Mortgage Borrowers Should Know Their Rates

Not knowing your mortgage rate can be an expensive mistake, especially in this rising interest rate market.

Yet nearly three-in-10 mortgage borrowers (29 percent) either didn’t know their mortgage rate or wouldn’t say, according to a survey by Bankrate.

This is a big problem, says Martin Choy, operations manager at Westwood Mortgage in Seattle.


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Foreclosure and Buying a Foreclosed Home: A Guide

A mortgage is a type of secured loan, with the house serving as collateral. Technically, a borrower owns the house as soon as they sign the mortgage contract, but if they fail to meet their monthly repayments and any other obligations, the lender may seek to secure the asset. This process is known as foreclosure. […]

Foreclosure and Buying a Foreclosed Home: A Guide is a post from Pocket Your Dollars.

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What Is the Self-Employment Tax?

Working for yourself, either as a part-time side hustle or a full-time endeavor, can be very exciting and financially rewarding. But one downside to self-employment is that you're responsible for following special tax rules. Missing tax deadlines or paying the wrong amount can lead to expensive penalties.

Let's talk about what the self-employment or SE tax is and how it compares to payroll taxes for employees. You’ll learn who must pay the SE tax, how to pay it, and tips to stay compliant when you work for yourself.

What is the self-employment (SE) tax?

In addition to federal and applicable state income taxes, everyone must pay Social Security and Medicare taxes. These two social programs provide you with retirement benefits, disability benefits, survivor benefits, and Medicare health insurance benefits.

Many people don’t realize that when you’re a W-2 employee, your employer must pick up the tab for a portion of your taxes. Thanks to the Federal Insurance Contributions Act (FICA), employers are generally required to withhold Social Security and Medicare taxes from your paycheck and match the tax amounts you owe.

In other words, your employer pays half of your Social Security and Medicare taxes, and you pay the remaining half. Employees pay 100% of federal and state income taxes, which also get withheld from your wages and sent to the government.

When you have your own business, you’re typically responsible for paying the full amount of income taxes, including 100% of your Social Security and Medicare taxes.

But when you have your own business, you’re typically responsible for paying the full amount of income taxes, including 100% of your Social Security and Medicare taxes.

Who must pay the self-employment tax?

All business owners with "pass-through" income must pay the SE tax. That typically includes every business entity except C corporations (or LLCs that elect to get taxed as a corporation).

When you have a C corp or get taxed as a corporation, you work as an employee of your business. You're required to withhold all employment taxes (federal, state, Social Security, and Medicare) from your salary or wages. Other business entities allow income to pass directly to the owner(s), so it gets included in their personal tax returns.

You must pay the SE tax no matter if you call yourself a solopreneur, independent contractor, or freelancer—even if you're already receiving Social Security or Medicare benefits.

You must pay the SE tax no matter if you call yourself a solopreneur, independent contractor, or freelancer—even if you're already receiving Social Security or Medicare benefits.

How much is the self-employment tax?

For 2020, the SE tax rate is 15.3% of earnings from your business. That's a combined Social Security tax rate of 12.4 % and a Medicare tax rate of 2.9%.

For Social Security tax, you pay it on up to a maximum wage base of $137,700. You don't have to pay Social Security tax on any additional income above this threshold. However, this threshold has been increasing and is likely to continue creeping up in future years.

However, for Medicare, there is no wage base. All your income is subject to the 2.9% Medicare tax.

So, if you're self-employed with net income less than $137,700, you'd pay SE tax of 15.3% (12.4% Social Security plus 2.9% Medicare tax), plus ordinary income tax.

Remember that your future Social Security benefits get reduced if you don't claim all of your self-employment income.

What is the additional Medicare tax?

If you have a high income, you must pay an extra tax of 0.9%, known as the additional Medicare tax. This surtax went into effect in 2013 with the passage of the Affordable Care Act (ACA). It applies to wages and self-employment income over these amounts by tax filing status for 2020:

  • Single: $200,000 
  • Married filing jointly: $250,000 
  • Married filing separately: $125,000 
  • Head of household: $200,000 
  • Qualifying widow(er): $200,000

What are estimated taxes?

