What Income Taxes Will You Have To Pay on the Sale of Your Home?

Tax Season: What to Expect When Selling Your Home - http://blog.rismedia.com/2016/tax-season-home-sale/: Tax season is upon us and if you have a pending or recent home sale, you'll surely want to know: what income taxes will you have to pay on the sale?

BUYING A HOME? Tips to Build Your Down Payment Stash.

So You Wanna Buy a House?                  Step 2: The Down Payment

By  Jamie Wiebe  Realtor.com

                                                                                            Alexandr Dubovitskiy/iStock

Scratching together a down payment is probably the most daunting hurdle to buying a home—and there are boatloads of them! But that’s why we’ve launched our 2016 Home-Buying Guide, a series of articles giving you the critical intel you need to buy your own house, step by step. This is the perfect time to start your search in earnest.

Last week in Installment 1, we covered cleaning up your credit score. This week, we’ll unlock the secret to amassing a mountain of cash for the down payment.

Yeah, you already know that Rome wasn’t built in a day. The same holds true for building a down payment. It takes time. But as long as you grease the gears early (like now), you’ll barely notice you’re saving until—boom!— one day in the foreseeable future you’ll be sitting on a pile of money that could pave the way to homeownership … maybe even in time for peak home-buying season this summer.

Sound good? Good.        Here’s how to get started.

Trim those quiet, unnecessary expenses

OK, let’s shift those preconceived notions. Contrary to popular belief, saving for a home isn’t mostly about grueling sacrifice—e.g., holing up in your apartment under a bare light bulb, eating ramen, and piggybacking off your neighbors’ Wi-Fi.

“It’s about a lifestyle change,” says Travis Sickle, a financial adviser with Sickle Hunter Financial Advisors in Tampa, FL. A more sustainable strategy, he says, is to pinpoint your silent money siphons that you barely notice. Odds are you could try some of the following cost-cutting measures without feeling the pinch:

• Replace your $250 monthly cable service with a $10 Netflix standard streaming account, and you’ll save $2,880 per year.
• Cut that languishing gym membership—at $50 per month, you’d save $600 a year. Go running instead!

• Packing lunch will save you about $60 a month—or $720 a year.
• Bike to work. For a 10-mile commute, biking can save you around $5 a day, according to Kiplinger—or $1,250 a year.
• Start a coin jar. Saving all your loose change can have a big impact—up to $700, according to financial blogger J.D. Roth.
• Turning down your thermostat just 3 degrees could shave almost 10% off your electrical bill, netting you $20 a month on a $200 bill, or $240 a year.
• Curb those dinners and drinks out at restaurants, which can quickly add up. If you typically shell out $40 three times a week, reduce that to one evening a week, and you’ll save $80—or $4,160 per year. (Bonus: It’ll make those times you do indulge more special!)

And if you and your significant other team up and try all of the above, that would amount to $10,550 per person, or $21,100 in one year’s time. Just remember that when you’re thinking of ordering a second glass of artisanal craft beer.

Open a dedicated account

If you don’t have a savings account, now’s the time to open one. A checking account is great for daily expenses, but when it comes to saving money—well, they don’t call them savings accounts for nothing. You’ll earn interest on your balance, plus there’s a lot to be said for the mental benefit of having a specific place to stash your down payment. While interest rates haven’t been very impressive in recent years (though, you’ll be grateful for that when it comes time to get a mortgage), it’s still great to have a dedicated account where you can see how you’re progressing toward your goal.

Financial planner Bob Forrest of Mutual of Omaha points out that CDs and money market accounts offer higher gains than savings. You’ll need a larger minimum balance than for a regular savings account, but your goal is to make it grow, not shrink, right? If you’re using a CD, just make sure you don’t withdraw the money before the time is up or else you’ll face some stiff penalties.

Automate your savings

If you’re struggling to put enough money away because of the constant temptations to blow your paycheck, consider automating the process. Ask your employer if you can have your paycheck deposited into multiple accounts—if so, instruct it to send a certain percentage of your salary directly into your savings account. Or go through your bank, setting up automatic withdrawals from your checking to savings account that will force you to keep spending in check.

Tap into your IRA

Another great place to stash your cash? A traditional or Roth IRA, says Forrest. In addition to being a tax-friendly retirement vehicle, it allows you to withdraw up to $10,000 for a home. While withdrawals from a traditional IRA will be taxed, a Roth IRA you’ve owned for more than five years won’t be taxed at all, as long as you’re a first-time home buyer. Just be careful with this method, though, as you will be denting your retirement funds. But combined with other savings, it can quickly add some heft to your growing nest egg.

