As Led Zeppelin once said, “The song remains the same,” and it should be added that the tune usually plays out like this: It’s a hot day and our throat is parched. We have no cash on us (when do we ever?), but duck into the nearest 7/11 anyway for sustenance. Even though we feel somewhat ridiculous for using our trusty Visa to pay for a $2 bottle of water, we stop mid-slide when we realize the stained sticky note posted under our poised hand. The note reads “Minimum card purchase: $6.” We frantically scramble around, grabbing at caloric candy bars to add to the sole reason we came in the first place, for our coveted bottle of water. Thanks to a minimum charge (or special fee), we get to leave feeling refreshed but ripped-off…and a little peeved at the entire situation.
Guess what? Technically stores can’t add fees, surcharges or require a minimum on your card purchases. If only I had known this a decade ago. Adding fees and other charges to a credit card purchase is in violation of credit card issuer practices, according to American Express, MasterCard and Visa merchant agreements.
While some storeowners break these rules to make money or cover their merchant fees with your ignorance, many owners probably aren’t even aware that it’s in violation of their contracts. Taking into consideration that merchant fees are about $2 of every $100 spent on credit cards, it’s no wonder that many storeowners are scrambling to recoup fees — but it’s still no excuse.
"To clarify Visa's rules, merchants are not permitted to charge cardholders an additional fee for using a Visa card,” a Visa spokesperson tells CreditCards.com.
An American Express rep tells the site that its merchants pay for the service of accepting American Express from their customers, and that "if a customer suspects he or she has been treated unethically, they should contact us.” If, like me, you’re a part of the Visa family, Visa says that "if cardholders have any questions about Visa's rules, they should call the number on the back of their card or visit our Web site for more information."
Bottom line, if you feel you’ve been unfairly swindled with a fee, surcharge, or minimum charge requirement, report the violation to your credit card company. If I choose to spend $2 on a bottle of water (hey, I was dying of thirst!), then I should have to pay no more than $2, Visa card or not.
For much more information, and a fabulous little table defining credit card practice that are and are not allowed, swing on over to CreditCards.com.
Wednesday, February 11, 2009
Tuesday, February 10, 2009
More women choosing babies over careers
Since the late '60s, women have overwhelmingly refused to accept the same fate as their '40s and '50s mothers, suckling babies and cleaning house for their 9-to-5 husbands. And what happens when they do assume the June Cleaver role? We automatically think of Terms of Endearment, when Debra Winger is having lunch with those corporate power women in Manhattan who treat her "non-career" of raising her children as a disease worse than the cancer she's been diagnosed with. Sad, but personified the sentiment of many women in the '80s.
The point to that scene, besides making us tear up for poor Debra Winger in her shabby, threadbare cardigan, was that "successful," progressive women wanted careers of their own, so they delayed having babies until they felt they had wrung all they wanted out of the proverbial employment towel. Well that all may be changing, the Wall Street Journal reports, as new data from the National Center for Health Statistics has found that the average age at which women have their first babies is falling.
Historically, the paper says, recessions have reduced family size, but their impact on the age at which women start families is less clear. What we do know, within the last three years at least, is there may be a correlation with the country's current economic woes and the move toward younger child-bearing. That and we won't have to witness anymore heartbreaking Debra Winger scenes. [Wall Street Journal]
The point to that scene, besides making us tear up for poor Debra Winger in her shabby, threadbare cardigan, was that "successful," progressive women wanted careers of their own, so they delayed having babies until they felt they had wrung all they wanted out of the proverbial employment towel. Well that all may be changing, the Wall Street Journal reports, as new data from the National Center for Health Statistics has found that the average age at which women have their first babies is falling.
