Today’s top story: What really happens when you try to win money to pay down student loans. Also in the news: How to sidestep the potential pitfalls of travel credit cards, new
What Really Happens When You Try to Win Money to Pay Down Student Loans
Behind the scenes.
How to Sidestep the Potential Pitfalls of Travel Credit Cards
Free travel can be costly.
New Barclays Feature Takes Card Locking One Step Further
More ways to control your spending.
How to Pay the Exact Amount of Taxes You Owe in Advance
Using the IRS Withholding Calculator.
Q&A: Student loan forgiveness fail
Dear Liz: You recently answered a question from someone who had defaulted on federal student loans. You mentioned ways to get out of default and qualify for income-driven repayment plans that could reduce her monthly payments. Couldn’t she also qualify for student loan forgiveness?
Answer: There are programs that are supposed to allow federal student loan balances to be forgiven after 10 years of payments for people in public service jobs and after 20 or 25 years for other borrowers. It’s questionable how much anyone should count on getting this relief, however.
Last year was the first time borrowers qualified for forgiveness under the 10-year public service program, which was enacted under President George W. Bush in 2007. The Department of Education has denied the vast majority of applicants their expected relief. Nearly 40,000 people had applied by Dec. 31 and fewer than 300 people have been approved, according to the Washington Post.
Critics say the U.S. Department of Education has set much more rigid standards for approval than anything Congress envisioned when creating the program. Many applicants also relied on erroneous advice given by the private companies that service federal student loans.
It’s possible that lawsuits, or Congress, will force the Education Department to forgive more of the debt. But if this is what can happen to people who have given a decade of their lives to public service, one has to wonder how much relief other borrowers can expect to get.
Liz Weston, certified financial planner, is a personal finance columnist for NerdWallet. Questions may be sent to her at 3940 Laurel Canyon, No. 238, Studio City, CA 91604, or by using the “Contact” form at asklizweston.com.Distributed by No More Red Inc.
Friday’s need-to-know money news
Today’s top story: Hit with a tax penalty? The IRS might give you a do-over. Also in the news: Why your 401(k) just got more valuable, how to capture savings on professional photography, and how to talk about money on the first date.
Hit With a Tax Penalty? The IRS Might Give You a Do-Over
How the penalty-abatement program works.
Your 401(k) Just Got More Valuable
New tax laws change the deduction game.
How to Capture Savings on Professional Photography
How to Talk About Money on the First Date
Breaking the financial ice.
Thursday’s need-to-know money news
Today’s top story: How being late on your taxes could ground your vacation plans. Also in the news: 5 ways to maximize ‘shoulder season’ travel, what it’s like to win money to pay down student loans, and why you shouldn’t use your debit card on anything you can’t afford to lose.
Late on Your Taxes? Your Vacation Plans May Get Grounded
Your passport could be in jeopardy.
5 Ways to Maximize ‘Shoulder Season’ Travel
Off-peak travel offers bargains.
What it’s really like to win money to pay down student loans
Pressing your luck.
Don’t Pay Debit on Anything You Can’t Afford to Lose
Learning from WOW Airlines.
Wednesday’s need-to-know money news
Today’s top story: Travel rewards can take you far – but only if you pay attention. Also in the news: How blind loyalty can cost you in the points and miles game, the states where tax bills have shrunk the most, and what to do if your credit card application was rejected.
Travel Rewards Can Take You Far – but Only If You Pay Attention
Don’t overestimate their value.
In the Points and Miles Game, Blind Loyalty Can Cost You
Keeping your rewards as rewarding as possible.
These are the states where tax bills have shrunk the most
Is yours one of them?
What to Do If Your Credit Card Application Was Rejected
Make sure your credit report is correct.
Tuesday’s need-to-know money news
Today’s top story: The one form that could be the root of all your tax woes. Also in the news: Income-driven student loan repayments, 4 credit score horror stories that could happen to anyone, and understanding the difference between a hobby and a side hustle.
This One Form Could Be the Root of All Your Tax Woes
The innocent looking W-4.
Income-Driven Repayment: Is It Right for You?
What to do when you can’t afford your student loan payments.
4 credit score horror stories that could happen to anyone
Tiny mistakes that could trash your credit.
Before You Do Your Taxes, Understand the Difference Between a Hobby and a Side Hustle
When your hobby becomes a job.
Your 401(k) just got more valuable
If your tax refund this year was disappointing, you may be able to do something about it: Contribute more to a retirement fund.
Tax-deductible contributions to 401(k)s, IRAs and other retirement accounts are among the few remaining ways to reduce taxable income if you don’t itemize deductions. And few of us do these days: Only about 1 in 10 taxpayers
As a result, many of the traditional tips and tricks for reducing tax bills either no longer work or are of limited help. In my latest for the Associated Press, how to use your 401(k) to reduce your taxable income.
Monday’s need-to-know money news
Today’s top story: What students can learn from the days before college loans. Also in the news: How one couple paid off over $120,000 in debt in three years, which 1.5% cash-back credit card you should choose, and how millennials racking up credit card points could backfire.
What Students Can Learn From the Days Before College Loans
Community college as a money-saver.
How I Ditched Debt: Kicking Frugality Into High Gear
How one couple paid off over $120,000 in three years.
Which 1.5% Cash-Back Credit Card Should You Choose?
Finding the perfect fit.
Millennials are racking up credit card points—here’s how that could backfire
When chasing points puts you in debt.
Q&A: Figuring home-sale taxes
Dear Liz: My husband and I bought a home in Los Angeles in 1976 for $200,000. He died in 1992. The value of the house was at that time about $850,000. (I had it appraised.)
I want to sell the house now. The value is about $2 million. How much would be the stepped-up base for capital gain tax when I sell it?
Answer: In most states, only your husband’s half of the home would have gotten a new tax basis at his death. (A tax basis is used to determine potentially taxable profit.) In community property states such as California, however, both halves of a property get the step up in basis when one spouse dies.
You can add to your basis any commissions or fees paid to purchase the property and the cost of any additions or improvements. What you spent on maintenance and repairs doesn’t count. The improvement must add to the value of your home, prolong its useful life or adapt it to new uses to qualify, according to the IRS.
To figure your taxable profit, you’ll take the net amount you receive from the sale — the sale price minus any commissions or fees paid to sell the home — and subtract your basis from that. You can exempt up to $250,000 of the home sale profit, but you would pay long-term capital gains rates on the rest.
Let’s say you invested $150,000 in improvements over the years. That would be added to your $850,000 basis for a total adjusted basis of $1 million. Let’s also assume you pay $100,000 in commissions to sell your home, netting $1.9 million. Your $1 million basis would be subtracted from the $1.9 million, leaving you with a $900,000 home sale profit. Because $250,000 of that would be exempt, you would owe long-term capital gains tax on $650,000.