Gunning Daily News

New Increase in FICA Tax Hitting Americans' Paychecks

January 18, 2013 4:14 pm

As wage earners in the United States begin to receive their first paychecks in 2013, they'll likely notice their net pay has gone down. That's because a two-year payroll tax holiday expired on December 31, 2012, and was not renewed as part of the fiscal cliff deal, explains Barry Habib, chief market strategist at Residential Finance Corp (RFC), a nationwide mortgage lender. How can the average American offset the loss in take-home pay? Refinancing a home mortgage is one strategy definitely worth thinking about, Habib says.
Every worker will see a two percent FICA tax increase now that the rate has reverted from 4.2 percent to 6.2 percent. The increase in the FICA tax, which is deducted from workers' paychecks, will cause take-home pay to decrease by $600 per year for workers with an annual income of $30,000. Workers with an annual income of $50,000 will bring home $1,000 less per year, while workers with an annual income of $100,000 will bring home $2,000 less per year.

"While two percent may sound like a modest increase, the toll it takes on discretionary spending is much greater," Habib adds. Consider a couple in which each partner earns $45,000 per year, earning $90,000 combined. They will likely pay $26,000 in taxes, and their living expenses may be in the range of $46,000 a year, he explains. "That leaves a couple earning $90,000 in combined income with $18,000 in discretionary spending. A two percent tax hike resulting in $1800 less per year will feel more like a 10 percent reduction, as they're losing 10 percent of their discretionary income," Habib says.

One practical solution to offset the decrease in income is to refinance a home mortgage, Habib notes. With rates at historical lows, many Americans could benefit by refinancing to a lower interest rate, he says. "Of course, not everyone is qualified to refinance, or is in a position where it makes sense. However, for many homeowners, refinancing their mortgage could more than offset the loss homeowners will feel from the increase in the FICA tax," Habib says.

Habib offers the following tips to consumers considering a refinance:

  • Know the Current Value of Your Home
    A drop in your home's value may prevent you from being able to refinance if the equity in the property isn't enough to meet lenders' criteria. "Do some research and speak to a couple of real estate agents on what similar homes in your neighborhood have been selling for to get an accurate valuation. Doing so allows you to make a well-informed decision about whether refinancing is feasible and makes sense, before you spend money on an appraisal or pay any of the other additional fees associated with refinancing," according to Habib.
  • An Assumable FHA Mortgage Will Make Your Property More Valuable and Easier to Sell
    Homeowners may want to consider refinancing to an assumable Federal Housing Authority (FHA) mortgage, Habib says. With an assumable mortgage, the home buyer has the ability to take over the existing mortgage of the seller. An assumable mortgage typically raises the value of your home, and will certainly make it more sellable should you decide to sell, he notes. "Selling a home with an assumable mortgage gives you an edge on your competition," Habib says.
  • Instead of Giving the Bank Money in Points, Pay Yourself
    Think twice about paying points on a refinance, Habib advises. "It's tempting to see how low a rate you can get by paying more points, but you need to consider the cost of the money you're spending today," he says. Instead, Habib suggests homeowners think about using the money to reduce the principal on their mortgage. For example, on a $200,000 mortgage, rather than paying three points or $6000, the homeowner could pay their mortgage down to $194,000. "While your rate will be higher, your payment is based on a smaller principal amount, so you'll spend less on your mortgage in the long run," Habib says.
  • Refinance to a 15- or 20-Year Loan
    Strongly consider refinancing to a 15- or 20-year mortgage. "With today's low interest rates, you may find that your mortgage payments are pretty darn close to what you're paying now," Habib says. "With a shorter loan term, so much more of your payment is going toward principal, that even after a couple of months, you're realizing a benefit. "Homeowners who are able to refinance to a mortgage with a shorter term build a much greater amount of equity in their homes as time goes on, he adds.

Source: http://www.ResidentialFinance.com

Word of the Day

January 18, 2013 4:14 pm

Easement. Limited right to cross or use for some specified purpose the property of another. It may be permanent or temporary. Water, sewage, and utility suppliers frequently hold an easement across private property.

