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2018 tax rates announced

The 2018 tax rates below are as proposed in the bill that will be voted on tomorrow.

The tables aren’t the actual tax you pay on gross income, but on taxable income which is gross less a number of items, including the standard deduction for single $12,000 or joint $24,000. You’ll note, there’s no mention of personal exemptions, the $4,050 per person, including dependents in your household, that’s gone, in favor of this higher standard deduction. Yes, this means that if you itemized in 2017, that (a) you might not be itemizing any longer, and (b) those who still itemize don’t see the benefit of the higher standard deduction, only the loss of exemptions.

Last, if the bill doesn’t pass, I’ll return and edit, so this page will accurately reflect the 2018 rates, once they are certain. Along with a follow up post discussing highlights of the rest of the bill and the impact of the new tax code details.

I’ll be referring back to this article over the next year whenever the tax table is part of the conversation. Check out the new rate table and start planning for 2018.

Single

Taxable income is over But not over The tax is Plus Of the amount over
$0 9,525 $0.00 10% $0
9,525 38,700 952.50 12% 9,225
38,700 82,500 4453.50 22% 38,700
82,500 157,500 14,089.50 24% 82,500
157,500 200,000 32,089.50 32% 157,500
200,000 500,000 45,689.50 35% 200,000
500,000 150,689.50 37% 500,000

 

Married Filing Jointly
Qualifying Widow(er)

Taxable income is over But not over The tax is Plus Of the amount over
$0 19,050 $0.00 10% $0
19,050 77,400 1,905.00 12% 19,050
77,400 165,000 8907.00 22% 77,400
165,000 315,000 28,179.00 24% 165,000
315,000 400,000 64,179.00 32% 315,000
400,000 600,000 91,379.00 35% 400,000
600,000 161,379.00 37% 600,000

 

How to Quickly Fix Your Credit in 3 Months

As a licensed Realtor ™ I know how important your credit score is, so I am pleased to share today’s guest post with my readers –

Like many Americans, you’ve probably noticed that your credit score is a deciding factor in much of your life. Want a new job? Better have a good credit score. Looking for a better apartment? Not without stellar credit. Dreaming of a credit card with awesome rewards? Sorry, your credit is just too low.

Fortunately, quickly fixing your credit in three months is possible.

Pay off debt

Believe it or not, you credit score is partially determined by how much money you owe your creditors. A number, called your debt-to-credit ratio, is a big part of your credit score. If you owe $1,000 on a $5,000 credit card, your debt-to-credit ratio is 1000/5000 or 0.20. The closer your ratio gets to 1, the worse your credit will be.

Paying off as much debt as possible – even if you have to drain your savings temporarily to do so – is a great way to boost your credit score.

Similarly, if you have good enough credit to get a new credit card, or a credit limit increase, do so. Increasing your amount of available credit will lower your debt-to-credit ratio and can increase your credit score.

Remove errors

Next, order a copy of your credit report from all three credit bureaus (Equifax, TransUnion, and Experian). Once you’ve done so, comb through the reports to find any potential errors or omissions. Many Americans will find errors on their credit report and, unfortunately, these errors can have a negative impact on their credit score.

Fortunately, most errors are easy enough to fix. There are companies you can hire who will contact the credit bureaus directly to have these mistakes corrected. Although the companies can be pricey, it is definitely the easiest option to have the errors removed. Many credit repair companies will also teach you how to build credit once they’ve cleaned up your credit report, in a sort of two-for-one deal.

If you need to fix your credit quickly, you’ve got two options: The first is to improve your debt-to-credit ratio by paying off debt or increasing credit. The second is to remove errors from your credit report either through a credit repair company or by contacting each agency directly. Whichever you choose, you’ll be on your way to better credit in three months.

Buying Life Insurance

A guest post today, from Crystal –

A lot of things can affect your life insurance premiums. Your family health history, gender, age, and lifestyle choices can have an impact on the policies you are eligible for, and what you ultimately pay for them. Insurance laws and the rights of the insured vary from state to state. Of course, insurance can be a confusing quagmire for those shopping for a new policy.

Most states offer some wiggle room when it comes to late payments. State laws meant to protect consumers help reduce penalties for late or missed payments. This is important because state laws are one of the main forms of regulation and consumer protection. That is, state legislatures regulate and write many of the laws that insurance companies need to follow. This prevents the large insurance companies from running roughshod over the insured.

Whether you are shopping for a whole or term life insurance policy, you have to consider how these state laws might affect your policies. This is particularly important when moving from state to state. Certain aspects of an old policy could become null and void when carried out in a new state. Every state has its own website (like this one for Washington state) listing official insurance laws and regulations.