"Mothers' mean age at their first childbirth fell to 25 years in 2006, the most recent figures available, from 25.2 in 2005. Women ages 20 to 24 led the shift, with a 5% increase in the rate of first births."There are a bevy of factors as to why the age is beginning to decline for the first time, but overwhelmingly experts see a shift in attitudes. "More young women today just assume they'll have both a career and a family, and on their own timetable," one source told the WSJ. "Young women feel less compelled to spend a decade proving themselves on the job before kids." People, the feminist movement happened to give women the freedom of choice, that is, the choice to have kids, a career, and/or both. Not to choose one in lieu of the other, therefore stigmatizing you by your decision.
Historically, the paper says, recessions have reduced family size, but their impact on the age at which women start families is less clear. What we do know, within the last three years at least, is there may be a correlation with the country's current economic woes and the move toward younger child-bearing. That and we won't have to witness anymore heartbreaking Debra Winger scenes. [Wall Street Journal]
And now, a word from the economy
Investors have waited with baited breath the last few days to hear of what will become of the bank bailout plan. A go? No go? Give us something, government! All eyes were on Treasury Secretary Timothy Geithner this morning, when he took the podium and delivered the highly anticipated bailout details.....aaaaaand the stock market plunged. Watching the indexes alternate between tiny rises and lower drops as Geithner spoke was like watching a heart monitor tied to an ailing pulse. Just. beat. harder. It turns out there is no quick fix or bandaid, and the fact that the process -- like most processes, actually -- won't be fast and easy dented the market today. If you missed Geithner's press conference, or started spacing out on his pointy, elf-like ears about three minutes into the speech, here's a quick runup of his solutions:
• The creation of a "bad bank": A joint Treasury and Federal Reserve program, insured by the FDIC and financed by private investors, that will buy up cruddy mortgage-related assets from banks.
• Expanding the Federal Reserve's existing $200 billion program to between $500 billion and $1 trillion in order to unfreeze the credit market. I smell higher taxes!
• Using the remaining $350 billion from the Troubled Asset Relief Program to inject ailing banks with capital, which, while it seemed like a bad idea on the first go-round, has become necessary since the banking system is basically insolvent.
• A $50 billion initiative aimed at stemming home foreclosures, the details of which will be announced later in the week. [Reuters via Daily Intel]
All of a sudden my "crazy" idea of moving to Italy and selling flowers out of a cart doesn't seem so crazy after all, hmm??
• The creation of a "bad bank": A joint Treasury and Federal Reserve program, insured by the FDIC and financed by private investors, that will buy up cruddy mortgage-related assets from banks.
• Expanding the Federal Reserve's existing $200 billion program to between $500 billion and $1 trillion in order to unfreeze the credit market. I smell higher taxes!
• Using the remaining $350 billion from the Troubled Asset Relief Program to inject ailing banks with capital, which, while it seemed like a bad idea on the first go-round, has become necessary since the banking system is basically insolvent.
• A $50 billion initiative aimed at stemming home foreclosures, the details of which will be announced later in the week. [Reuters via Daily Intel]
All of a sudden my "crazy" idea of moving to Italy and selling flowers out of a cart doesn't seem so crazy after all, hmm??
To buy or not to buy is the question
If you any of you read my interview on FiLife last week, it's no secret that I'm simply salacious about real estate. It's up there on my shelf of "favorite things," along with shoes, fondue and Mad Men. One of the reasons why I can't wait till Love graduates law school next year -- aside from us moving back to California -- is that we can start saving to invest in said real estate. I want to own apartment complexes, office spaces, downtown buildings in San Francisco. I want to be Donald Trump (minus the horrible hairdo and gold-plated cufflinks), and even coming close would make me happy. This insatiable appetite for real estate is what keeps me addicted to HGTV -- especially shows like House Hunters and My House is Worth What? -- and what fuels my late-night searchfests on Zip Realty, bowl of sugar-free chocolate pudding in hand.
It appears that MarketWatch, as much as they share my love of real estate, seems torn on the issue of whether to buy in or not. They've written two lengthy articles: one trumpeting the merits to buy and the other explaining why not to. The dichotomy proved to be an interesting case analysis.
