To sell, or not to sell your home

One of the questions that often come up during a conversation about buying, selling, or refinancing a home. The question is, do I sell my home or not? The answer depends on what it is you want, do you want to just keep your home, and refinance it because the rates are low, or refinance to get cash out of your equity, or sell your home all together especially during this market. The interest rates are super low right now, and most people are refinancing to get that lower rate, and then there are those who are wanting to purchase a home and get that sweet, low rate deal.

Well, there are a few things to consider. If you are choosing to sell your home, you want to first figure out your tax stuff. What I mean by that, is are you going to be paying taxes on your profit/income/gain? this is called “capital gain”

Well, according to the IRS: https://www.irs.gov/taxtopics/tc701, you do not have to pay capital gains on the sale of your home if 1: the profit is $250,000 or less (single), or $500,000 if married; 2: if you have lived in your home for 2 years out of the 5 years that you have owned your home.

So, let’s say, you purchased your home in 2012 for $200,000, and decide to sell your home in 2020 for $300,000, you will not have to pay capital gains if you lived in the home for 2 years, and your profit is less than $250,000. So, if you sell your home for $300,000, your profit is only $100,000.

<script data-ad-client="ca-pub-2000317746725339" async src="https://pagead2.googlesyndication.com/pagead/js/adsbygoogle.js"></script>

IRA'S and the IRS

IRA AND THE IRS

It’s all about IRA’s and taxes

The reason you are here is because you have questions, questions that I may be able to answer regarding your taxes and IRA account!

I have to admit, I hate taxes but I love my IRA account! I love knowing that the money that is automatically transferred into my IRA account will be there when I’m ready to collect!

I hate paying taxes, but unfortunately, that part will never go away!

So, I wanted to talk about IRA’s and taxes!

But first, let me begin by explaining the difference between the two types of IRA’s.  Firstly, IRA stands for Individual Retirement Account.  The two types of IRA’s is the “traditional” IRA, and “Roth” IRA.

Traditional IRA are tax-deductible.  Plain and simple.  You can deduct your contributions to your traditional IRA on your taxes.  But if you’re covered by a retirement plan at your job, then, your deductions may be less.  

Here’s the catch, you won’t be taxed on your contributions till you are ready to withdraw which will be at your retirement age, which is 70 ½.  So, in other words, while you’re not paying taxes on your money as you contribute to your IRA account in today’s dollars, your money will be taxed whether it’s fully or partially at the time you collect on your contributions.

So, now you want to contribute to a Traditional IRA, how much can you contribute? $6,000 annually. (it went up from last year (2018) which was $5,500).  For me, I simply cannot contribute $6,000 annually, and this is in terms of monthly contributions, I just can't do it.  If you can contribute $500 per month into your IRA account then by all means, go for it because it will benefit you in the long run!

But I think it can be challenging for some of us.. So, I just contribute about $100 per month, depending on what I have going on financially, and if I'm able.  When contributing, the only type of compensation you can contribute are wages, commissions, tips, bonuses, salaries, or net income from self-employment pretty much anything that is on your W2 you can contribute.

Can you and your spouse own an IRA in joint names? The answer is, NO. But you can have a beneficiary or beneficiaries to collect the contributions after you’ve passed on. 

Very important side note, make sure you start collecting on your money by April 1 of the year after the year you reach age 72, otherwise you will owe an “excise” tax.  And make sure that you don’t withdraw before age  59 ½, otherwise you will be charged 10% on your withdrawal.

Now, let’s talk about the Roth IRA.  The rules are similar as far as how much you can contribute and when to collect on your money.  The only difference is that you cannot write off your deductions on your taxes, therefore you do not have to report your contributions to the IRS. Period.   That’s it! And when its time to withdraw, you are not taxed at all!  Why? Because you have been paying on your contributions all along!  And this is why I like the Roth IRA versus the Traditional IRA. 

---

<script data-ad-client="ca-pub-2000317746725339" async src="https://pagead2.googlesyndication.com/pagead/js/adsbygoogle.js"></script>

To pay or not to pay your auto loan in full, what makes financial sense?

To pay or not to pay your auto loan in full is the question of the day!

Here is my take on this question:

There are a few things to consider first before deciding which option is right for you.

No matter what, you should always, always and again, always pay yourself first. Whatever dollar amount that is, is up to you. But don’t forget to pay yourself first, then your emergency savings fund (you need to have at least 6 months of savings or at least enough to keep you afloat for at least 6 months if you lose your job (rent, utility bills, food, etc.)

So, now that you have your six months of savings ready on hand, you can now consider whether paying off your entire auto loan makes sense. There is a term called “Depreciation” and what that means is, decrease in value due to wear and tear over the life of the car. So, if you purchased your car brand new from a dealership, your brand new car loses its value the moment you drive it off the lot, and the number of years you own it because over time, wear and tear occur and your car will not hold its value to equal close to what you paid.

In my opinion, I would rather put that money in a money market fund, or real estate (paying down your mortgage). Because those are assets that grow over time or increase in value over time. Whereas your car decreases in value.

On the flip side, if you pay your auto loan off, you essentially will be getting rid of the interest rate on that car loan. So, if your interest rate is 4%, and you pay your loan off, you can put that 4% in your emergency savings account, or use that to pay down your mortgage, or put it in your savings account towards the down payment of your future home!

Let’s use this as an example, you have an auto loan for $20,000 with bank A with an interest of 4%, and 60 months term.  Your auto payment will be roughly $368.00.  Your total cost if you paid the loan off with the interest in 60 months will be 22,100.  So, basically, you will be paying $2,100 in interest at the end of the 60 months term!  But, if you pay off your auto debt, you can put that 4% interest in your savings rather than give it to the banks and make them rich.   Why not make yourself rich?

OR

So, let’s say you paid your car off and you’re happy as a clam with your title to the car and you are just so proud of yourself, and then all of a sudden, you get into an auto accident that isn’t your fault.  Your trusted auto insurance company will pay you for your car if it’s totaled, however, they will only give you what the value of the car is and nothing more. 

This is something you would want to have a discussion about with your family members, close or close friends because there are unforeseen factors that can affect the value of your car, for one: such as what if you get into an accident or someone decides to vandalize your car, your auto insurance company will only give you what the current value of your car is. (just imagine if you paid it off, and you don’t even get half the money you put into your car to pay it off!) The one good reason why you should NOT pay off your auto loan!

So, in my opinion, don’t pay off your auto loan, you may regret it!