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Do It Yourself and Save Big Bucks
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In today's economy, we need to remind ourselves we can save without saving by using do-it-yourself production.
Suburban homeowners might employ a lawn service to take care of their yard or join a health club or gym with a personal trainer to take up a program of planned exercise. Do-it-yourselfers will get their exercise mowing the grass and avoid the lawn service and the health club altogether.
One of the often overlooked advantages of owning a home over renting an apartment is the opportunity to save with do-it-yourself production. Apartment renters lose the tax deductions for property taxes and home mortgage interest, but their rent has to cover all of the landlord's landscaping and maintenance costs.
Renters pay out of pocket each month while the homeowner can choose a few, or many, do-it-yourself savings from lawn care, painting the shutters, replacing faucet washers, or flashing the roof vents.
Condominium owners get property and home mortgage tax deductions, but lose some do-it-yourself opportunities since condominiums often provide landscaping and exterior maintenance in common as part of a monthly fee paid with after tax dollars.
Take just $60 a month out of a condo fee for landscaping and the savings are $8,835 for 10 years at just 4 percent interest.
Remember too that cost of living increases come as a percentage of gross income. If you have a $50,000 salary and a 3 percent cost of living increase, it will be $1,500 more in gross income. Before you get a dime, 7.65 percent goes to social security, at least 15 percent goes to the federal income tax and probably 5 to 8 percent goes to a state income tax. That's before you buy anything, which will also be taxed.
With heavy taxation and the loss of at least a third of gross income, do-it-yourself savings of only $800 or $900 will be equal to $1,500 of gross income. It is something to think about in a stagnant economy.
In the United States, nearly every transaction that can be recorded is recorded, then it's counted and taxed. In the mayor's office, or the county commissioner, or the state legislature, or the federal Congress, they want transactions. It is their bread and butter, so to speak.
Do-it-yourselfers have another idea.
Fred Siegmund covers America's jobs as part of work doing labor market analysis and projections for a client base of recruiters, trainers and counselors. Visit him at www.americanjobmarket.blogspot.com
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How the Bush Tax Cuts Have Affected You
In an article on March 28, The Washington Post wrote about the Bush Tax cuts, saying, "The tax cuts, the signal economic achievement of the Bush administration, are among the three biggest federal tax reductions since World War II … "
If you work for a living, you might want to know how the Bush tax cuts affect your taxes.
Try an example from 2000 with a married couple that files a joint return with $40,000 salary and using the standard deduction with 2 personal exemptions. The year 2000 taxes — before the Bush tax cuts — for our hypothetical couple would be $4,057.50 on taxable income of $27,050.00.
In 2007, the same couple with the same income would pay $2,592.50 on taxable income of $22,500. The tax savings is $1,465.00.
Notice, though, that there are two components to the tax decrease. One is the cut in tax rates. In 2000, the entire taxable income was taxed at 15%. In 2007, the first $15,650 was taxed at 10% and the rest at 15%. The new lower 10% tax rate is the Bush tax cut part of the tax decrease.
The tax rate cut saved $782.50, which is 5% saved on $15,560.
The other part of the tax cut is due to the higher standard deduction and the higher personal exemption, which Congress decided to adjust for inflation long before the Bush tax cuts.
Combined, the standard deduction and personal exemption went up from $12,950 to $17,500, or an increase of $4,550 for 2007 over 2000. That part of the tax decrease is $682.50 because $4,550 was not taxed at all in 2007. The $682.50 is 47 percent of the tax cut that is not part of the Bush tax cut.
Do the same thing for a married couple with $100,000 of income. Now 2000 taxes equal $18,673.50 on $87,050 of taxable income, but 2007 taxes are $13,472.50 on taxable income of $82,500.
Tax savings is $5,201.00.
In 2000, the first $43,850 was taxed at 15% and the rest at 28%. In 2007, the first $15,650 was taxed at 10% instead of 15%. The amount of taxable income from $15,650 to $43,850 was taxed at 15% the same as 2000, but the amount greater than $43,850 but less than $63,700 was taxed at 15% instead of 28% as in 2000 — a 13% tax rate cut.
The rest of the income above $63,700 was taxed at 25% instead of 28%, a 3% savings. Combine the three tax rate reductions and the Bush tax cuts reduced taxes on the higher income by $3,927.
The same $4,550 of reduction in the standard deduction and personal exemption was not taxed at all as before, which saved $1,274 because it was taxed at 28% in 2000.
Here we see a difference of proportion because the Bush tax rate cuts of $3,927 were 76 percent of the total tax cut for Mr. and Mrs. $100,000 instead of 47 percent as with Mr. and Mrs. $40,000. The Bush tax rate cuts reduce taxes, but inflation adjusted exemptions and deductions are more important to lower income families.
Do Bush tax cuts favor the well to do? You be the judge.
Fred Siegmund covers America's jobs as part of work doing labor market analysis and projections for a client base of recruiters, trainers and counselors. Visit him at www.americanjobmarket.blogspot.com
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What Are You Doing With Your Tax Rebate?
