Higher property tax bills have accompanied the rising market values of homes over the past several years. If your property taxes have reached the stratosphere, here are some tips to knock them back down to earth.
What is happening
Property taxes typically lag the market. In bad times, the value of your home goes down, but the property tax is slow to show this reduction. In good times, property taxes go up when you buy your new home, but these higher prices quickly impact those that do not plan to move.
To make matters worse, you can only deduct up to $10,000 in taxes on your federal tax return. That figure includes all taxes – state income, property and sales taxes combined! Here are some suggestions to help reduce your property tax burden.
What you can do
Your best bet is usually to approach your local tax assessor and ask for a property revaluation. Here are some ideas to cut your property tax bill by reducing your home’s appraised value.
Do some homework to understand the approval process to get your property revalued. It is typically outlined on your property tax statement.
Understand the deadlines and adhere to them. Most property tax authorities have strict deadlines. Miss one deadline by a day and you are out of luck.
Do some research BEFORE you call your assessor. Talk to neighbors and honestly assess the amount of disrepair your property may be in versus other comparable properties in your neighborhood. Call a few real estate professionals. Tell them you would like a market review of your property. Try to choose a professional that will not overstate the value of your home hoping to get a listing, but who will show you comparable sales for your area. Then find comparable sales in your area that defend a lower valuation.
Look at your property classification in the detailed description of your home. Often times errors in this code can overstate the value of your home. For example, if you live in a condo that was converted from an apartment, the property’s appraised value could still be based on a non-owner occupied rental basis. Armed with this information, approach the assessor seeking first to understand the basis of the appraisal.
Ask for a review of your property. Position your request for a review based on your research. Do not fall into the assessor trap of defending your review request without first having all the information on your property. Meet the assessor with a specific value in mind. Assessors are so used to irrational arguments, that a reasonable approach is often readily accepted.
While going through this process, remember to be aware of the pressure these taxing authorities are under. This understanding can help temper your position and hopefully put you in a better position to have your case heard.
Here are some suggestions to help you master the art of documenting and organizing your business now and in the future.
Document policies and procedures. Write down daily responsibilities, skills needed to complete tasks related to these responsibilities, and the location of all paper and electronic files. Appoint and cross-train backup staff to ensure these daily tasks are done.
Document your succession plan. It may not be for another 10 or 20 years, but documenting your succession plan is critical for both you as the owner and for your employees. Consider how much longer you plan on owning the business and who you have in mind to take over after you leave. If you currently don’t have a successor in mind, document your plan to either train or find this person(s).
Document your tax planning strategy. Be aware of possible tax incentives, such as credits for hiring certain workers and accelerated depreciation available for acquiring business assets. For example, for asset purchases, retain receipts and record the purchase details. These details include the type of equipment, the acquisition date, the amount of the purchase, the date you began using the equipment, and a schedule of related set-up costs.
Organize your daily documents. Organize your desk by shredding documents with sensitive information and scanning older papers into computer files. The most efficient method is to scan, file, and shred as soon as you are finished with a document. If you don’t have time, consider assigning document organization to specific employees and making it a task to be completed on a daily basis.
You’re busy, and you may feel that organizing your records will take more time than you have available. But spend a minute and consider how using these organizational tips may save you not only time, but money as well.
Financial goals make it possible for you and your partner to achieve the things you dream about. Here are several action items to create – and achieve – financial goals as a couple:
Start talking sooner rather than later. Finances can be hard to talk about. People sometimes feel guilty about debt or ashamed that they don’t make more money than they do. More than that, many people consider money to be a private thing that shouldn’t be discussed with others.
However, the first step to setting financial goals as a couple is to start talking. And the sooner you start talking with your partner, the better prepared you’ll be to make positive financial decisions. Saving for a big purchase, for example, takes time and planning. Having a discussion early gives you more time to start saving.
Agree on your goals. Once you’re talking about your finances, you’ll want to agree on your goals. Would you like to pay off your credit card debt? Save for a big family vacation? Have more of a financial safety net?
After you’ve agreed on what you’d like to achieve, start talking about how you’ll work together to achieve it. The best financial plans require both partners to contribute to the financial goal – whether that means each agreeing to contribute monthly to a savings account or cutting back on personal spending.
Keep the conversation going. Plans need maintenance to succeed. That means continuing to talk about them, and checking progress on a regular basis. It’s important for both partners to know all the numbers, even if one partner is the primary manager of the finances.
Scheduling a regular financial conversation is one way to keep you and your partner on track to achieving your goals. This financial date night is a good way to ensure that things are proceeding as planned. It’s an opportunity to check in and adjust the numbers accordingly.
With open communication and commitment from both partners, you’ll be well on your way to reaching your financial goals.
While U.S. savings habits are improving, nearly 50% of Americans have no more than $500 in the event of an emergency. If you want to ramp up your savings, every little bit helps. Consider these 3 rules to jumpstart your savings and start building wealth.
Create a budget. Track your expenses for one month to discover how much you really spend. Be sure to track everything, including food, utilities, household items and debt payments. Take your total expenses and multiply it by 6. This the amount of money to aim for saving in your emergency fund.