As I mentioned, when you’re an employee, your employer withholds money for various taxes from your paychecks and sends it to the government on your behalf. This pay-as-you-go system was created to make sure you pay all taxes owed by the end of the year.

You must make quarterly estimated tax payments if you expect to owe at least $1,000 in taxes, including the SE tax.

When you’re self-employed, you also have to keep up with taxes throughout the year. You must make quarterly estimated tax payments if you expect to owe at least $1,000 in taxes, including the SE tax.

Each payment should be one-fourth of the total you expect to owe. Estimated payments are generally due on:

  • April 15 (for the first quarter) 
  • June 15 (for the second quarter) 
  • September 15 (for the third quarter) 
  • January 15 (for the fourth quarter) of the following year

But when the due date falls on a weekend or holiday, it shifts to the next business day. Your state may also require estimated tax payments and may have different deadlines.

How to calculate estimated taxes

Figuring estimated payments can be extremely confusing when you’re self-employed because many entrepreneurs don’t have the faintest idea how much they’ll make from one week to the next, much less how much tax they can expect to pay. Nonetheless, you must make your best guesstimate.

If you earn more than you estimated, you can pay more on any remaining quarterly tax payments. If you earn less, you can reduce them or apply any overpayments to next year’s estimated payments.

If you (or your spouse, if you file taxes jointly) have a W-2 job in addition to self-employment income, you can increase your tax withholding from earnings at your job instead of making estimated payments. To do this, you or your spouse must file an updated Form W-4 with your employer.

The IRS has a Tax Withholding Estimator to help you calculate the right amount to withhold from your pay for your individual or joint taxes.

How to pay estimated taxes

To figure and pay your estimated taxes, use Form 1040-ES, Estimated Tax for Individuals, or Form 1120-W, Estimated Tax for Corporations. These forms contain blank vouchers you can use to mail in your payments, or you can submit funds electronically.

When you have a complicated situation, including having business income, one of your new best friends should be a tax accountant.

For much more information about running a small business successfully, check out my newest book, Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers. Part four, Understanding Business Taxes, covers everything you need to know to comply and stay out of trouble.

From personal experience, I can tell you that when you have a complicated situation, including having business income, one of your new best friends should be a tax accountant. Find one who listens well and seems to understand the kind of work you're doing.

A good accountant will help you calculate your estimated quarterly taxes, claim tax deductions, and save you money by helping you take advantage of every tax benefit that's allowed when you're self-employed. In Money-Smart Solopreneur, I recommend various software, online services, and apps to help you track expenses, deductions, and tax deadlines that will keep your business running smoothly.

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20 Money-Saving Auto Insurance Discounts

If you own a car or truck, you know it can be expensive. Your loan payment, ongoing maintenance, fuel, taxes, and auto insurance can take a big chunk of your budget. According to a 2019 AAA study, the average cost to own and operate a new vehicle was $9,282 per year.

When you consider just auto insurance, the most recent data from the Insurance Information Institute shows that the average cost is $936 per year nationwide. However, where you live significantly affects your rate. New Jersey drivers pay the most, $1,309, and Iowa drivers pay the least, $628 per year.

Many personal attributes get factored into your base car insurance rates that you can't change. They include where you live, if you’re a homeowner, your age, gender, marital status, and credit rating.

Insurance savings are available, but many policyholders don’t know what discounts exist or that they need to ask for them.

However, when it comes to getting auto insurance discounts, you have more control. Insurance savings are available, but many policyholders don’t know what discounts exist or that they need to ask for them.

In this post, we’ll review 20 auto insurance discounts that can easily save you money. What’s available depends on your insurer and the state where you live.

But even if you only qualify for a few insurance discounts, they can add up. Then you can put your savings toward something more rewarding, such as taking a vacation or boosting your emergency fund.

20 Money-Saving Auto Insurance Discounts

See how many of the following discounts you qualify for.

