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401k Contribution Limits And Rules

The IRS has released their 401k contribution guidelines for the 2021 tax year. How much can you contribute to your retirement account in 2021?

The post 401k Contribution Limits And Rules appeared first on Bible Money Matters and was written by Peter Anderson. Copyright © Bible Money Matters – please visit biblemoneymatters.com for more great content.

How I Use A Barbell Investing Strategy To Avoid Financial Ruin

A barbell investing strategy may remove the probability of blowup events from seemingly safe investments. It’s worth learning about, especially during uncertain financial times.

7 Income-Producing Assets You Need To Know About

They say that millionaires have 7 streams of income. And most of them are boring. Common examples of income-generating assets include your classics like real estate (rental income, depreciation benefits, equity appreciation) and dividend stocks (dividend income is taxed favorably), which I love.

But every so often, there's one in there that sounds as exciting as going to Vegas and always betting on black.

Today, I want to talk about those obscure investments. Those weird, you only hear about them in the movies, oddball investments that can produce cash flow. I don't want the obscure ones that don't produce cash (invest in whiskey, art, or some other collectible … that just makes you eccentric), these have to produce a stream of income.

Maybe the stock market has you spooked. Maybe you simply have enough in equities.

Maybe you want income but all the income-producing assets you know of are boring (or you have enough) – who really cares about certificates of deposit, Treasury bonds, and dividend stocks. If you wanted them, you would've gotten them by now (or you have and want even more diversification).

Today, you'll read about some truly interesting assets that you've probably never heard of before:

I will reference different websites and companies in this list as examples. I haven't used a single one of them. These are not endorsements.

1. Crowdfunded real estate

Crowdfunded real estate is a relatively new phenomenon. It's when you can invest in a little piece of real estate as part of a “crowd” of investors. This lets you diversify your real estate holdings without the work of buying and selling properties.

You have some companies, like RealtyMogul, that curate deals and offer you a piece of the investment. There are others, like Fundrise, that run funds that do the investing and you can buy shares of those funds. In both cases, you diversify your risk across several investments and can generate passive cash flow in the process (as well as equity appreciation).

If you aren't an accredited investor, here is a list of real estate investing sites for non-accredited investors.

2. Peer-to-peer lending

Peer-to-peer lending is older than crowdfunded real estate investing but follows the same principles. You act as a bank, lending money to borrowers, but are able to diversify your loans across a variety of different borrowers with varying levels of risk. By funding loans with $10 and $20, you can deploy thousands of dollars across hundred of borrowers that, hopefully, are not correlated.

3. Mineral rights

Mineral rights are exactly that—the rights to extra minerals from the earth for a specific plot of land. They may be called mineral rights, mineral interests, or mineral estate, but the term is clear. It gives the owner the right to mine and extract minerals from the land.

When you own the mineral rights, you own any valuable minerals trapped in the land.

This is lucrative because when you own the mineral rights, you own any valuable minerals trapped in the land. The most valuable minerals are oil and gas, gold, copper, diamonds, and coal. In the United States, most of the value is in finding oil and gas.

When you own a mineral right, you can reach an agreement with a miner or extractor to receive a royalty based on production. For example, it's not uncommon for the Lessee (the miner) to pay the Lessor (owner) 1/8th value of what is produced.

If you want to buy mineral rights, do your homework!

4. Structured settlements

Structured settlements are an interesting asset.

Let's say you slip and fall in a store. You sue the store, because they were negligent, and you reach a settlement with the store. They offer to pay you $5,000 a year for 20 years. You see this a lot whenever there is a settlement on a massive scale with multiple claimants. The responsible party has to do this or they might go bankrupt. If they go bankrupt, no one gets paid.

Structured settlements are fine, except sometimes the person getting the money needs the whole sum. Or they don't want to wait. That's when an investor can offer to buy it from them. At this point, it's really an annuity to the investor.

This area has a bad reputation because sometimes the parties involved don't behave honorably. They might take advantage of someone in a bad situation and offer a lowball amount for a settlement. Whatever the case may be, the instrument itself is aboveboard.

Continue reading on Wallet Hacks …

Can I Invest in Trump’s Companies?

Q. Is there a way to capitalize on all of Donald Trump’s businesses? I expect he will make policies more favorable for his companies. I want in! — I want in! A. President-elect Trump is expected to have a huge impact on the economy. Before we discuss his businesses, let’s look at the big picture…. Read More

The post Can I Invest in Trump’s Companies? appeared first on Credit.com.

Still Waiting on Your Second Stimulus Check? Here’s How to Track It

The second stimulus check started hitting bank accounts last week. That means many people who have direct deposit are waking up to find an extra $600 in their bank accounts if they’re single or $1,200 if they’re married, plus a $600 coronavirus credit for each dependent child 16 or younger. But what if your second […]

This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.

5 Things to Know About the Home Office Tax Deduction and Coronavirus

Since the coronavirus quarantine began, many people have been forced to work from home. If you didn’t have a home office before the pandemic, you might have had a few expenses to set one up. I’ve received several questions about what benefits are allowed for home offices during the COVID-19 crisis.

One question came in on the QDT coronavirus question page. Money Girl reader Ian said:

"I have a question about next year's taxes and working from home. For the past 13 weeks, I have been forced to work from a home office. (I am a regular W-2 employee, not self-employed.) I have had some expenses come up that were brought about by working from home: a computer upgrade so I can better connect to Wi-Fi, a new router, and even a desk chair so I am comfortable while I work. Should I be keeping track of those expenses? Will they be deductible? My employer is not going to reimburse them. Thank you for your help!"