We're not getting much of a tax rebate this year — which is a good thing, by the way — so the $132 will either go toward our upcoming vacation or housing fund.
MSNBC.com recently polled some of its readers, asking them what they plan to do with their tax rebates.
In a sign of either a slowing economy or a return to personal finance best practices (unfortunately, I think it's the former), nearly all of the published responses focused on paying bills or adding to savings funds.
A few of the responses:
I should just sign the check over to Exxon Mobil. It’s all going to cover higher gas prices anyway.
Jim Smith, Sebastian, Fla.Spend? You must be kidding! No way! It is going in my savings account.
Alex deCastro, Klawock, AlaskaIf I get a rebate, I will add it to my grandkids’ college funds. They will have to have a good education to exist, much less thrive.
Sue North, Howell, Mich.I am putting it aside to use on my family's summer vacation.
Martha Davidson, Mechanicsville, Va.I am paying down my credit cards. It is useless to do what the president says in regards to spending the money. He obviously does not know how money-strapped the working class is.
Chez Escudero, Virginia Beach, Va.If you're getting a tax rebate this year, we want to know: what are you doing with it?
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How Our Taxes Came Out Perfectly
I finally got around to doing our taxes over the weekend — I had been putting them off for a bit and then couldn't find a good time to sit down and do them.
They were a little bit more confusing this year, thanks to our inter-state move in November and reaching a high enough income on my Web publishing gigs to pay self-employment taxes.
Once I was able to get it all straightened out, the results came out about as perfectly as they could.
The final totals?
Federal: $136 refund
Massachusetts: $175 refund
Maryland: $179 to paySo, in the end, we'll be getting $132.
Not a lot, but that's okay — remember, every dollar the government pays to you is a dollar you've given to them, interest-free.
Now, I know that a certain school of thought would rather pay taxes than receive any refund — and I respect that — but I would rather err on the side of getting a little bit back than having to shell out more.
If you ended up with a really large refund, take back your salary today. Talk to your HR person and adjust your W4 to have more withholdings — you'll get more money in your paycheck and you won't be loaning out your cash to the government interest-free.
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Money Saving Links: 3/07/08
H&R Block Catering to Younger Taxpayers - Consumerism Commentary
This year, H&R Block has assembled an online community to promote its tax preparation products and services. The H&R Block Digits website is a forum where visitors can talk with each other about taxes as well as other random topics, like the one titled, “When You’re All Done Having the Babies.”
Wide Open Wallet: 50 Awesome Open Source Financial Tools - Free Geekery
One of the great things about open source is that you know the software you’re using is made by real people, who understand real needs. In financial software, we see a great application of this “real people” effect, offering high levels of customization and ease of use. In this software collection, you’ll find tools that were made with you in mind, and are often completely free to boot.
Workers step up raids on 401(k)s - The Wall Street Journal (via MSN Money)
Eighteen percent of workers had loans outstanding from their retirement plans in 2007, up from 11% in 2006, according to a survey by the Transamerica Center for Retirement Studies, a nonprofit corporation funded by Transamerica Life Insurance.
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Our Taxes Are Going to Be Confusing. Crap.
As I was hanging out in Best Buy last week while my car speakers were getting replaced, I wandered over to the software section to check out the tax programs.
For the past couple of years, I've used H&R Block TaxCut to file our taxes (how do you file yours?) with little problem.
This year, however, it's going to be a bit more confusing.
Since we moved in the middle of 2007 (well, November), we'll have to pay state taxes in both Massachusetts (where we moved from) and Maryland (where we now live).
Perusing the TaxCut software, I noticed that every version only comes with one state. So I'll only be able to use the software to file in either Maryland or Massachusetts.
Thankfully, Maryland lets individual taxpayers file online for free with their "iFile" system. Check out the demo online.
Chances are, I'll probably use TaxCut for federal and Massachusetts and iFile with Maryland.
Do you have a confusing tax situation? Let us know about it.
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File Your Taxes Online: What's the Best Option?
It seems everywhere I go I'm inundated with solicitations from H&R Block, Liberty, and a slew of local accountants.
It's tax time, they all want my business, and most seem to want me to come into their physical establishments.
Maybe a coupon or promo item would at least make me to consider moving from the online tax filing service I've been using the last few years. Until that happens, I'll stick with H&R's online TaxCut service.
Before starting with TaxCut, I filed using one of the free services the IRS promotes on their site. I must say, TaxCut (and its competitors I quickly researched) are far superior to the couple of free services I had used in the past.
But I do now see that TaxCut and some other higher profile services are now available for free, as well. For those who qualify, that's a nice deal.
How do you file your taxes? Also, let us know what your experiences have been with online tax services.
Loading ...Tom Valenti is a marketer and project manager who currently works for a financial institution in New Jersey. For more info, visit him at http://tomvalenti.com.
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