1. Safe Driver Discount

Your driving history plays a significant role in how much you pay for car insurance. It makes sense that auto insurers love safe drivers and are willing to reward them for being claim-free.

If you have a clean record with no moving violations or at-fault accidents over the past three to five years, most insurers typically give you a nice discount.

Potential savings: 10% to 20%.

2. Educated Driver Discount

But what if you don’t have a squeaky-clean driving record? You may be able to redeem yourself by passing an in person or online defensive driving course. Insurers know that boosting your education and skills can make you a better driver.

Potential savings: 5% to 15%.

3. Affiliation Discount

Did you know that belonging to a particular group can qualify you for a car insurance discount? Depending on your insurer, it’s likely that they have hundreds of different partner organizations that allow members to get a break on the cost of car insurance.

They may include alumni associations, education organizations, certain fraternities or sororities, honor organizations, and recreational groups.

Potential savings: 5% to 10%.

4. Occupation Discount

There are also auto insurance discounts if you work in specific industries or occupations, such as being in the military, a teacher, medical professional, or government employee. Also, members of professional associations, such as unions and state bar associations, often qualify for reduced rates.

Potential savings: 5% to 15%.

5. Good Student Discount

An often-overlooked car insurance discount is for students who make good grades. You typically qualify if you’re in high school, college, or graduate school (up to age 26) and have at least a “B” average.

Insurers consider good students less of a risk when they’re behind the wheel. So, parents shouldn’t miss the opportunity to make it more affordable to insure their young drivers.

Potential savings: 10% to 25%.

6. Distant Student Discount

Another way to cut the cost of insurance for students who live away from home, no matter their grades, is to request a distant student discount. It applies if a student lives at least 100 miles away from home and doesn’t have an insured vehicle with them on campus. They’ll be covered when they come home for breaks, but at a reduced rate.

Potential savings: 5% to 25%.

7. Low Mileage Discount

Maybe you’re driving less for a new job or keeping a car in the garage more often. If your driving patterns change, be sure to let your car insurance company know. Vehicles that are on the road less have fewer claims, and that earns you a substantial insurance discount.

Potential savings: 5% to 15%.

8. Usage-Based Discount

Many insurers offer usage-based insurance or UBI, which adjusts your rate based on how you drive. Data may be collected using a device that you keep in your vehicle or that gets reported from a smartphone app.

UBI programs evaluate different driving behaviors such as the time of day you drive, your average speed, how hard you brake and corner, and your mileage. If you’re considered a safe driver, your discount gets applied at renewal.

Potential savings: 5% to 40%.

9. Loyalty Discount

Every auto insurer wants to retain existing customers and give you every reason not to switch. Being loyal to one company for at least a few years often results in substantial savings.

Potential savings: 10% to 25%.

10. Multi-Car Discount

If you have more than one vehicle in your household, insuring all of them with the same company usually gives you a multi-car discount. Insurers offer incentives to make sure they get as much of your business as possible.

Potential savings: 10% to 25%.

11. Bundling Discount

In addition to insuring more than one vehicle, getting different types of coverage with the same insurer is known as bundling or a multi-line discount. Many insurers cover more than just cars. You could get auto and homeowner, renters, or life insurance with the same company and score savings.

Potential savings: 5% to 15%.

12. Paperless Discount

Some insurers offer a discount if they don’t have to mail paper documents, such as your policy description and bills. Merely electing to be a paperless customer can qualify you for a small discount. You can get your information by email or an online account.

Potential savings: 3% to 5%.

13. Full Payment Discount

Instead of making monthly or semi-annual auto insurance payments, paying your entire annual premium upfront may qualify for savings.

Potential savings: 5% to 10%.

14. Automatic Payment Discount

Also, signing up for automatic premium payments using automatic withdrawals from your bank account can help you save a small amount.

Potential savings: 3% to 5%.

15. Online Quote Discount

Some auto insurers offer a discount if you sign up for a policy after getting an online quote. You could shop directly on a carrier’s website or an aggregator site, such as Bankrate.com.

Potential savings: 5% to 10%.