Check out down payment assistance programs

Depending on the city and state you live in, you may be eligible for down payment assistance programs, which provide money to help people buy a home. Go to Down Payment Resource to find programs you might be eligible for. Most offer up to $15,000, typically in the form of a grant or low-interest loan. Most require your income to be below the area median. But even if you make more, do your research—there are programs that provide funds for higher-income households.

Once your down payment is on a roll, it’s time to start looking for a home—and to do that, you’ll need to determine exactly how much house you can afford. 

Protect Retirement Assets from Stock Market Volatility

How to Protect Retirement Assets from Stock Market Volatility

      

RISMEDIA, Friday, September 11, 2015— (TNS)—You’ve been through volatile markets before. You know not to sell in a panic.

But if the recent market gyrations have your attention, putting a few rainy-day strategies in your retirement game plan—particularly if you are in your 60s—can help you make the best of the situation.

Delayed retirement credits—the 8 percent per year pickup in income you get for delaying claiming past your full retirement age up to 70—are a great deal. Some advisers even recommend spending down an investment portfolio as a way to delay. But if that means pulling income out of a wounded portfolio—or if you could be ensnared by Medicare cost hikes next year—it might be time for a rethink.

If you already started Medicare and were planning to begin Social Security benefits sometime in 2016, think about accelerating those plans, says Michael Kitces, a financial planner, blogger and research director at Pinnacle Advisory Group. With Medicare Part B premiums set to increase next year, most Social Security recipients can take advantage of the program’s “hold harmless” provision, which caps premium raises at a beneficiary’s Social Security cost of living adjustment, which next year is zero, Kitces says. (Be aware this won’t work for high-income beneficiaries who will be subject to Medicare’s surtax.)

“Accelerating a bit more to take advantage of the Medicare hold harmless rules may be appealing, but the decision whether or not to delay Social Security is still dominated more than anything” by your ability to forgo benefits, which if you can do it will be more valuable, he says.

Tapping some home equity is another way to avoid taking retirement income from stock funds, but traditional home equity lines of credit can be frozen in certain market conditions.

If you’re 62 or older, it might make sense to establish a line of credit using a reverse mortgage (under the federal home equity conversion mortgage program), says Shelley Giordano, principal of Longevity View Associates, a reverse mortgage consulting firm.

Shop around for lenders because Giordano says some are offering low or no closing costs in exchange for a slightly higher starting interest rate. Some also will allow a homeowner to establish a credit line with just a nominal initial amount, such as $50.

Hopefully, you have investments outside the stock market from which you are drawing money for day-to-day expenses. Likewise, if you’re still a few years from retirement and gradually pulling money out of the market to create a retirement income stream, you can afford to take a pause in that strategy to let markets stabilize.

At some point, however, you’ll need to refill those buckets and make withdrawals, and who’s to say the market won’t be in even worse shape a few years from now?

The question becomes, are we there yet? Should investors refrain from withdrawing from stock funds, even if it’s part of a longer-term rebalancing strategy? Should retirees think about forgoing an inflation bump, or even taking a pay cut?

“On a year-to-date basis the market is down 6 percent or so, so we’re not in a correction mode yet,” says Judith Ward, senior financial planner with T. Rowe Price, as markets were rebounding somewhat.

If the correction deepens to more like 20 percent by year-end, she says, that’s when she might suggest forgoing the inflation raise.

Of course, it never hurts to start thinking about expenses you could cut out if that day comes.

A market decline can be a good time to convert money in a traditional IRA to a Roth IRA because you can convert more shares for the same taxable withdrawal, but you also have to assess whether converting makes sense at your age, experts says. Do it if you’re trying to diversify retirement income tax liabilities or leave money to heirs, but otherwise it makes less sense at this age, experts says.

It could also be wise to take withdrawals from variable annuities and certain life insurance products while asset prices are down, says Michael Goodman, an accountant and financial planner with Wealthstream Advisors Inc.

And if you’ve been looking for an excuse to end a bad relationship with an adviser, leaving now could be a good time because if it involves selling some positions, you could owe less in capital gains taxes.

“Determine if your investments were allocated properly and what the new adviser will do differently” before jumping ship, cautions Candace Bahr, managing partner at Bahr Investment Group.

Even if you don’t have an adviser, if you weren’t allocated well, do something about it rather than sitting on your hands, says Michael J. Garry, an adviser and estate planning attorney with Yardley Wealth Management.

“If you’ve kept too high an allocation towards stocks trying to ride the run-up, then I’d say this is the time to hop off and get to the right allocation,” he says.

Janet Kidd Stewart writes The Journey for the Chicago Tribune.

©2015 Chicago Tribune
Distributed by Tribune Content Agency, LLC

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