Q: What Is the Difference between Appraised Value and Market Value?

January 18, 2013 4:14 pm

A: A certified appraiser who is trained to provide the estimated value of a home determines its appraised value. The appraised value is based on comparable sales, the condition of the property, and several other factors.
Market value is the price the house will bring at a given point in time, once you and the buyer establish a “meeting of the minds” on price.

These Energy Saving Measures Still Generate a Sizable Tax Benefit

January 17, 2013 6:30 pm

To help you understand energy savings and tax benefits, I will provide you with some energy-related tips from the Alliance to Save Energy's Director of Government Relations, Rob Mosher.

As the New Year commences, Mosher says homeowners could be eligible to receive a sizable tax return if they invested in an electric vehicle, geothermal heat pump, or fuel cell system in 2012.

Certain electric vehicles acquired after 2009 are eligible for up to $7,500 in tax credits. Qualified plug-in electric vehicles qualify for a $2,500 tax credit, and the credit increases by $417 for each additional kWh of battery capacity up to $7,500.

A complete list of vehicles eligible for this tax credit is available at fueleconomy.gov.

Mosher says geothermal heat pumps installed anytime since 2009 in a main or second home qualify for a federal tax credit. These are similar to traditional heat pumps, but use the earth's natural heat to control the temperature of your home more efficiently.

The federal government is offering a tax credit of 30 percent of the installation costs, with no upper limit. All EnergyStar geothermal pumps qualify and are over 45 percent more efficient than standard models.

Visit EnergyStar.gov for more detailed information on qualified heat pumps and tax filing.

Installing residential fuel cell systems provides another opportunity for homeowners to save money and utilize federal tax incentives, according to Mosher. Fuel cells produce electricity through a chemical process of combining oxygen with hydrogen extracted from natural gas or propane.

While these systems can be expensive, they can also :

  • Supply a steady portion of the home’s electric energy needs;
  • Allow for excess electricity to be sold back to the local utility, and;
  • Power the home during power outages

The tax credit covers 30 percent of installation costs (up to $1,000 per kWh) for fuel cell systems placed in service in 2009 or later on a non-business property. Learn about fuel cell qualifications from the U.S. Fuel Cell Council at www.eere.energy.gov.

5 Credit Myths to Ditch Now

January 17, 2013 6:30 pm

Everyone knows that having a good credit score marks you as a credit-worthy individual with increased buying power. But, said consumer finance consultant Jill Krasny, many people have critical misconceptions about what makes for a good credit score.

Krasny offers five common credit misconceptions:

  • Having too much available credit can hurt your score – False. There is nothing in the credit scoring formula that penalizes a consumer for having too much available credit. If anything, it may increase your credit worthiness in the eye of lenders, who operate on the theory that having a lot of credit available but low balances and on-time payments make you the best possible risk.
  • Income is part of your credit score – Wrong. Credit reporting agencies do not even include your income on your report. Lenders are interested only in whether your pay your bills on time.
  • Once married, a couple’s credit score is combined – Wrong again. All consumers, married or not, have individual credit files and scores. But it is important to manage your finances carefully, especially when it comes to shared debts.
  • Carrying balances on credit cards is better for your score – Not. The only thing a running balance will get you is interest charges. Paying off your bill on time each month shows credit activity as well as credit worthiness.
  • A credit repair agency can get negatives off your report – False. If late payments are listed accurately on your credit report, no agency can legally remove them, no matter what they promise. If the information is correct, the only thing you can do is make on-time payments going forward. If the information is not accurate, you should file a dispute with the credit reporting agency, asking them to correct the inaccurate information or remove the negative info that doesn’t belong to you – which credit agencies are obligated to do within 30 days under the Fair Credit Reporting Act.

