Personal finance topics including budgeting, debt reduction, investing, income creation and saving.
It has been an amazing year this year, with a lot of twists and turns at our house. We were dealing with a tough pregnancy, and then a tough birth of our new son. And now we're getting to experience life as parents as well! It's been a lot of fun.
Now the new year is coming on, and with it new challenges, but also the hope of rebirth and fresh starts. So let's all take that opportunity to make this next year the best one ever!
God bless and Happy new year!
In the past couple of years a lot of people have been enticed into purchasing new windows, doors or other energy efficient home improvements because of the $1500 in tax credits that are available on qualified energy efficient home improvements. I think this last week of 2010 may see a flurry of activity as thousands of people rush to home improvement stores and contractors to get improvements done before the end of the year, and the expiration of the $1500 tax credit. Why you ask? Because the 2011 home improvement tax credit has been reduced in the amount, in addition to what qualifies. From the latimes.com
provisions in the bill could be bad news for homeowners interested in remodeling projects to conserve energy next year. The legislation slashed the popular tax credits for energy-efficient remodeling from 30% of an improvement’s cost ($1,500 maximum per taxpayer) to just a 10% credit with a $500 maximum for expenditures on insulation materials, exterior windows and storm doors, skylights, and metal and asphalt roofs that resist heat gain.
The home improvement tax credit we've had for the past 2 years allowed homeowners to claim up to 30% of cost of the home improvement, up to $1,500. The amount of that credit is substantial enough that a lot of people were deciding to finally upgrade old windows or doors – $1500 was just too much to pass up.
That tax credit is expiring on December 31st, 2010 (so act this week if you want in!). The tax cut package passed last week passed a new version of the tax credit for 2011, but the amounts have been reduced. Here are the details.
So you can receive at most a home improvement tax credit of $500. If you've already received credits totaling $500 or more from 2005-2010, you aren't able to claim the credit in 2011.
Most of the same products that were eligible for the 2010 home improvement tax credit are eligible for the 2011 version. The amounts on most have just been reduced and/or capped. Some of the eligible products include:
- Energy efficient doors and windows. Installation costs are not eligible for the credit. Other restrictions apply. EnergyStar windows have a max of only $200 eligible for the credit
- Water Heaters. Credit includes installation costs; some restrictions for energy efficiency apply. $300 max credit.
- Insulation, whether spray foam, fiberglass, or blow-in cellulose, they’re all covered so long as they meet IECC requirements. Installation cost is NOT covered.
- HVAC components, including advanced air handlers, air force heat pumps, central A/C units, boilers, propane, and gas furnaces. Tax credits include installation costs. $300 limit, and furnaces must now be 95% efficient.
- Biomass Stoves. $300 credit limit.
- Metal and asphalt roofs. Credit doesn’t include installation costs.
According to the government site, some of the tax credits allow you to claim installation costs, while other credits do not. To find out if your product is included, and whether you can include installation costs, check the government site here.
To claim the energy efficient products tax credit, you’ll need to claim the credit on your 2011 taxes in 2012. There will be a form from the IRS to send in with your return. (I’ll update with a link once it becomes available). The product has to be placed in service in 2011.
2011 Federal Income Tax Brackets for your reference.
The tax credits have been greatly reduced for many products. For example, if you replaced your windows last year, you may have been able to claim the full $1500 credit. This year, you'd be maxed out at $200. That's quite a drop.
Will that mean that less people go out to buy these energy efficient home products? Most likely. To me that really reduced the effectiveness and the reason for the credit. Why even have it if it doesn't have a stimulus effect?
A lot of building industry folks aren’t happy about the reduction in the credit either.
The net effect of all this, say home building and remodeling experts, will be to severely diminish consumers’ interest in energy-efficient home improvements. Donna Shirey, chairwoman of the Remodelers Council of the National Assn. of Home Builders and president of a contracting firm in the Seattle area, said the gutting of energy-efficiency credits “is a big step backward. It’s bad for the environment, bad for consumers and, of course, bad for jobs in our industry. We’re heading the wrong way here, sending absolutely the wrong message.”
What are your thoughts about the reduction in the amount of the credit? Do you think it will have a negative effect on home remodelers, contractors and other building trades? Tell us your thoughts in the comments.