It appears that MarketWatch, as much as they share my love of real estate, seems torn on the issue of whether to buy in or not. They've written two lengthy articles: one trumpeting the merits to buy and the other explaining why not to. The dichotomy proved to be an interesting case analysis.
Reasons for buying a house:
- Affordability is better than ever
- You have a large inventory to choose from
- Builders are offering big discounts
- Mortgage rates are historically low
- You can get a federal tax credit
Reasons against buying a house:
- Prices are still dropping
- This sale will be on for a while
- You may not stay put
- Your job could be the next to go
- Your cash reserves will be eaten up
Within the personal finance blogosphere, there seems to be two camps of people: Those who are on Team Home and those who aren't. As much of a pessissimist as I make myself out to be, I'm still pro-real estate -- bad market be damned! Do you agree or disagree? More importantly, are you, too, addicted to HGTV? Don't lie!
Another 15 bite the dust?
One of the most fascinating things about 2009 -- aside from the fact that I'm hitting the ripe age of 27 in April, and thereby officially old -- is how many retailers will go belly up in the rising economic tide. Perhaps it's the Machiavelli in me. There's obviously saturation in every retail niche, some more than others, and the current malaise seems to be just the concoction needed to vet out the superfluous. Who knew how unnecessary Linens 'N Things was in the face of many a Bed Bath & Beyond? Or a Target, for that matter? Even with the undeniable allure of office supplies and our addiction to Post-Its and personalized paper clips, even Office Max couldn't stay afloat, what with a Staples seemingly on every corner.
So which companies will fail to survive what's started out to be a difficult 2009? U.S. News placed their bets on 15 firms they don't see living past another year. Among them? Sbarro, Six Flags, Blockbuster and Claire's Accessories. Claires?! The mecca of uber-affordable jewelry? Now where will we duck shamefully into in every mall, our heads low among the throngs of teeny-boppers, while we fish for giant cocktail rings we'll eventually tell our friends we bought at expensive places like Bloomingdales? One more lie, squashed. Thanks economy.
Another possible casualty they predict? Krispy Kreme Donuts. "The donuts might be good, but Krispy Kreme overestimated Americans' appetite - and that's saying something." [U.S. News]
So which companies will fail to survive what's started out to be a difficult 2009? U.S. News placed their bets on 15 firms they don't see living past another year. Among them? Sbarro, Six Flags, Blockbuster and Claire's Accessories. Claires?! The mecca of uber-affordable jewelry? Now where will we duck shamefully into in every mall, our heads low among the throngs of teeny-boppers, while we fish for giant cocktail rings we'll eventually tell our friends we bought at expensive places like Bloomingdales? One more lie, squashed. Thanks economy.
Another possible casualty they predict? Krispy Kreme Donuts. "The donuts might be good, but Krispy Kreme overestimated Americans' appetite - and that's saying something." [U.S. News]
Friday, February 6, 2009
I've been interviewed!
I'm very excited to announce that FiLife.com interviewed me this week and posted the Q&A on their website last night. I know I don't divulge much personal information about myself on my blog, but hopefully you can get to know me more through my interview and learn why I started my website and what I hope to accomplish with it.
I have to say that I really appreciate having a loyal base of readers -- you're what keeps me writing! :) To read my interview, click here!
I have to say that I really appreciate having a loyal base of readers -- you're what keeps me writing! :) To read my interview, click here!
Thursday, February 5, 2009
The top 10 ways to save on groceries
I was on Chow.com recently looking for easy, after-work recipes (love this website, if you're a foodie, definitely bookmark it!), and I came across a fabulous list of ways to save at the grocery store. I am in no way an accomplished chef or even come close to one (I once accidentally lit a bag of microwaveable popcorn on fire -- in the microwave), so when I perused the items on the list, some seemed like a far cry from what I normally do in the kitchen. Roast my own deli meat? Who am I, Martha Stewart? Definitely not, but after I got past the Betty Crocker stereotype of some of these tips, they actually aren't that hard or time-consuming, and best of all, they're very creative ways to save you money!