Make household debt your enemy. If you’re juggling credit card, vehicle and mortgage payments, your savings accounts may be starved. And without enough cash to cover emergencies, many people resort to credit cards and lines of credit to cover unforeseen expenses. So the debt cycle continues. Since you now have a budget, you can see exactly how much debt you have to pay off.
Review your income. With your current level of income, calculate how long it will take to pay off all your debt, then build up your 6-month emergency fund. Depending on your financial goals, consider whether it makes sense to start a side gig, or continue upgrading your current skillset, to continue growing your income.
How to Stay on Track
Treat your savings like a monthly bill. Once you have an emergency fund, treat your savings as your most important monthly bill. Write a check to your savings account first, or have money automatically deducted from your checking account or paycheck and transferred to your savings account.
Contribute to retirement accounts. Tax-deferred retirement accounts offer a smart way to save money for retirement. If your employer offers a 401(k) or SIMPLE retirement plan, contribute as much as you can. If your employer doesn’t offer a plan, consider opening an individual retirement account (IRA). The money you contribute to a retirement account can reduce your taxable income and grow tax-free until withdrawn.
Control your spending. When it comes to saving, think control. For example, control the use of your credit cards. The amount you pay each month in finance charges could go towards savings instead. Also control the use of your ATM card. Get in the habit of giving yourself a regular cash allowance, and try to live with it.
The number of independent workers continues to soar in the U.S. According to MBO Partners, there were 64.6 million independent workers in 2022, an increase of 26% from 2021. The number of full-time independent workers increased to 21.6 million, up from 15.3 million in 2019.
Succeeding as an independent contractor, however, can be challenging because it requires understanding a different set of key success factors than being a full-time employee. Here are some tips on developing your skill set as an independent contractor and where to turn to if you need help.
Contract for companies with generous payment terms. The time required for companies to pay its bills to contract workers varies from business to business. Investigate a company’s policy for paying its contract workers to make sure it’s what you’re expecting. Remember, cash is king!
Market your services by creating an online portfolio. If being a contract worker is your full-time job, you’ll need to always be looking for your next gig. One great way to market yourself to prospective businesses is to create an online portfolio that showcases the work you can perform. You can choose to build a website using a do-it-yourself service or hire a developer to create a custom website.
Stick to a budget. As a full-time employee, you know the exact date you’ll receive your paycheck and usually the exact dollar amount. As a participant in the gig economy, however, you could earn a bunch of money in one month and hardly any money the following month. Prepare a financial budget so you can use income earned during your good months to cover costs during low income months.
Stay one step ahead of the IRS. Paying taxes is now your responsibility. Participating in the gig economy requires more knowledge about how to meet your tax obligations, so ask for professional help. You can also find more information by visiting the IRS Gig Economy Tax Center.
Get advice from others. Working primarily by yourself can leave you isolated from fellow workers. Join a local group of self-employed workers that meets on a regular basis to network and learn what other workers are doing to be successful.
Remember that you are not alone. The complex nature of tax obligations for contractors can be navigated with professional help.
You may be one of many Americans who plan to work into retirement. Some report they need to work because their savings declined over the past several years, while others say they choose to work because of the greater sense of purpose and engagement that working provides.
Whatever your reason for continuing to work into retirement, here are some tips to get the greatest benefit from your efforts.
Consider delaying Social Security. You can start receiving Social Security retirement benefits as early as age 62, but if you continue to work it may make sense to delay taking it until as late as age 70. This is because your Social Security benefit may be reduced or be subject to income tax due to your other income. In addition, your Social Security monthly benefit increases when you delay starting the retirement benefit. These increases in monthly benefits stop when you reach age 70.
Pay attention to bracket-bumping. Keep in mind that you may have multiple income streams during retirement that can bump you into a higher tax bracket and make other income taxable if you’re not careful. For example, Social Security benefits are only tax-free if you have less than a certain amount of adjusted gross income ($25,000 for individuals and $32,000 for married filing jointly in 2022), otherwise as much as 85 percent of your benefits can be taxable.
Required distributions from pensions and retirement accounts can also add to your taxable income. Be aware of how close you are to the next tax bracket and adjust your plans accordingly.
Be smart about health care. When you reach age 65, you’ll have the option of making Medicare your primary health insurance. If you continue to work, you may be able to stay on your employer’s health care plan, switch to Medicare, or adopt a two-plan hybrid option that includes Medicare and a supplemental employer care plan.
Look over each option closely. You may find that you’re giving up important coverage if you switch to Medicare prematurely while you still have the option of sticking with your employer plan.
Consider your expenses. If you’re reducing your working hours or taking a part-time job, also consider the cost of your extra income stream. Calculate how much it costs to commute and park every day, as well as any other work-related expenses. Now consider how much all those expenses amount to in pre-tax income. Be aware whether the benefits you get from working a little extra are worth the extra financial cost.
Time to downsize or relocate? Where and how you live can be an important factor determining the kind of work you can do while you’re retired. Downsizing to a smaller residence or moving to a new locale may be a good strategy to pursue a new kind of work and a different lifestyle.
Focus on your deeper purpose. Use your retirement as an opportunity to find work you enjoy and that adds value to your life. Choose a job that expresses your talents and interests, and that provides a place where your experiences are valued by others.
