baggage fees and other non-monetary perks. Likewise, if you’d like more flexibility in what your rewards can be used for, a cash-back rewards card might be better for you.
  4. Can you get higher rewards with another card? If you want more flexibility than the automated investing inherent with the Fidelity Rewards card allows, there are cards that offer higher rewards (for example, the American Express Blue Cash Preferred gives a whopping 6% cash back on up to $6,000 in purchases per year at U.S. supermarkets), so the automated investing aspect should be particularly important to you.

Remember, whenever you’re shopping for a rewards card, it can really pay to keep your spending habits and rewards goals in mind as you compare cards. To get started, you can check out our list of the best cash back credit cards. And, no matter what type of plastic you’re on the hunt for, you can reference our expert guide to getting the best terms you possibly can on a credit card.

At publishing time, the American Express Blue Cash Preferred credit card is offered through Credit.com product pages, and Credit.com is compensated if our users apply and ultimately sign up for this card. However, this relationship does not result in any preferential editorial treatment. This content is not provided by the card issuer(s). Any opinions expressed are those of Credit.com alone, and have not been reviewed, approved or otherwise endorsed by the issuer(s).

 

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.

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8 Tax Breaks Most Homeowners Don’t Realize They Can Get

Whether you're a new homeowner or you've been in your house for years, you may want to find out if you qualify for these tax deductions for 2016.

It’s tax season again, and if you bought a new home in 2016, you want to be sure you don’t miss out on one of the numerous tax deductions you could be eligible for. Even if you aren’t a new homeowner, there could be some deductions you might not be aware of that can help you maximize your tax refund.

We spoke with Mark Luscombe, principal analyst at Wolters Kluwer Tax & Accounting. He reviewed some of the tax deductions home owners should be aware of as they begin working on their tax returns.

1. Mortgage Interest

“In 2016, the IRS acquiesced in the Ninth Circuit Voss case, which changes the way the mortgage interest deduction is calculated,” Luscombe said. “The IRS now says it is allowed on a per taxpayer rather than a per residence basis.”

That means that, if you own a home with an unrelated taxpayer, you are now each entitled to a mortgage interest deduction of up to $1 million of mortgage principal for funds used to purchase, construct or improve a home and an additional $100,000 of principal for a loan secured by the home but where the funds are used for other purposes.

“This also creates another marriage penalty in the Tax Code since, if the two taxpayers get married, then they are just entitled to a mortgage interest deduction up to the $1.1 million limit,” Luscombe added.

2. Mortgage Insurance Premiums & Debt Forgiveness

The deduction for mortgage insurance premiums expired at the end of 2016 but is still available for 2016 tax returns. Likewise, the exclusion for mortgage debt forgiveness also expired at the end of 2016 but is still available for 2016 tax returns.

“In order to try to better determine if taxpayers are claiming the proper amount of mortgage interest deduction, mortgage lenders are now required to report on Form 1098 not only the mortgage interest received for the year but also now the principal amount of the mortgage, the date the mortgage originated, and the address of the property,” Luscombe said. So be sure to download or request a copy of your Form 1098 if you haven’t already received one in the mail.

3. Energy-Related Tax Deductions

There are two energy-related tax breaks that homeowners can qualify for.

  • The nonbusiness energy property credit expired at the end of 2016 but is available for 2016 tax returns.  This credit is a $500 lifetime credit for improvements such as energy-efficient windows, doors, insulation and roofs, as well as certain home systems.
  • There is also a residential energy efficient property credit for items such as solar and wind installations that currently extends through 2021 but is subject to phase-downs over its final years.

4. Capital Gains Exclusion

If you’ve owned and lived in your principal residence for at least two of the last five years, then the exclusion for gain on its sale remains available. The exclusion is up to $250,000 of gain for a single taxpayer and up to $500,000 of gain for joint filers, Luscombe said.

5. Inheritance of Property

When you inherit an asset, the cost basis of the asset is “stepped up to value” on the date of death, which helps you avoid capital gains taxes on that property. Here’s how it works: Let’s say your grandfather just died, leaving a home to you and your siblings. The home is valued at $500,000 at the time of your grandfather’s death, but the original price paid for the home, the basis, when he bought it 30 years ago was $100,000. While you and your siblings may have to pay estate or inheritance taxes depending on the size of the estate, you won’t have to pay capital gains taxes on $400,000 in gains on the house.