1. Pick and Choose Which Organics You Buy. Save on the items where buying organic doesn’t give you as much benefit, like onions and avocados. These crops retain the least pesticide residue (peaches and apples are the worst, according to the Environmental Working Group), so if you buy organic for that reason, you can feel OK about purchasing some conventional produce.
2. Skip the Deli Counter. It’s not very hard to roast your own turkey or beef for sandwiches, and you’ll enjoy substantial savings. Even precut turkey tenders are about $4 cheaper per pound if you roast and slice them yourself versus the $8.99-per-pound roasted turkey at the deli. Plus you can season it exactly how you like. If you’re not very well versed in roasting meat, invest in a cheap meat thermometer and you’ll feel a lot more confident.
3. Make Your Own Granola. Even in bulk, granola and cereal are expensive (Chow found them in the $3- to $8-per-pound range). Put a few cups of plain rolled oats on a baking sheet; toast them in the oven for about 20 minutes (stirring once); toss them with about a quarter cup of honey, some vanilla, a little bit of brown sugar, and a tablespoon of vegetable oil; then put them back in the oven for another 15 to 20 minutes, and you’ll have a base to which you can add whatever dried fruit and nuts you want, like this recipe for peanut butter and coconut granola.
4. Buy Spices in Small Amounts. Spices are often used in very small amounts, so don’t waste money on the big jars at the grocery store. Instead, see if you can find what you need at ethnic markets, where Chow has found the spices packed in little plastic envelopes to be considerably cheaper. If you have a store in your area that offers bulk spices, buy only as much as you need. (I blogged on this phenomenon a few months ago here.)
5. Don’t Pay a Premium for Health Fads. Pomegranate juice is a darling of superfoods enthusiasts, bartenders, and chefs, but it carries a hefty price tag. Christie Matheson, co-author of Wine Mondays: Simple Wine Pairings with Seasonal Menus, suggests using less expensive cranberry juice (look for the highest percentage of juice), which has the same “tart, tangy flavor, lends a pretty scarlet hue to cocktails, and comes loaded with antioxidants.” It’s about $3 to $6 cheaper per quart.
6. Find Sparkling Alternatives. Real Champagne is expensive. If you want to drink some bubbles, Matheson suggests popping open a cheaper bottle of Spanish cava. It’s “made according to the same traditional method, and can be just as dry and delicious.”
7. Make Mock Maple Syrup. When things were tight growing up, this Chow.com writer's mom would simmer brown sugar with water and whatever spices were on hand (say, a vanilla pod that might otherwise be tossed after scraping) to make syrup for pancakes and waffles. It’s good, and it keeps you away from the nasty commercial substitutes out there if you can’t afford to buy the real stuff.
8. Create Snacks from Scratch. Prepared foods like pesto and hummus cost $4 to $6 for a tiny package, but they’re easy to make. For hummus, put a can of garbanzo beans in the blender with some lemon juice, garlic, salt, a dash of olive oil, and, if you have it, a dollop of tahini, then purée. You can throw in whatever else you like at this point: herbs you might need to use up, olives, roasted peppers, etc. Likewise with pesto: Skip the $6 package and buy a bunch of basil, then put the leaves in the blender with olive oil, garlic, salt, and a handful of nuts (pine nuts are traditional, but you won’t miss them if you use less expensive almonds or walnuts).
9. Use Substitutions for Fancy Ingredients. Crème fraîche is a sour cream–like ingredient common in recipes like Chow's Savory Onion and Leek Tart and Winter Greens Lasagne, but it can cost nearly $10 per pound, and might be hard to find. Chow.com readers suggest using sour cream instead, or you can make this simple version suggested by Matheson: “Sanitize a small nonreactive bowl in your dishwasher or boiling water, combine 1 1/2 teaspoons of buttermilk with 1/2 cup of heavy cream, cover the bowl, and let it sit at room temp for 24 hours. Stir it and use it, or keep it covered in the fridge for up to a week.”
