Posts Tagged ‘saving money’

5 Year-End Tax Tips for 2011

December 6, 2011

Time is running out to take steps to lower your 2011 tax bill. Here are 5 ways you can do so, but act quickly!

1. If you’ve been putting off energy-efficient improvements to your home such as replacing your roof, windows, exterior doors, upgrading your furnace or hot water heater or adding skylights or insulation materials, time is running out to claim the tax credit associated with qualified improvements. There are lot of limitations to this credit, but it expires at the end of this year, so get cracking if you want the credit.* (and remember a tax credit¬†is a dollar-for-dollar reduction of your tax bill, so you can knock the full dollar amount off what you pay)

2. Are you planning to make a big purchase like a car or other high-ticket item in the next couple months? If you itemize, you might consider making that purchase this year – it’s the last year you can elect to deduct total sales tax paid instead of state and local income taxes. This isn’t an excuse to go shopping, but if you’ve budgeted for it and it’s almost time, it might be worth it to get shopping before December 31.

3. Go ahead and prepay 2012 college tuition (for the first 3 months at least) while the higher education above-the-line deduction is still in effect. This provision expires at the end of this year, which allows you to deduct up to $4,000 in qualifying education expenses. Income limits apply, so if you make more than $80,000 (or $160,000 if you’re married) you don’t qualify. If you make between $65,001 and $80,000 ($130,000 or less if married) then you can only deduct $2,000. Not sure? Ask me!

4. If you pay estimated state or local income taxes and you itemize, mail those payments before December 31, (even though they’re not due till January 15) so you can deduct them against this year’s income.

5. Since tax rates aren’t changing for next year (they remain¬†10%, 15%, 25%, 28%, 33%, or 35%), try to defer income until next year so you can wait a whole extra year to pay the taxes.

Just remember: it’s perfectly legal to avoid taxes, but it’s quite illegal to evade. To ensure that you’re maximizing tax savings without violating the law, contact me for a consultation.

* If you’ve claimed the credit in the past (in one or more years since 2005) then you may be limited. There is a lifetime cap of $500 ($200 for windows). If you haven’t yet met the cap, you can claim the difference.

Kelley C. Long, CPA is a personal financial coach and tax preparer who believes that the true meaning of financial security means having choices in life. Visit her website at www.kclmoneycoach.com for more information.

Cohabitation: Your Ticket to Financial Freedom?

August 20, 2011

I recently had the privilege to write an article for LearnVest, a great website for women and finances, regarding the potential financial benefits of moving in with your significant other. Since the article that ran was a much-edited version of what I submitted, essentially losing the spirit with which I wrote it, I felt it necessary to post my original submission here. Hopefully this clarifies that my opinion is IF you decide to move in with your boyfriend/girlfriend, it can also significantly boost your bottom line. Read on for my original submission:

 

When my aunt moved in with her boyfriend in 1988 it caused quite a stir in our family. The perception was that she was “giving up the milk for free,” and he was the one gaining while she must be losing. It wasn’t until he’d put a ring on it that my grandmother was able to chill.

 

Nowadays, things are different. My grandmother still isn’t excited about the fact that I live with my boyfriend, but she understands that times have changed. It seems like young women who don’t cohabitate before marriage are the unusual ones now.

 

The thing is, rather than compromising ourselves by shacking up, we’re hoping to avoid divorce by giving it a test-run first. “Paradoxically, more people today value marriage. They take it seriously. That’s why they’re more likely to cohabit. They want to make sure before they take the ultimate step,” said University of Pennsylvania sociologist Frank Furstenberg in the May 28, 2001, issue of Newsweek.

 

Over 12 million unmarried partners are living together today according to the US Census Bureau’s American Community Survey: 2005-2007, a number that increased 88 percent between 1990 and 2007. “Today it’s unusual if you don’t live with someone before you marry them,” John Hopkins University sociologist Andrew Cherlin stated in Newsweek.

 

The decision to move in with your significant other should obviously be based on your love and level of commitment to one another, but it also offers some financial benefit if you play it right. My friend James* summed it up best when he said, “We moved in together because we simply wanted to be around each other all the time.”

 

Back when Shelby’s boyfriend moved in with her, she found that it improved her financial situation “quite a bit. We were saving his rent payment plus utilities, gas going to and from his place and we were able to cook our own meals more since we were coming home to the same place.” Shelby, who is a CPA, was appointed the CFO of their relationship and took over management of both of their finances.

 

Combining their homes and money also enabled them to become debt-free. “[Sam] did have a boatload of debt when he moved in. Combining our finances definitely helped pay off that debt more quickly. By a lot. Both because we significantly reduced expenses and because I was more aggressive in paying it off than he had been.”

 

Similarly Kaylie, a project manager from Ohio, found her financial situation better than it had ever been once she moved in with Zach. She was able to eliminate credit card and student loan debt and they “had the money to do pretty much everything we wanted to without worrying about whether we could afford it.”

 

The key is to be strategic about what you do with the money you save when moving in together. Like Kaylie says, “When you go from supporting two households (as a couple) to one, there is likely going to be a certain amount of flexibility when it comes to finances.”

 

Rather than increasing your daily latte intake or becoming a regular at Ann Taylor, sock your extra cash away to jettison any long-term financial worries you’ve been harboring. If you’re still paying down credit card debt, increase your payments till you’re debt free. And if you don’t already have an emergency nest egg of six months salary tucked away, get that going. Nothing spells financial freedom like knowing you can take care of yourself if things don’t work out.

 

When my sweetheart and I moved in together, our joint housing costs decreased by almost half. But that’s not the only perk I’ve enjoyed. Sharing a household with the love of my life has allowed me to save more toward retirement, and concern for our joint financial health has drawn us closer while offering us the chance to really improve our communication.

 

Walking through a financial decision together is also one of the best ways to really see someone else’s values in action. The way my boyfriend makes financial decisions shows me what’s important to him and the fact that we make decisions jointly serves to deepen our trust in each other and gives us a greater sense of being in it together.

 

In the end, if you’re considering sharing an address with your significant other, it can also be a great opportunity to change your financial picture for the better. With proper evaluation of the savings realized and honest communication with your partner, moving in together could be the ticket to long-term financial success and freedom for both of you.

 

* All names have been changed to protect privacy