16. Switching Discount

Just like your existing auto insurer wants to keep you, others want to entice you. A switch or transfer discount is a promotional offer that cuts your rate for a time after you sign up with a new carrier.

Potential savings: 5% to 15%.

17. New Car Discount

If you purchase a new vehicle or one that’s less than three years old, many auto insurers offer a discount. Newer cars typically have modern safety features that reduce the likelihood that you’ll make a claim.

Potential savings: 5% to 10%.

18. Anti-Theft Discount

Car insurance companies want to help you prevent car theft, so most offer discounts for having any device, feature, or system that helps keep criminals away from your car. They could be factory-installed or an after-market product that you install.

Examples of systems that may lower your insurance rate include a GPS-based location system, such as OnStar, or a theft recovery system, such as LoJack. VIN etching, which is a permanent engraving of your vehicle’s identification number on the windshield and windows, may also qualify you for a discount.

Potential savings: 5% to 20%.

19. Safety Features Discount

Cars with modern safety features, such as anti-lock brakes, airbags, and rear-view cameras, are less likely to get in an accident and cost an insurer. So be sure to let them know every on-board safety device in your vehicle.

Potential savings: 5% to 30%.

20. Mature Driver Discount

If you’re at least age 55 and pass an in-person or online defensive driving course, you can qualify for a discount. Insurers know that maintaining good driving skills reduces your risk and makes you less likely to file a claim. Most insurers offer a mature driver discount in many states.

Potential savings: 5% to 30%.

Understanding Auto Insurance Discounts

The savings you get from auto insurance discounts are typically capped. For example, an insurer may only allow a total discount of 40% off your base premium, even if you qualify for multiple discounts.

You don't have to wait until your auto insurance policy is up for renewal to compare quotes.

Also, it’s important to remember that not all discounts are applied to your rate automatically. You may have to ask for discounts that an insurer wouldn’t know you qualify for, such as getting a new job or having a driver in your family who qualifies for a good student discount. And not every insurer may offer all of the discounts we’ve covered.

Auto insurance prices vary from company to company, and they can even change from month to month. You don't have to wait until your auto insurance policy is up for renewal to compare quotes. So, if you haven’t reviewed your car insurance lately or it’s been a while since you’ve shopped policies, you may be leaving money on the table.

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Everything You Need To Know About Final Expense Insurance

Final expense insurance is typically a small whole life insurance policy where the proceeds are earmarked specially for funeral and other end of life expenses. Ultimately, the net result will be a tax-free cash payment to a beneficiary(s). Most insurance companies aim to pay claims within a few days since they know the funds are… Read More

The post Everything You Need To Know About Final Expense Insurance appeared first on Credit.com.

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GSCU Mortgage Rates Reviews: Today’s Best Analysis

Granite State Credit Union (GSCU) provides members with a variety of mortgage products across the state of New Hampshire. GSCU AT A GLANCE Year Founded 1945 Coverage Area New Hampshire  HQ Address 1415 Elm Street, Manchester, New Hampshire 03101 Phone Number 1-800-645-4728   GSCU COMPANY INFORMATION Services the state of New Hampshire Offers conventional loans, […]

The post GSCU Mortgage Rates Reviews: Today’s Best Analysis appeared first on Good Financial Cents®.

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Choosing a Health Plan

In a lot of cases, our health insurance coverage comes from a group plan that is offered to you by your employer or by your spouse’s employer. For individuals who do not have insurance through their employer, individual policies exist as an option as well.  Of course, you can also opt for having no coverage […]

Choosing a Health Plan is a post from Pocket Your Dollars.

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What’s a Mother-in-Law Apartment? Should You Rent One?

You’re on the prowl for a new place to rent in your city’s super competitive rental market — so you think outside the box! One of your coworkers mentions a mother-in-law apartment for rent by one of his neighbors, and what do you do? You come to ApartmentSearch, of course! Here’s the ultimate guide on […]

The post What’s a Mother-in-Law Apartment? Should You Rent One? appeared first on Apartment Life.

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