10. Chop Your Own Greens. Bagged salad mixes are a terrible value. Instead, buy a fresh head of lettuce, and when you unpack your groceries spend an extra five minutes washing, drying, and chopping it up, then store it in a bag in the refrigerator. It’ll be just as convenient, fresher, and cheaper. [Chow.com]
1. Pick and Choose Which Organics You Buy. Save on the items where buying organic doesn’t give you as much benefit, like onions and avocados. These crops retain the least pesticide residue (peaches and apples are the worst, according to the Environmental Working Group), so if you buy organic for that reason, you can feel OK about purchasing some conventional produce.
2. Skip the Deli Counter. It’s not very hard to roast your own turkey or beef for sandwiches, and you’ll enjoy substantial savings. Even precut turkey tenders are about $4 cheaper per pound if you roast and slice them yourself versus the $8.99-per-pound roasted turkey at the deli. Plus you can season it exactly how you like. If you’re not very well versed in roasting meat, invest in a cheap meat thermometer and you’ll feel a lot more confident.
3. Make Your Own Granola. Even in bulk, granola and cereal are expensive (Chow found them in the $3- to $8-per-pound range). Put a few cups of plain rolled oats on a baking sheet; toast them in the oven for about 20 minutes (stirring once); toss them with about a quarter cup of honey, some vanilla, a little bit of brown sugar, and a tablespoon of vegetable oil; then put them back in the oven for another 15 to 20 minutes, and you’ll have a base to which you can add whatever dried fruit and nuts you want, like this recipe for peanut butter and coconut granola.
4. Buy Spices in Small Amounts. Spices are often used in very small amounts, so don’t waste money on the big jars at the grocery store. Instead, see if you can find what you need at ethnic markets, where Chow has found the spices packed in little plastic envelopes to be considerably cheaper. If you have a store in your area that offers bulk spices, buy only as much as you need. (I blogged on this phenomenon a few months ago here.)
5. Don’t Pay a Premium for Health Fads. Pomegranate juice is a darling of superfoods enthusiasts, bartenders, and chefs, but it carries a hefty price tag. Christie Matheson, co-author of Wine Mondays: Simple Wine Pairings with Seasonal Menus, suggests using less expensive cranberry juice (look for the highest percentage of juice), which has the same “tart, tangy flavor, lends a pretty scarlet hue to cocktails, and comes loaded with antioxidants.” It’s about $3 to $6 cheaper per quart.
6. Find Sparkling Alternatives. Real Champagne is expensive. If you want to drink some bubbles, Matheson suggests popping open a cheaper bottle of Spanish cava. It’s “made according to the same traditional method, and can be just as dry and delicious.”
7. Make Mock Maple Syrup. When things were tight growing up, this Chow.com writer's mom would simmer brown sugar with water and whatever spices were on hand (say, a vanilla pod that might otherwise be tossed after scraping) to make syrup for pancakes and waffles. It’s good, and it keeps you away from the nasty commercial substitutes out there if you can’t afford to buy the real stuff.
8. Create Snacks from Scratch. Prepared foods like pesto and hummus cost $4 to $6 for a tiny package, but they’re easy to make. For hummus, put a can of garbanzo beans in the blender with some lemon juice, garlic, salt, a dash of olive oil, and, if you have it, a dollop of tahini, then purée. You can throw in whatever else you like at this point: herbs you might need to use up, olives, roasted peppers, etc. Likewise with pesto: Skip the $6 package and buy a bunch of basil, then put the leaves in the blender with olive oil, garlic, salt, and a handful of nuts (pine nuts are traditional, but you won’t miss them if you use less expensive almonds or walnuts).
9. Use Substitutions for Fancy Ingredients. Crème fraîche is a sour cream–like ingredient common in recipes like Chow's Savory Onion and Leek Tart and Winter Greens Lasagne, but it can cost nearly $10 per pound, and might be hard to find. Chow.com readers suggest using sour cream instead, or you can make this simple version suggested by Matheson: “Sanitize a small nonreactive bowl in your dishwasher or boiling water, combine 1 1/2 teaspoons of buttermilk with 1/2 cup of heavy cream, cover the bowl, and let it sit at room temp for 24 hours. Stir it and use it, or keep it covered in the fridge for up to a week.”