This past week the Congress passed the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. The tax package was designed to extend the Bush era tax rates for another 2 years, in addition to extending unemployment benefits, lowering the estate tax and other smaller measures. This means that the 2011 federal income tax brackets will remain essentially unchanged.
A few new tax measures were created in addition to extending the current rates, however. Among them was the 2011 payroll tax holiday.
One measure that President Obama wanted to pass as a replacement to the expiring Making Work Pay tax credit that was enacted in 2009 is the new 1 year 2011 payroll tax holiday. The payroll tax, or FICA portion of your paycheck tax withholding – which funds Social Security and Medicare, will be cut by 2% for 2011. The withholding rates for your Social Security taxes will go from 6.2% to 4.2% for the 2011 tax year. The other 1.45% of your FICA taxes go to Medicare funding, and will remain unchanged.
What does that mean for the average taxpayer? Around a $1000 tax savings. Since the Social Security tax is capped at $106,800, the maximum savings that could be seen by a higher income individual is around $2136. This as opposed to a $400 credit for singles and $800 credit for families under the “Making Work Pay” tax credit.
Typically the payroll tax is taken care of by your employer or the company that processes your payroll. You as the employee shouldn't need to take any action – like filling out a W4 withholding form.
New withholding tables have been released by the IRS now, so most employers will begin updating their own tables soon. Since the legislation was passed so late in the year, employers will have until 1/31/2011 to put in place the new payroll tax rate of 4.2%, and make any adjustments or corrections by 3/31/2011. So you should starting seeing it shortly after the new year. If you haven't seen the changes in your paycheck byFebruary, you may want to ask your HR department when the change will be happening.
What are your thoughts on the new payroll tax holiday? Are you glad they enacted something to take the place of the “Making Work Pay” tax credit? What are your thoughts?
I just wanted to wish everyone a Merry Christmas! Thank you for reading my lowly blog this year as we've grown from nothing to the point where we've got thousands of page views every month. I couldn't have done it without you all, and I'm so thankful for every one of you in this Christmas season.
Things may be a bit dead around here for the next few days as we celebrate with family, but I hope that you and yours have a blessed holiday. God bless!
From time to time I get questions about blogging from friends and family members. They know I've started a couple of blogs and made them somewhat successful, and they want to know how they might go about setting up their own successful sites.
At this point I usually start talking to them about how much work it is to blog, how you have to constantly be writing content, promoting the site, networking and researching SEO. After I've been talking to them about this for a few minutes usually their eyes start to glaze over, and they begin to realize that making a blog successful isn't an going to be an easy project. Most of them ditch the idea before they even get started. To me that's a big mistake because starting a blog, while it is a lot of hard work, can also be extremely rewarding – both monetarily and in other ways.
Once they've heard just how hard blogging can be, they often move on to the question of how I can afford to spend so much time doing something that is essentially just a hobby in their mind. At this point I have to explain how I started blogging as a hobby, but after a year or so of constant effort I realized that it could be so much more. Blogging has the potential to become a nice side income, and if you work especially hard and have a bit of luck – you can turn it into a full time income. Because of that I started to treat my blogging more as a business. I think without that added benefit of being able to make quite a bit of money from blogging, I may have stopped writing quite some time ago.
While I haven't matched my day job income yet from my blog, I am blessed to say that it has been enough to replace my wife's day job income so that she could stay home with our son that was born 5 months ago. To me that's huge, having the peace of mind that this extra blogging income creates is priceless.
One of the great things about launching a blog is that it has almost zero startup costs, but has the potential to make quite a bit of money. What costs can you expect to incur right at the beginning?
Those are the main things you'll need to pay for. So for anywhere from $67-$200+/yr you can start your own money making business. That's not a bad deal!
I actually started another site last weekend. In about 1 hour I bought a domain name, added the domain to my hosting account, installed WordPress and the Thesis theme. Now it's up and running and being indexed by Google! Once you have done it a couple of times, setting up a new site is a breeze!
To me the biggest cost that there is related to blogging is the free time you'll lose to writing content, promoting your site, getting backlinks, tweaking your site, networking, engaging in social media, etc. There are endless tasks to perform with a blog, and if you don't enjoy it, you could burn out pretty quick. For me I would probably have blogged as a hobby anyway, and doing it for money just made it all the more attractive. I don't mind spending 20-30 hours a week on my sites because I actually enjoy the entire process. For others it might be more of a chore. Make sure you go in with eyes wide open.