If you are in the market for a new policy and trying to educate yourself before making any final decisions, the Health IQ quiz will be very helpful. Take a few minutes to take this life insurance quiz, and you will definitely learn some vital info about how state laws can effect insurance policies.  Also, visit www.HealthIQ.com/quiz to find other financial health quizzes, such as Student Loan Refinancing or Loans: Debt Snowball or Avalanche.

Avoiding Taxes While Building Wealth For You and Your Family

Today, a guest post from my friend, Crystal.

It can be difficult to make confident financial plans when you have a family. Most of us find family life busy and challenging. Oftentimes money is in too short supply. If this is familiar to you, you may not find the time or purpose in thinking about building future wealth. After all, how would you start to make it happen?

Finding ways to avoid taxes is one of the best ways to build further wealth, especially when you have a family. Fortunately, there are a number of tax-protection methods made available by the government and various programs. By becoming aware of these and taking advantage of them, you’ll start to have more money to spend and save. This is by no means a complete list, but it’ll show you the kind of things to look for and practice.

  1. Life Insurance. Life insurance isn’t the first tax avoidance strategy that most people think of, but this doesn’t mean that it doesn’t have excellent potential. Whole life insurance programs may offer tax-protected investment opportunities, which can be of great service if you’ve already maxed out other plans. For term life, the death benefit of no exam life insurance policies is almost always paid out tax free. In either case, life insurance has positive tax implications, even as it provides security and peace of mind for the future.
  1. Using Real Estate Wisely. If you sell a home, you will have to pay a big tax bill…that is, unless you buy another house with that money right away. Another way to use a home to save on your tax bill is to write off the mortgage insurance that you’re required to have in most situations. The tax benefits of home ownership are not as juicy as they used to be, but you may be able to find some real savings when writing off renovations, home office space, some local taxes, and other areas.
  1. Take Advantage of Tax-Protected Investment Accounts. Roth and Traditional IRAs, 401(k) plans, and a variety of other tax-protected investment accounts are all made available by the government so that people can prepare for an independent financial future, without having to rely on the government for support down the road. People get quite sophisticated with accounts like these, finding ways to maximize the annual contribution limits far above what they may seem to be on the surface. Whether or not you go all the way like that, doing something simple like maxing out an IRA is a great place to start.

There are plenty of ways to avoid taxes legally, while using the money you’re sheltering to build a better financial future for you and your family. Pay attention to all government tax write-offs made available to parents with young children, and focus on ways to pass on your estate with minimal tax loss if you are older. In any case, becoming aware of the most efficient ways to pay and not pay taxes is one of the best ways to build wealth in the long run.

The #FightFor15

The #FightFor15 is the movement to raise the minimum wage in the United States, and many other countries in the world. I’ve touched on the topic of minimum wage before, first in a 2013 article “Time to Raise The Minimum Wage” and in 2014, “What Wealth Transfer Looks Like” in which I make the case that taxpayers are directly supporting rich shareholders of companies like Walmart by subsidizing their workers’ income so the company can pay substandard wages. I also addressed the objection that “higher minimum wage will result in fewer jobs.”

Now that we are in the midst of tax reform discussion, I find that the minimum wage discussion is inextricably linked to outrage regarding the huge tax cuts the top 1% are bound to enjoy. I understand that the tax code doesn’t address minimum wage, nor does it address healthcare, but there’s no separating them as congress and the senate are both populated by horse traders, always withholding a vote on one issue to get their way on another. If the tax code is about to get changed so the top .2% can save the $100B tax bill their estates might be subject to, it’s only right to discuss how we can help nearly half the US population who are earning a sub-$15 wage.

There’s a cliche that those who don’t study history are doomed to repeat it. Today, this is appropriate to the GOP propaganda suggesting that cutting corporate taxes will “bring back jobs”, “help middle class workers”, and “raise salaries across the board.” This concept was called Trickle Down Economics, and yes, it was proven to have been a failure. Wikipedia offers a Will Rogers quote that gives a bit of perspective:

“This election was lost four and six years ago, not this year. They [Republicans] didn’t start thinking of the old common fellow till just as they started out on the election tour. The money was all appropriated for the top in the hopes that it would trickle down to the needy. Mr. Hoover was an engineer. He knew that water trickles down. Put it uphill and let it go and it will reach the driest little spot. But he didn’t know that money trickled up. Give it to the people at the bottom and the people at the top will have it before night, anyhow. But it will at least have passed through the poor fellows hands. They saved the big banks, but the little ones went up the flue.”