National Foundation for Credit Counseling Launches Spanish Version of MyMoneyCheckUp

January 17, 2013 6:30 pm

The National Foundation for Credit Counseling (NFCC) recently announced the expansion of MyMoneyCheckUp™, the NFCC’s free innovative online financial resource tool for consumers.

The tool is now available in Spanish at https://www.miayudafinanciera.org and www.DebtAdvice.org, bringing Hispanic populations and communities a unique and much-needed method of assessing personal financial health.

“Our mission at the NFCC has always been to provide the public with the resources necessary for financial stability,” says Gail Cunningham, spokesperson for the NFCC. “The introduction of MyMoneyCheckUp™ in Spanish allows us to bring the tool to a much wider audience.”

As of 2011, the Hispanic population comprised 16.7 percent of the United States population, the largest minority group following African-Americans. In addition, 20.3 percent of U.S. households speak a language other than English.

Recognizing the need for expanded financial resources to the Hispanic community, Experian provided a generous grant to translate MyMoneyCheckUp™ into Spanish.

“Experian is so pleased to work with the NFCC Member Agencies in helping families with their financial capability and in making this valuable tool available to a wider audience,” says Maxine Sweet, Experian Vice President of Public Education. “We have a shared goal of helping everyone learn to live credit smart. That starts with a clear understanding of your financial position and having readily accessible tools to help guide your future.”

The English version of MyMoneyCheckUp™ originally launched in 2011 to provide consumers with a means of evaluating four key areas of personal finance: budgeting and credit management, saving and investing, planning for retirement, and home equity.

After answering a series of topic specific questions, a personalized assessment of the individual’s overall financial health and associated behaviors is generated. With areas of concern identified, the analysis suggests changes that consumers are encouraged to implement in order to become more financially independent. The traditional red, yellow and green traffic light colors signal whether the consumer should continue on their current money path, proceed with caution, or stop and make a change respectively. Individuals can also complete an optional budget to further help them assess their financial health.

“When developing the tool, one goal was to make financial education more readily accessible to a broad segment of the population. Thousands of Americans across the country have already benefited from the English version of MyMoneyCheckUp™. It is our hope that the Hispanic community will now take advantage of this simple and free personal finance assessment tool, and embrace the opportunity to improve their financial stability,” continues Cunningham.

Since 1951, The NFCC and its members have promoted financial education, sound money management, and positive financial habits to millions of people in the U.S. and Puerto Rico, giving them the knowledge, capability, and support needed to achieve their financial goals. The NFCC Member Agency services are provided for free or at low cost, and are available in both English and Spanish.

For more information, visit www.DebtAdvice.org.

Word of the Day

January 17, 2013 6:30 pm

Earnest money deposit. Money that accompanies an offer to purchase as evidence of good faith. It is almost always a personal check, certified check, or money order rather than cash.

Q: What Is the Difference between List Price and Sales Price?

January 17, 2013 6:30 pm

A: The list price is your advertised price, or asking price, for a home. It is a rough estimate of what you want to complete a home sale. A good way to determine if the list price is a fair one is to look at the sales prices of similar homes that have recently sold in the area.

The sales price is the actual amount the home sells for.

Use Your Green to Go Green in 2013

January 16, 2013 5:56 pm

Many of us are interested in making eco friendly changes. But with all of the information available, deciding what energy efficient features to invest in can be confusing. When it comes to purchasing eco friendly amenities, electronics and the like, you want to be sure you’re investing in the best choice. Some great ideas about using your green to stay green came to me from Miriam Berg, who manages digital content for the Alliance to Save Energy.