Making money with a blog isn't easy, and it takes time. In order to make real money, you'll need to start building up content, get plenty of backlinks by participating in carnivals and writing for article sites, guest posting and a variety of other things.
As a general rule, however, if you do everything the right way, you can probably expect to be making at least something by your 5th or 6th month. My first site didn't take off until the 6th month, and at that point it's been a money maker ever since. This site you're reading this post on started making money it's second month because I already had some contacts to sell advertising to from my other sites.
So what are some of the biggest sources of income for some of the bigger sites?
What it really comes down to is that your income opportunities are only as limited as your imagination!
I won't go in depth in this post as far as step by step instructions on starting a blog, but here are a few tips for things I've learned about blogging.
So there's my brief intro into blogging as a business. I'll probably be writing more about this in the coming weeks. In the meantime, however, if you're interested in starting a blog, here's a comprehensive ebook on how to make money with a blog.
You can get $5 off by using this coupon code for a limited time: som5
Have your own blogging tips, or questions that you'd like answered? Tell us your thoughts in the comments!
The last few months we've had quite a bit of uncertainty when it comes to what will happen to our 2011 marginal tax rates. The Congress and President Obama have gone back and forth trying to work out a deal on extending the current tax rates. First there was no consensus on whether they would extend them for all taxpayers, or only some. Republicans wanted them extended for everyone, while the Democrats wanted them extended for everyone except high income individuals.
After the election at the beginning of November, however, President Obama took on a decidedly different tone when it came to the tax rate extensions. His party had lost power in the House, and he was now more open to a compromise to get something done. He doesn't want to risk having the rates go up on the middle class and poor, and admits that raising the rates while our economy is down like it is – wouldn't be the course he'd want to take.
A couple of weeks ago President Obama met with Republicans and hammered out a tax cut package that would extend the current tax rates for another 2 years. Also included in the package would be a social security tax holiday, in addition to an extension for 13 more months of unemployment benefits for the long term unemployed – which lapsed last month. Details of what is included in the package:
As of this week the tax cut package is still working it's way through Congress. Yesterday the Senate passed the package overwhelmingly, and it now moves on to the House.
The Senate approved a controversial $858 billion tax cut package Wednesday, overwhelmingly voting to extend the Bush-era tax reductions despite a series of objections from both the left and the right.
The measure passed 81-19 to advance to the House of Representatives, which will take it up on Thursday, according to Majority Leader Steny Hoyer, D-Maryland.
The package includes a two-year extension of the Bush-era tax cuts set to expire December 31. It also would extend unemployment benefits for 13 months, cut the payroll tax by 2 percentage points for a year, restore the estate tax at a lower level and continue a series of other tax breaks.
So one of the key hurdles, passage in the Senate, has now been cleared.The problem? In the House some of the Democrats have threatened to change certain provisions of the bill that they don't like, which could derail the compromise.
A number of House Democrats, including Speaker Nancy Pelosi, D-California, want to change the estate tax to levels previously approved in a separate House bill that would exempt inheritances up to $3.5 million and tax amounts above that at a 45% rate. Pelosi said Wednesday the change would bring in an additional $25 billion instead of providing tax protection to only 6,600 more families through the lower rate and higher exemption in the negotiated tax deal.
Some moderate Democrats have called for the House to pass the bill unchanged. So now we'll have to wait and see if the measure will be changed, and if so, what that means for hopes of it passing.
The House Rules Committee decided Wednesday night to allow a vote on changing the estate tax provision to the levels in the previously passed House bill. If approved, the changed bill would then go back to the Senate. If rejected, the House would then hold a separate vote on the Senate version, with approval sending the bill to Obama.
Republicans involved in the negotiations with the White House on the package have warned that any changes by the House could derail the entire proposal, causing tax rates to increase in 2011.
So now we wait and see what happens with the bill – if the House votes to change the estate tax provision, and if so, if the Senate will allow the changes. Some have said that such a change could derail the deal, and could mean that marginal tax rates go up on January 1st. We shall see!
UPDATE: Sounds like the House passed the bill now as well, 277-148. Both parties contributed almost an equal amount of votes to get it to pass – 139 Dems, 138 Republicans. All that remains now is for the president to sign the extension.
What do you think will happen? Will the compromise package be passed, or will changes be made to the package that sends it back to the Senate. Tell us what you think in the comments!