10. Chop Your Own Greens. Bagged salad mixes are a terrible value. Instead, buy a fresh head of lettuce, and when you unpack your groceries spend an extra five minutes washing, drying, and chopping it up, then store it in a bag in the refrigerator. It’ll be just as convenient, fresher, and cheaper. [Chow.com]
Wednesday, February 4, 2009
Gimme a (tax) break
Continuing in the tax vein, there are specific steps that 20-somethings (especially recent college grads) can take to shelter portions of their income from being taxed, and inevitably save more money! In order to start saving anything, though, you'll need to remember to file your taxes! I honestly can't believe how many 20-somethings I know who feel they can't be bothered to file because they'll only get back a small amount (say $100 or $200). Either that, or they rely on their parents to do their taxes for them -- no joke!
To all the guys out there, if there's one way you can turn a girl off (aside from being unemployed or lacking personal hygiene), it's telling her that your parents do your taxes for you. If you're even reading this blog -- guys or girls -- I assume that you've decided to take some stock in your financial life, which means doing things, such as taxes and the like, yourself and not relying on Mommy and Daddy. (Contrary to popular belief, 21+ should never be the new 16.)
With that out of the way (phew!), do not, I repeat, do NOT use a Form 1040EZ when filing your taxes because doing so prohibits you from taking advantage of the super-tax-payer-saving ways I'll mention in a second. Instead, use the standard 1040 form. I assume that it's a trade-off as to whether you want to fill out a no-muss-no-fuss form (the 1040EZ), or whether you want to get into the more nitty-gritty and wring some cash from your filing form (the standard 1040). Since the EZ is just so......easy.....most tend to file using the former, which is fine if you know you don't qualify for deductions.
Here are some clutch ways to save yourself some greenbacks when filling out your 1040:
- If you're making less than you thought you would after graduation, don't fret! You're automatically eligible for a saver's credit, as long as you're lining any retirement plan you've chosen (401(k), IRA, etc.) with monthly contributions. The catch is you have to make less than $26,000 per year (not horrible, considering the cost of living differs from region to region), but you can save an upward of $1,000 in money that might have otherwise gone to paying taxes. Consider it the government's reward for savers who are thinking ahead.
- Did you know that your moving expenses (renting a U-Haul, gas for the trip, buying packing boxes, etc.) can be tax-deductible if your job out of college is 50+ miles away from your old address?
- The idea of paying off those student loans could give anyone an ulcer, but remember this: you can now claim up to $2,500 of interest on student loans in the form of tax deductions, even if you're parents are paying off your loan interest. Apparently, the government deems any payments from a parent toward their kids' student loan a "gift," which is great news for both parties!
Tuesday, February 3, 2009
A "kinder, gentler" IRS?
Call it a reflection of the times, but the New York Daily News is reporting that the IRS has promised to go easy on the nation this year in relation to filing taxes. Seems like a first, but we like firsts -- especially during the recession. The words "IRS" and "kind" have never been synonymous. The stereotype of the hard-as-nails, unmerciful IRS agent exists for a reason, after all.
It turns out the IRS actually does have a heart, and understands what the majority of U.S. citizens are going through, what with so many layoffs and foreclosures budding on a daily basis. No they aren't forgoing collection of taxes this year (wouldn't that be grand?); instead, they'll be more flexible with tax collection to help easy the fiscal burden that's cloaked the shoulders of so many of us.
The only catch is that you have to ask for help if you need it. Though the IRS may have gone the way of the Tin Man, it doesn't mean it's also gone the way of the all-knowing Oz. Struggling to pay your monthly bills and need a filing extension? Just lost your job and have no savings to pay taxes? Ask and you (probably) shall receive help.