“Stepped-up basis on death remains available for a principal residence, as well as other taxpayer assets on death,” Luscombe said. “However, with discussions about eliminating the estate tax and shifting to carryover basis, it is not clear how much longer current law will remain in effect. Stepped-up basis means that the inheritor of the residence who then sells the residence would likely have minimal taxable gain because their basis would be stepped-up to the date of death value of the residence.”

6. Property Taxes

Currently, real estate taxes with respect to a residence may also be deducted, although tax reform proposals being discussed in Congress would eliminate that deduction.

7. Home Office Expenses

If you use part of your home for business operations, you may be able to deduct some of your business expenses. The home office deduction is available for homeowners and renters, and applies to all types of homes, according to the Internal Revenue Service, which provides details and a full explanation of the requirements to claim this deduction on its website.

8. Moving Expenses

If you moved because you changed jobs or your business relocated, or if you started a new job or business, you may be eligible to deduct your moving expenses. The IRS explains that you must meet the following criteria in order to qualify.

  • Your move closely relates to the start of work
  • You meet the distance test
  • You meet the time test

Again, you can find a full explanation of these criteria on the IRS website. And for more answers to all those question bound to pop up between now and April 15, check out our tax learning center.

Image: Portra

The post 8 Tax Breaks Most Homeowners Don’t Realize They Can Get appeared first on Credit.com.

4 Tips for Entrepreneurs Worried About Trump Immigration Policies

The Obama administration took steps to help foreign entrepreneurs stay in the United States but will the Trump immigration policy changes alter that?

When Mike Galarza first heard what then-candidate Donald Trump had to say about building a wall between the United States and Mexico, deporting illegal immigrants and possibly limiting legal immigration, he was stunned. As an immigrant from Mexico, the issue was personal, but as an entrepreneur and business owner, he worried it could also impact his bottom line.

“It’s a bad representation of American culture and it’s totally the opposite of what I’ve seen and my reality here in the U.S.,” Galarza, the founder and CEO of of billing automation startup Entryless, and one of Business Insider’s “Badass Immigrants in Technology,” said. “I think it’s a very divisive rhetoric that goes beyond the Mexican people … so my first reaction was ‘he is not what America is, not what America stands for.’”

Galarza has beefed up his visa and is actively pursuing a green card. And in light of Trump’s executive order Wednesday that directs funds to build a border wall and curtail some immigration, Galarza is waiting to see whether it could signal that documented immigrants may have a harder time doing business in the United States over the next several years.

The White House declined to comment on how new immigration policies might impact current visa holders or future visa applicants.

What to Watch for 

What will be most telling, according to Susan J. Cohen, founder and chair of the immigration practice at law firm Mintz Levin in Boston, is what the administration does with a ruling by the Department of Homeland Security in the waning days of the Obama Administration. The International Entrepreneur Rule has been frozen pro forma along with most pending rulings and edicts across most federal government departments as the new administration reviews them.

Galarza

Mike Galarza beefed up his visa ahead of potential immigration policy changes. Photo courtesy of Mike Galarza.

“I think what happens with that rule will at least provide some insight into how some of the other aspects of immigration may go in this administration,” Cohen said.

The rule, set to take effect July 17 if it isn’t altered by the new administration, provides for a “parole” period for foreign entrepreneurs, granting them 2.5 years in the United States to establish and grow a startup. They would, of course, need to qualify for that time, including having $250,000 in funding and being able to demonstrate the potential for “significant public benefit.” After the parole period, the applicant would be able to apply for a 2.5 year extension as long as the startup meets additional benchmarks.

“Right now, I think we’re just in wait-and-see mode with respect to the skilled worker population who have extraordinary talents that they would like to bring to the United States,” Cohen said.

Waiting and seeing is exactly what Galarza, who grew up in San Luis Potosi, Mexico, is doing. Last October, he wrote about his concerns for the future of his company and himself in the United States in a blog post on inDinero.com.