If a clever quote isn’t satisfying, let’s look at some history –

There are two important things to understand in this graph. In relative numbers, average wages have gone nowhere in 50 years. Less than 18% real growth since 1968. Even worse, the minimum wage has fallen in real terms during this time.

Let me offer you a term you might not have hear before, “Velocity of Money.” When I learned this term in grad school, I thought it was great, I imagined money going through the economy getting spent over and over inside of just one year. That’s actually what this phrase means, it’s the total dollar amount of transactions divided by the money in circulation. This raises a major point. $1000 given to a 1%er (Those making over about $400K per year) is just a rounding error, less than a half day’s wages, and just deposited to their checking account. The minimum wage worker is taking the next dollar, the next hundred dollars, and going to the grocery store to buy food. To the department store to replace their kid’s worn out clothing. In other words, it gets spent so fast that it’s gone before the next pay day comes. If trickle down proved a failure, the bottom up approach would provide spectacular results, if only it could be implemented.

Next, let’s consider the GOP’s recent campaign of 31 Reasons for Tax Reform. I plan to write more on this, but today, I’m thinking about how they suggest that cutting corporate taxes will somehow bring back manufacturing (On the page for Aug 7). It’s not tough to find that Ivanka Trump has her products made overseas and for wages that are sub-$1 per hour. There is no reason to expect that any business with a lower tax burden will use that money to create higher paying jobs, it will simply raise their profits. There are classes of manufacturing, clothing for one, that just aren’t coming back. American Apparel has done an admirable job of declaring their manufacturing to be “Sweatshop Free,” and also filed for bankruptcy a second time.

I’ve continued to see people say that the low wage workers should get an education, college, of course, and get a higher paying job. Now, let me show you why this suggest is remarkably ignorant.

This is a forecast from the Bureau of Labor Statistics. It offers a look at the jobs they expect to grow in number by the most over the next decade, beginning in 2014. What do you see? I’ll tell you the two things that spoke the loudest to me. First, manufacturing didn’t make the list, these are all service jobs. More important, I added the numbers. Of the 4.13M jobs projected, 55% were sub $15, in this case, $26,590 or lower. There is something disingenuous (and innumerate) about the rich person suggesting that it’s possible for everyone to have an above average education and approach an above average wage.  When I go to a restaurant, I’m not thinking my waitperson should go get a better job, I’m hoping that she is making tips and an overall wage that gives her a good life. It gets even more personal when I visit my mother in law, in an assisted living facility. An average $11/hr for personal care aides who are taking care of our loved ones. The same people saying “go get an education” would be disappointed to find they can’t get any care for their own parents when the time comes. I’ll say it to anyone, I love my mother in law. Unfortunately, we are at a point where she needs the care that can only come from 24/7 heath aides taking care of her. They are not lazy by any means, and deserve to be well paid. You can read the full list above, and hopefully walk away with one message – we need people to do these jobs, and all they ask for is that as wealth in the US grew enormously this past half century, their wages should have kept up. The disparity in the graph I offered above is the creation of a shift in the distribution of income, where the newly created wealth went to the top, at the expense of the middle class.

A few years ago, I read an article, The Pitchforks Are Coming… For Us Plutocrats. Written by a multibillionaire who recognizes that the divide between rich and poor is growing, rapidly. You can read the full article, but I’ll share the most frightening part – “But the problem isn’t that we have inequality. Some inequality is intrinsic to any high-functioning capitalist economy. The problem is that inequality is at historically high levels and getting worse every day. Our country is rapidly becoming less a capitalist society and more a feudal society. Unless our policies change dramatically, the middle class will disappear, and we will be back to late 18th-century France. Before the revolution.” He goes on to say, “In fact, there is no example in human history where wealth accumulated like this and the pitchforks didn’t eventually come out. You show me a highly unequal society, and I will show you a police state. Or an uprising. There are no counterexamples. None. It’s not if, it’s when.”

The most unfortunate thing is that the solution is not difficult, in fact, it’s very simple. A living minimum wage has a remarkable domino effect. When people are not going to bed hungry every night, or making decisions between one necessity and another, local crime goes down. The need for medical care due to malnutrition also goes down. When parents are making enough money to make ends meet on only 80 hours a week combined,  they are available to their children, and the next generation performs better. We are at a critical juncture in our history, there’s a choice to be made here that will be regarded by historians as either “the moment we decided as a society to eliminate poverty in the US” vs “the new tax code that spoke volumes about being ‘doomed to repeat it’.”

 

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