Below is a list of some of the top tax deductions that are often overlooked. Many of these common deductions have limits and qualification rules, so don’t assume any entitlement. Review the list and look into any of the items that sound like they may apply in more detail. Also remember that the rules change often. Some of these items were often overlooked in prior years, but have become easier to spot on the latest forms. Others may have reduced benefits, or none at all, compared to previous years. Even if you do qualify for the deduction, some are either/or, meaning that an alternative deduction might be more valuable. If nothing else, you’ll be aware of these items when the relevent section of Turbo Tax is reached, or when you discuss deductions with your accountant or tax preparer.

Continue >>

At tax time, the question always comes up about whether to use software or hire someone to do your taxes for you. While this post is titled, TurboTax versus CPA, those are really just specific examples of each side of the argument.

When I say Turbo Tax, I mean:

• TurboTax
• TaxCut
• Filing online at irs.gov
• Filing out a paper 1040
• etc

When I say CPA, I mean:

Continue >>

As difficult as is can be to decide when to buy an investment, knowing when to sell can be even more difficult. This is particularly true of losing investments. When our investments decline, the decision needs to be made whether to cut our losses, do nothing, or invest more to take advantage of the lower price.

I wish that I could say that there’s a tried and true rule, such as when an investment has declined by a certain percentage, but there are too many other factors. The type of investment, time held, tax consequences of a sale, risk/reward profile, and countless other pieces of information go into the decision. Another aspect of selling a loser is that you have to admit that you may have made a mistake. Far too often people hold on to their losers, hoping for a turnaround. What’s worse: getting out of an investment only to see it recover or to hold on and watch a continued decline?

Continue >>

The fourth installment of a blog carnival on the subject of P2P Lending is now available at Prosper Lending Review. My recent post, P2P Borrowers: The Greatest Tenants You Can Find, is a part of this event.

A little competition between potential mortgage lenders can help to get you the best deal. Going into the process, it’s good to know the prevailing rates for the type of loan you are looking for. I get that information from the “today’s feature rates” section at Capitol Federal. Those rates may not be what you’ll get depending on your credit rating and location, but give you a ballpark estimate of what you can expect. If lenders come back radically different than what you see there, that indicates that something is wrong. It could be you (bad credit,etc) or them.

The next step is to apply with multiple lenders. You want to balance the work of applying with the benefit of having multiple offers. I usually get two quotes, but more may be even better. Having multiple quotes allows you to bargain back and forth with each company. I’ve found it useful to deal with a specific person (preferably a manager) at the lenders rather than with a generic customer service rep who may not be able to make a deal happen.

Continue >>

I just added a “Mortgages and Real Estate” category to the Personal Finance Topics section. A few recent posts fell into that category, so it seemed like a logical addition.

I’ve mentioned it in the past, but confusion over the tax deduction for mortgage interest warrants it being repeated: the deduction is not a reason to have a big mortgage. Too many people get talked into buying more house than they can afford because they get sold on the idea that a big mortgage means a big deduction from the interest you pay. While it’s true that the more you pay in interest, the larger your deduction will be, that deduction is simply returning a portion of your money to you. You would be much better off not paying the interest in the first place.

The amounts vary with your tax bracket, but let’s assume that you are in the 28% bracket. That would mean that for every dollar you spend in mortgage interest, you’d reduce your taxable income by a dollar, which would save you 28 cents in taxes. If you were in the 25% bracket, you’d save 25 cents per dollar spent, etc. Spending a dollar to save 28 cents means that you are losing money. Having a larger mortgage and paying more in interest means that you are losing more money.

Continue >>

I came across a great article about purchasing a home in a buyer’s market. It can be found on the Irvine Housing Blog (link below). While the article, and the blog, deal with real estate in Irvine, CA, the information is practical as a general resource as well. Even those buyers in markets that didn’t balloon as drastically as southern California can no doubt learn some valuable tips from the humorous and informative post. While not all buyers will go to quite the extremes suggested, you can pick and choose the methods that will work best for your situation and market. Read the post here.

I keenly remember the excitement that surrounded my first read of a book that has become a financial classic: Rich Dad, Poor Dad by Robert T. Kiyosaki. It wasn’t just the philosophical difference in how assets are traditionally defined (things you own with perceived value) versus the author’s new definition (things that put money into your pocket each month.) No, the real excitement came from the practical application that accompanied that definition: investing in rental property.

For all of the benefits that come along with finding a rental property with positive cash flow, the downsides (even if only perceived to be so) hold people back from such an investment. Even though the author provided many solutions (such as hiring a property manager) to the typical complaints of those opposed to rental property (such as “I don’t want to fix toilets”) there were still some things that were holding me back too. I liked the idea of investing in something that paid me back regularly, but the overhead and management of a rental property business dissuaded me from the investment.

Continue >>

How many times have we heard budgeting advice simplified down to “cut coffee out of your daily routine”? Sure, it’s sound advice and I’ve probably even made that recommendation myself from time to time. It’s true that cutting back on small, repetitive items can have a large impact, but it’s often easier and more effective to focus budgeting efforts on larger items, what I call the heavy hitters. Reducing costs on more expensive items not only has a larger effect, there’s typically more margin available to be cut.

This philosophy is similar to one outlined by authors Marcus Buckingham and Curt Coffman in their book First, Break All the Rules. They stressed the value of managers spending as much time as possible with their top performers rather than wasting time on under performers. The same idea applies to your budget: Spend as much time and effort reducing your largest costs. You can cut back on coffee all you want, but doing so won’t have nearly the effect as reducing your largest costs (like housing, insurance, and food) by the same percentage.

Continue >>