When I founded Entryless, I faced—and continue to face—unique challenges because of my immigrant status. I came to the U.S. from Mexico in 2009 on a travel Visa, which allowed me to work for an employer but not for myself. This required me to build Entryless from the ground up in my spare time—and by spare time, I mean at night when I should’ve been sleeping … It was worth every sleepless night. I now have an E2 Visa, and even though I have to return to the U.S. Embassy in Mexico each year to renew it, Entryless is established and growing. However, my next renewal is not a slam dunk — especially if the next administration adopts isolationist policies.

Since then, Galarza decided it was as good a time as any to beef up his visa. He recently upgraded to an EB1 visa, also known as an Outstanding Researcher or Professor visa. It renews every 10 years, which he says gives him some comfort now that Trump is in office. He also is actively working on getting his green card.

Reviewing visa options and starting the green card process are both good steps for immigrant entrepreneurs regardless of whether they are just setting up a business or, like Galarza, have been established for some time, according to Cohen.

Here are four things immigrant entrepreneurs can do right now to help ensure their business succeeds in the United States going forward.

1. Talk to an Immigration Attorney

“It’s important to meet with a competent professional who can help each person explore all possible options and leave no stone unturned to try to figure out a solution that will allow the individual to hopefully remain in a secure immigration status in the U.S. if that’s what they want to do,“ Cohen said.

Depending on your immigration status, that process could mean looking at which visa fits your situation best, looking at a different kind of visa that provides a little more security like Galarza did; it could mean seeking green card status or even applying for citizenship, Cohen said.

2. Breathe

Nothing is going to change right away, Cohen said. There are few unilateral changes that the new president can make (The North American Free Trade Agreement’s (NAFTA’s) TN-1 visas excluded. They would disappear if the United States withdraws from NAFTA). Most immigration reform, including changes to visa requirements, and even changes to how visas are vetted will take time.

“Things are going to take a considerable period of time before they get changed,” Cohen said. “There are a lot of things that can’t be changed without Congress.”

3. Focus on Your Business

“Get customers,” Galarza said. “That’s the first thing, because if you have that really nothing can stop you, because there’s a need for your product and people that rely on it and it becomes critical to them and their existence and there’s this chain that gets created. Based on that … you can prove to the American immigration system that you’ve earned your right to stay in this country and to get funding to grow your business faster.”

4. Create Your Own Funding

If you’re just starting your business or are at a point where you are ready to expand but can’t secure venture capital or small business loans, credit cards can help you get through short-term cash flow issues, even if your credit isn’t stellar or you don’t have a credit history.

In fact, using a credit card for your business expenses can even help you establish and improve your credit standing. Keep in mind, however, that you can go overboard. It’s possible to have too many credit cards, which can lead to too much debt, missed payments because you can’t keep up with the due dates and other issues.

Image: BasSlabbers

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How Your Netflix Obsession Could Get You Scammed

People in a rush to get back to binge-watching their favorite shows are the prime focus for this scam targeting Netflix users.

A new scam targeting Netflix users is being reported by a cyber-security company that says the scammers are trying to get credit card and other personal information.

FireEye Labs first reported the phishing scam earlier this week, saying customers should be wary of any emails asking them to update their Netflix member information. Netflix had not posted any guidance for customers on its blogs nor released an official statement at the time of this writing, but a representative sent us this: “Members who want to learn more about how to keep their personal information safe against phishing scams and other malicious activity can go to netflix.com/security or contact Customer Service directly.”

According to the FireEye Labs report, a link in the email being sent to Netflix members looks like an official Netflix web page but is not legitimate. The page asks users for:

  • The name on their credit card
  • Their credit card number
  • Card expiration date
  • 3-digit security code; and
  • Social Security number

According to FireEye, the email looks very realistic, and the phony site mimics the Netflix homepage, as you can see in the screengrab FireEye published in its report:

Screen Shot 2017-01-13 at 11.58.02 AM

According to FireEye, the phishing sites it referenced in its report are no longer active, but new scams like this pop up often. It’s important for consumers to know these things exist and be very careful about sharing sensitive personal or financial information.

How to Protect Yourself From Phishing & Other Scams

There are some standard best practices when it comes to protecting yourself from scams on the internet. These tips for better internet security are a good place to start. In a nutshell, it’s always a good idea to be suspicious, especially if a company is reaching out to you through email or text message. And until you’ve confirmed that the email, text or even phone call are legitimate, it’s wise to never give out personal data like your credit card or debit card numbers, date of birth, address or, worst of all, your Social Security number.