Berg recently blogged on a number of cool things you can buy that will keep returning you some green in the form of energy savings. They include:
  • Designer CFL bulbs which are available in a variety of flower and butterfly shapes. Berg says the shapely Plumen line saves up to 80 percent on energy and lasts 8 times longer than a standard incandescent.
  • Berg also likes motion-sensing digital picture frames that display different photos every time you enter a room, and automatically turn off when you leave to save electricity.
  • Personal care products like electric shavers, hair clippers and trimmers with ENERGY STAR-certified battery chargers can save up to 70 percent compared to those with conventional charging systems.
  • Cordless power tools like screwdrivers, drills, and saws – as well as cordless yard care tools like lawn mowers, string trimmers, and shears are also on Berg's list. All use about 30 percent less energy with ENERGY STAR-certified battery chargers.
  • Berg is also steering DIYers to air-powered caulk guns -- so you don’t have to squeeze so hard every time you need a line of caulk. They also cut down on mess because it’s easier to stop the flow of caulk with an air compressor than with a manual gun.
  • Finally, Berg says the Nintendo Wii ($129) is the game for gamers who care about energy efficiency. Although no video game console is lauded for saving energy (in fact, Energy Star doesn’t label them), the the total annual cost for a heavy Wii gamer is $4.16, while the original Xbox or PlayStation 3 could cost upwards of $35 a year to power up. But that’s just pocket change compared to the amount of energy Berg says you save by turning off your console when it’s not in use – that single practice can save up to $100 a year.

5 Gifts to Ensure Happy, Healthy Dogs

January 16, 2013 5:56 pm

Today’s modern world shows how much our relationship with animals has changed, says animal chiropractic consultant Dr. Rod Block.

“Back before the mechanical wonders of industrialization, we relied upon animals to carry the brunt of our work; essentially, their purpose was to haul loads, plow fields and chase down prey,” says Block, author of “Like Chiropractic for Elephants,” a book in part about his experience treating elephants and other animals for chiropractic problems.

“Today, tractors and other marvels of the post-industrial era have largely replaced the duties of the working animal. In a world where humans distance themselves more and more from one another, these animals have become our companions, family members and closest confidantes.”

More friends and custodians of animals – including dogs, horses and, yes, elephants – realize that they too suffer from spinal irregularities, he says.

“Of course, any living creature with a spine is vulnerable to injury, which can incur years of suffering and even death,” he says.

With that in mind, he offers gift ideas for the furry family member that cannot tell you with language what it needs:
• Dog harnesses: For those who haven’t already noticed, collars and choke chains hurt dogs that have a habit of pulling during walks. Collars centralize stress on their neck. Ideally, you should train your dog to not pull -- there are how-to books and programs that can help. In the meantime, and even after successful training, a dog harness works best on that rare occasion when, for example, a squirrel piques their interest. Harnesses appropriately distribute weight throughout a canine’s torso. They’re also appropriate for cats on leashes.
• Need a chiropractor? … Some animals go many years before their caretakers realize they have a significant mobility problem, or that there is an affordable solution to the problem. Many simply do not consider alternative health measures for their horse, dog or cat; they think their only options are expensive, invasive surgery, or nothing. To spot problems early, always monitor how they walk or run, and how they hold their head. “Pay attention to their movements, and how they respond to touch,” he says.
• Don’t overfeed: An overfed dog or cat, just like an obese human, experiences damaging health consequences. Excess weight puts stress on the skeleton and joints, and obese cats and dogs can get diabetes. Feed them the appropriate amount of pet food, and do not give them scrap from the dinner table. If your dog has grown accustomed to begging at meal times, put him in another room when you sit down at the table. Our pets do not have the right digestion system for many human foods.
• Dog beds: Know your dog. You wouldn’t give a child’s bed to a large adult; consider what’s appropriate for your dog’s length, weight and sleeping style. This knowledge will help you when confronted with the many styles of beds: bagel, doughnut and bolster beds; cuddler or nest beds; dog couches; round, rectangle or square beds; or elevated beds with frames. Also, consider manufacturer differences. Each may have its own definition of “large dog,” for example.
• Holistic options: As health-care avenues have expanded for humans, so too have they for pets. Often, the answer for human and animal well-being is not an overload of prescription medication. Acupuncture is a valid option with no adverse side affects that has shown positive results, especially for large animals like horses. In general, use common sense; an overstressed environment is not good for any living thing. Consider researching the latest alternative-health options for your animal.

For more information, visit www.drrodblock.com.