The Mail reports that among the changes this year:
If these "What Ifs" don't answer your questions though, IRS.gov also has a phone number you can call for help (1-800-829-1040) and a list of tax assistance offices that you can visit in person.
It turns out the IRS actually does have a heart, and understands what the majority of U.S. citizens are going through, what with so many layoffs and foreclosures budding on a daily basis. No they aren't forgoing collection of taxes this year (wouldn't that be grand?); instead, they'll be more flexible with tax collection to help easy the fiscal burden that's cloaked the shoulders of so many of us.
The only catch is that you have to ask for help if you need it. Though the IRS may have gone the way of the Tin Man, it doesn't mean it's also gone the way of the all-knowing Oz. Struggling to pay your monthly bills and need a filing extension? Just lost your job and have no savings to pay taxes? Ask and you (probably) shall receive help.
The Mail reports that among the changes this year:
- IRS employees will have greater authority to suspend collection actions — such as tapping your bank account — in certain hardship cases.
- If you already agreed to an installment plan with agency and have been paying on time but now face trouble, the IRS might allow you to skip a payment or pay a reduced monthly amount without voiding the agreement.
- If you thought you weren’t eligible for a so-called offer in compromise — in which a taxpayer and the IRS agree to settle a tax debt for less than the full amount — you may be now. In the past, if you had enough equity in your home to cover your tax debts, you may have been turned down. But given the downdraft in real estate, the IRS is willing to take a second look.
If these "What Ifs" don't answer your questions though, IRS.gov also has a phone number you can call for help (1-800-829-1040) and a list of tax assistance offices that you can visit in person.
Monday, February 2, 2009
Learn the lingo: Tax-deductible
This next ditty goes out to my sister, Sophia, who's been reminding me that she'd like if I wrote on anything tax-related, since she's in the dark about much of it. Without further ado ...
Tax-deductible:
A tax-deductible item, or tax deduction, off your income is when an expense is lopped off your adjusted gross income (also known as your total income) to reduce the amount of your income that is subject to tax. Huh? Basically, having a tax-deduction on your overall income basically allows you to shelter a part or parts of your salary from being taxed in total by the government. Sadly, it's not as easy as simply setting some unreported money aside, with the vague hope that the government won't notice (there's a term for that -- it's called tax evasion!). The IRS has a list of expenses, along with specific rules surrounding each one, that are legally considered tax-free. These expenses include (among others):
Tax-deductible:
A tax-deductible item, or tax deduction, off your income is when an expense is lopped off your adjusted gross income (also known as your total income) to reduce the amount of your income that is subject to tax. Huh? Basically, having a tax-deduction on your overall income basically allows you to shelter a part or parts of your salary from being taxed in total by the government. Sadly, it's not as easy as simply setting some unreported money aside, with the vague hope that the government won't notice (there's a term for that -- it's called tax evasion!). The IRS has a list of expenses, along with specific rules surrounding each one, that are legally considered tax-free. These expenses include (among others):
- A home mortgage.
- Apartment rent, if you make under a certain amount.
- Business expenses, including all expenses it might take to start your own business, travel and meals. Technically, these expenses can't exceed your total business income.
- Charitable contributions. If you save the receipts, this can even include all your old junk you donate to Goodwill!
- Any expenses paid in the removal of building barriers to the elderly and disabled.
- Union dues.
- Medical expenses that exceed a certain percent of your total income.
- Any work-related apparel. This can include uniforms, or necessary items such as safety goggles, safety helmets or heavy-duty gloves or shoes.
- In some situations, moving expenses can be tax-deductible.
Finding ways to ensure that portions of your income are tax-deductible is a fabulous way to save more money that would have otherwise gone to Uncle Sam, because it lowers your total taxable income. Say you make $28,000 per year, and you pay $1,000 in rent every month. Last I checked, the cutoff point for rent being tax-deductible was if you made $30,000 or less, so you would essentially shelter $12,000 worth of rent per year from being taxed, which means more money for you in the long run!
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