Friday’s need-to-know money news

Today’s top story: Make your brand loyalty pay off. Also in the news: When your new car have more tech than you know what to do with, one thing to know when filing your taxes, and beware email attachment scams this tax season.

Make Your Brand Loyalty Pay Off
Cash in on your devotion.

Does your new car have more tech than you know what to do with?
Too many bells and whistles?

There’s one thing you need to know when filing your taxes
You don’t have to do it on your own.

Beware Email Attachment Scams This Tax Season
Scammers never take a day off.

Q&A: Tax tips for hybrid owners

Dear Liz: Not a question, but a tip for your readers. I bought a plug-in hybrid in 2018. I couldn’t take advantage of the $7,500 federal tax credit because my income was too low to pay much in federal taxes. So I converted $30,000 of my IRA to a Roth IRA, which added that money to my income for 2018, allowing me to take full advantage of the credit. Hey, I even got some money back. I can’t touch that Roth account for five years, or else the income it generates won’t be tax-free, but when the time comes for my mandatory withdrawals, I’ll tap into the remainder of my regular IRA. This might be of help to some of your readers.

Answer: Normally conversions from a regular IRA to a Roth trigger a hefty tax bill, but your credit allowed you to convert tax-free. Leasing is another option to consider with hybrids and other cars that offer a federal tax credit. The value of the credit typically is built into the deal, so you benefit even if you don’t have a federal tax bill to offset.

Tuesday’s need-to-know money news

Today’s top story: 9 money resolutions and tips for 2020 from our experts. Also in the news: How one woman paid off nearly $125,000 of debt in nine years, how to pay off Parent PLUS loans faster, and why the IRS wants you to do your taxes early.

9 Money Resolutions (and Tips) for 2020 From Our Experts
There’s still time to restart your resolutions.

How I Ditched Debt: Keeping a ‘Passion for Fashion’ on the Road to Repayment
How one woman paid off nearly $125,000 of debt in nine years.

How to Pay Off Parent PLUS Loans Faster
Refinancing could get your loan done quicker.

Why the IRS Wants You to Do Your Taxes Early
Preventing refund fraud.

Wednesday’s need-to-know money news

Today’s top story: Mastering the awkward financial talk. Also in the news: Co-signing a student loan with bad credit, younger consumers getting a credit boost from their elders, and one in five fear they’ll owe the IRS money this spring.

Mastering the Awkward Financial Talk
Tackling tough topics with ease.

Can I Co-Sign a Student Loan With Bad Credit?
It’s not a good idea.

Younger Consumers, Get a Credit Boost From Your Elders
Authorized user status could give you score a bump.

One in five fear they’ll owe the IRS money this spring
Are you one of them?

Tuesday’s need-to-know money news

Today’s top story: 4 things to know if you’ve never budgeted before. Also in the news: Equifax breach – claims cutoff and more scammers ahead, how auto insurers use your nondriving habits to raise prices, and the benefits of filing taxes early.

4 Things to Know if You’ve Never Budgeted Before
Breaking down the basics.

Equifax Breach: Claims Cutoff and More Scammers Ahead
The fallout continues.

How Auto Insurers Use Your Nondriving Habits to Raise Prices
Your grocery shopping could raise your auto insurance.

The Benefits of Filing Taxes Early
There are good reasons to file early.

Q&A: How to keep tax benefits when renting out your primary residence

Dear Liz: If my wife and I sell our primary residence of 12 years, I understand we can exclude up to $500,000 in home sale profits from taxes. But if we rent it for a year or two, then sell, have we lost that tax break by converting it to income property?

Answer: As long as you lived in the property at least two of the five years before the sale, you can use the home sale exclusion that allows each owner to protect $250,000 of profits from taxation.

You would pay capital gains rates on profits above that amount, but a big home sale profit could have other tax implications.

If you’re covered by Medicare, for example, profits above the exclusion amounts could temporarily increase your monthly premiums. This is because the income-related monthly adjustment amount, which is added to premiums when modified adjusted gross income exceeds $87,000 for singles or $174,000 for married couples.

If you might be affected, you’d be smart to consult a tax professional to see if there’s a way to structure the sale to reduce these effects.

Also, renting property has its own set of tax rules, making it even more important to have a tax pro who can assist you.

Friday’s need-to-know money news

Today’s top story: Alter your buying habits in 2020 and keep the change. Also in the news: When the gift of giving brings a tax on receiving, student loan forgiveness and taxes, and 7 alternatives to costly payday loans.

Alter Your Buying Habits in 2020, and Keep the Change
Cutting back on impulse buying.

When the Gift of Giving Brings a Tax on Receiving
Understanding the gift tax.

Should You Worry About a ‘Student Loan Forgiveness Tax Bomb’?
Forgiveness comes at a price.

7 Alternatives to Costly Payday Loans
Avoiding astronomical interest rates.

Monday’s need-to-know money news

Today’s top story: 8 million student loan borrowers must do this in 2020. Also in the news: 5 ways to get credit-healthy in the New Year, how to take charge of your credit this year, and where to file state and federal taxes for free.

8 Million Student Loan Borrowers Must Do This in 2020
Time to renew your income-driven repayment plan.

5 Ways to Get Credit-Healthy in the New Year
No better time to get started.

How to Take Charge of Your Credit This Year
How to make your credit shine.

Where to File State and Federal Taxes for Free
Filling begins January 27th.

Q&A: This retiree got a big surprise: taxes

Dear Liz: I’m 76 and retired. During the decades I worked, I contributed to my IRA yearly using my tax refund or having money deducted from my paycheck. No one told me I would have to pay taxes on this when I turned 70. For the past six years, I have been required to withdraw a certain percentage of this IRA money and pay taxes on it. Is there ever going to be an end to this? Do I have to keep paying taxes on the same money every year? And what about when I pass away, do my children have to keep paying?

Answer: Ever heard the expression, “There’s no such thing as a free lunch”?

You got tax deductions on the money you contributed to your IRA over the years, and the earnings were allowed to grow tax deferred. Those tax breaks are designed to encourage people to save, but eventually Uncle Sam wants his cut.

Also, you aren’t “paying taxes on the same money every year,” because the money you withdraw has never been taxed. Plus, you’re required to take out only a small portion of your IRA each year starting at 70½. The required minimum distribution starts at 3.65% and creeps up a bit every year, but even at age 100 it’s only 15.87% of the total. You can leave the bulk of your IRA alone so it can continue to grow and bequeath the balance to your children.

Your heirs won’t get the money tax free. They typically will be required to make withdrawals to empty the account within 10 years and pay income taxes on those withdrawals. Previously, they were allowed to spread required minimum distributions over their own lifetimes. Congress recently changed that to require faster payouts because the intent of IRA deductions was to encourage saving for retirement, not transfer large sums to heirs.

The Roth IRA is an exception to the above rules. There’s no tax deduction when you contribute the money, but the money can be withdrawn tax-free in retirement or left alone — there are no required minimum distributions. Your children would be required to start distributions, but wouldn’t owe taxes on those withdrawals.