If you think you’ve been a victim of identity theft, you can monitor your credit scores for free by using Credit.com’s free credit report snapshot, or by paying for a complete credit report monitoring service, which includes your full credit report and daily alerts to monitor your credit.

Image: mphillips007 

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Phone Scams Reach Record 10.2 Billion. Here’s How to Protect Yourself

Phone scammers hit record breaking numbers this year, which is another reason to be aware of how to protect yourself from phone scams.

Does it feel like you’ve had more than your fair share of robocalls this year? If so, you’re not alone. Phone scammers were extra busy in 2016, making a record 10.2 billion robocalls to Americans, offering them everything from fake cruises and gift cards to opportunities to support bogus charities, according to a new report from Hiya, a company providing caller ID and call-blocker apps.

The same holds true for holiday scams, which saw an increase of more than 113% over last year, according to Hiya’s data.

“By taking advantage of the holiday ‘giving’ season, scam calls aimed at defrauding consumers are on the rise,” Jan Volzke, vice president of reputation data at Hiya, said in a prepared statement. “Whether preying on the spirit of gifting or the desire to get away after a rocky 2016, scammers are continuing to inundate the phone lines with fraud. We hope our data can educate consumers about these malicious and annoying calls so they can get back to enjoying their holiday season.”

These are the top phone scams for 2016, according to Hiya.

1. Telemarketer

Scammers are using telemarketing techniques to lure victims into giving out Social Security and credit card numbers, as well as bank account information.

2. Other Robocalls

Robocallers have been dodging regulations against their illegal activity by frequently changing or “spoofing” their caller ID so they appear to be calling from a local number.

3. Extortion/Kidnapping Scam

These scammers call random phone numbers and demand payment for the return of a “kidnapped” loved one.

4. IRS Scam

The caller pretends to be with the IRS and demands money for unpaid taxes or will trick the recipient into sharing private information. Remember, the IRS will never, ever call you about any taxes you owe.

5. Debt Collector

These scammers offer “solutions” to help victims pay off credit card and loan debt. Victims will give personal and financial information, enabling scammers to steal their identity and money.

6. Surveys

Scammers call victims offering prizes if they take a survey. However, before redeeming the prize, credit card information must be provided to cover “shipping and handling.”

7. Vacation Scams

Victims are notified that they have won a free vacation, but discover they have to pay a number of fees, provide a credit card number and are pressured to sign up for travel clubs to “earn” more trips.

8. Lucky Winner Scam

Scammers alert victims that they are the lucky winner of a contest or lottery. To redeem the prize, victims must provide personal and/or financial information.

9. Tech Support

Scammers pretend they are calling from a reputable tech agency (i.e. Microsoft or Dell) and claim that they have been notified of a virus on the victim’s computer. Scammers demand payment for services and third-party access to the computer to obtain private information.

10. Political Scams

During election season, scammers call victims requesting candidate donations, verifying voter registration, claiming they need to re-register to vote, or requesting that they take an election survey.

How to Help Avoid Being Scammed

To keep yourself safe from these and other scammers, the FBI recommends you exercise caution in how you respond to any call from someone you aren’t familiar with in order to help protect yourself from the damage of identity theft and fraud.

They urge you to:

Always be suspicious of unsolicited phone calls.

Never give money or personal information to someone with whom you don’t have ties and did not initiate contact.

Trust your instincts: If an unknown caller makes you uncomfortable or says things that don’t sound right, hang up.

If you think you or a loved one may have been a victim of a phone scam, it’s a good idea to check your financial accounts, credit reports and credit scores frequently for signs of fraud, like unauthorized transactions or unfamiliar entries. Be sure to immediately address these issues by notifying the authorities and even considering a credit freeze. Checking your bank activity for any problems is something you can do daily, but you can also get two free credit scores on Credit.com, updated every 14 days, to help you quickly spot some signs of identity theft, like that aforementioned sudden drop in scores. You can also get your free annual credit reports from AnnualCreditReport.com.

Image: ti-ja

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