Category Archives: Economy

Why Should You Freeze Your Credit?

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I first heard about how to freeze your credit on the Clark Howard radio show several years ago. photo

Why would you want to freeze your credit?  As Clark states in his Credit Freeze and Thaw Guide, “credit freezes are one of the most effective tools against economic ID theft available to consumers.”  It is a quick, easy, and a low-cost alternative to paying for a credit monitoring service.

What is a credit freeze?  Wikipedia describes it this way. “A credit freeze, also known as a credit report freeze, a credit report lock down, a credit lock down, a credit lock or a security freeze, allows an individual to control how a U.S. consumer reporting agency is able to sell his or her data. The credit freeze locks the data at the consumer reporting agency until an individual gives permission for the release of the data.”

How do you freeze your credit?  Clark’s guide is the best source I’ve found to date. It outlines how to contact each of the three major credit bureaus and how to thaw them.

After several of my family members and clients had their identities stolen, I finally got around to freezing my personal credit this past summer.  It was pretty painless and took no more than 30 minutes to complete (and cost less than $30 total – the cost depends on your state).  Check it out and see if it makes sense for you.

Now That The Fiscal Cliff Was Avoided – How Does It Impact You?

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The American Taxpayer Relief Act of 2012 does the following:

  • Tax Rates – For most individuals it extends the lower federal income tax rates that have existed for the last ten years.  However, if you make more than $400,000 (or $450,000 for joint filers), your top rate will increase to 39.6%.
  • Capital Gain Rates – Again for those under $400,000 things stay the same as in the recent past.  For those in the new top bracket, you will be subject to 20% (instead of 15%) for long-term capital gains and qualifying dividends.
  • Alternative Minimum Tax (AMT) – If you didn’t pay enough under the “normal” tax system, you may be subject to a separate tax system with its own rates and tougher rules.  The Act permanently extends AMT relief by indexing the exemption for inflation in future years.  They also retroactively fixed the patch for 2012.  This is a big deal to tax accountants as the annual patch created many tax planning headaches.
  • photo-1Estate Tax – The Act permanently makes the exemption $5 million (indexed for inflation) for the estate tax and gift tax but increases the top rate from 35% to 40% beginning in 2013.  Portability is made permanent as well (the transfer of any unused exemption from deceased estate to surviving spouse).
  • Phaseout of Itemized Deductions and Personal Exemptions – Since 2010, personal exemptions and itemized deductions have not been subject to a phaseout or limitation.  Beginning in 2013, both will be subject to phaseout beginning at $250,000 ($300,000 for joint filers).
  • Others – There are a handful of other provisions and temporary extensions we won’t get into here.

Bottom-line, if make less than $250,000 ($300,000 for joint filers) your tax situation will not be dramatically impacted either way (a few caveats though, your payroll taxes will go up as the Payroll Tax Holiday of 2% was not extended and some of the provisions of ObamaCare go into effect which could impact you).  For the top earners out there making more than $250,000 ($300,000 for joint filers), you will definitely see your taxes climb on a several fronts.

Ever Wonder How Much You Pay in ALL Taxes?

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With all the talk of raising taxes and the wealthy paying their “fair share,” have you thought about how much you pay in taxes?  It is not just income taxes but real estate taxes, sales taxes, gas taxes, hotel taxes, excise taxes, governmental fees, and license plate tabs.

How can you figure it out?  The American Institute of Certified Public Accountants (“AICPA”) has a new program called the Total Tax Insights™ Calculator.  The AICPA is the governing body of the US accounting industry.

According to the AICPA, “The Total Tax Insights calculator was developed by the AICPA as a public service to give taxpayers a clearer picture of the types and number of taxes they pay throughout the year and the estimated amounts of each. By linking federal tax rules with the country’s abundant and varied state and local tax conventions—including more than 20 of the most widely applied taxes—this first-of-a-kind online tool fosters greater public understanding of taxes and provides key insights to enhance one’s financial well-being.”

Wow do the taxes add up…..you’ll be surprised when you see the total.  At least knowing where we are at now, will give you a framework to gauge all the rhetoric over the coming weeks and months.

Post Election – What Happens Now?

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It is the big question – what happens now?  Do we go over the fiscal cliff? What about the estate tax situation?  Interest rates?  What about the economy?

Vanguard put together an interesting analysis yesterday.  https://personal.vanguard.com/us/insights/article/election-11072012?link=topStories&linkLocation=Position1

Bottom line is nobody knows but it is fun to see what the experts predict.