Another question came from Miki, who used my contact page at Lauradadams.com to reach me. She said:

"Hi, Laura, and thank you for a wonderful podcast! I've been listening for years and have always thought that you'd have a show for any question I could ever think of. But this new situation with COVID-19 has made me think of something that I'm sure many of us are dealing with right now.

"To start working from home, I had to spend quite a bit of money to get my home office on par with my actual office. I know you've done episodes on claiming home office expenses on taxes before, but could you do an episode on whether we can claim home office expenses on our taxes next year? And if we can, things we should start thinking about now (aside from saving the receipts)?"

Thanks for your kind words and thoughtful questions! I'll explain who qualifies for a home office tax deduction and serve up some tips for claiming it.

5 things to know about the home office tax deduction during coronavirus

Here's the detail on five things you should know about qualifying for the home office tax deduction in 2020.

1. COVID-19 has not changed the home office tax law

The CARES Act changed many personal finance rules—including specific tax deadlines, retirement distributions, and federal student loan payments—but the home office tax deduction is not one of them. In a previous post and podcast, Your Guide to Claiming a Legit Home Office Tax Deduction, I covered the fact that the Tax Cuts and Jobs Act (TCJA) of 2017 drastically changed who can claim this valuable deduction.

Before the TCJA, you could claim a home office deduction whether you worked for yourself or for an employer either full- or part-time. Unfortunately, W-2 employees can no longer take advantage of this tax benefit. Now, you must have self-employment income to qualify. My guess is that the IRS was concerned that it was too easy to abuse this benefit and reined it in.

Before the TCJA, you could claim a home office deduction whether you worked for yourself or for an employer either full- or part-time. Unfortunately, W-2 employees can no longer take advantage of this tax benefit.

The best option for an employee is to request expense reimbursement from your current or future employer even though they're not obligated to pay you. If you get pushback, make a list of all your home office expenses so it's clear how much you spent on their behalf. They might consider it for your next cost of living raise or bonus.

Unless Miki or Ian have a side business that they started or will start, before the end of 2020, they won't get deductions to help offset their home office setup costs.

 

2. The self-employed can claim a home office tax deduction

Let’s say you use a space in a home that you rent or own for business purposes in 2020. There are two pretty straightforward qualifications to qualify for the home office deduction:

  • Your home office space must be used regularly and exclusively for business
  • Your home office must be the principal place used for business

You could use a spare bedroom or a hallway nook to run your business. You don’t need walls to separate your office, but the space should be distinct—unless you qualify for an exemption, such as running a daycare. It’s permissible to use a separate structure, such as a garage or studio, as your home office if you use it regularly for business.

You must use your home as the primary place you conduct business—even if it’s just for administrative work, such as scheduling and bookkeeping. However, your home doesn’t have to be the only place you work in. For instance, you might work at a coffee shop or meet clients there from time to time and still be eligible for a home office tax deduction.

3. Your business can be full- or part-time to qualify for a home office tax deduction

If you work for yourself in any trade or business, either full- or part-time, and your primary office location is your home, you have a home business. No matter what you call yourself or your business, if you have self-employment income and do any portion of the work at home, you probably have an eligible home office. You might sell goods and services as a small business, freelancer, consultant, independent contractor, or gig worker.

If you work for yourself in any trade or business, either full- or part-time, and your primary office location is your home, you have a home business.

As I previously mentioned, the work you do at home could just be administrative tasks for your business, such as communication, scheduling, invoicing, and recordkeeping. Many types of solopreneurs and trades do most of their work away from home and still qualify for a legitimate home office deduction. These may include gig economy workers, sales reps, and those in the construction industry.

4. You can deduct direct home office expenses for your business

If you run a business from home, your direct home office expenses qualify for a tax deduction. These are costs to set up and maintain your office, such as furnishings, installing a phone line, or painting the walls. These costs are 100% deductible, no matter the size of the office.  

5. You can deduct indirect home office expenses for your business

Additionally, you’ll have costs that are related to your office that affect your entire home. For instance, if you’re a renter, the cost of rent, renters insurance, and utilities are examples of indirect expenses. You’d have these expenses even if you didn’t have a home office.

If you own your home, potential indirect expenses typically include mortgage interest, property taxes, home insurance, utilities, and maintenance. You can't deduct the principal portion of your mortgage payment, which is the amount borrowed for the home. Instead, you’re allowed to recover a part of the cost each year through depreciation deductions, using formulas created by the IRS.

Allowable indirect expenses actually turn some of your personal costs into home office business deductions, which is fantastic! They’re partially deductible based on the size of your office as a percentage of your home—unless you use a simplified calculation, which I’ll cover next.

How to calculate your home office tax deduction

If you qualify for the home office deduction, there are two ways you can calculate it: the standard method or the simplified method.

The standard method requires you to keep good records and calculate the percentage of your home used for business. For example, if your home office is 12 feet by 10 feet, that’s 120 square feet. If your entire home is 1,200 square feet, then diving 120 by 1,200 gives you a home office space that’s 10% of your home.

In this example, 10% of your qualifying expenses could be attributed to business use, and the remaining 90% would be for personal use. If your monthly power bill is $100 and 10% of your home qualifies for business use, you can consider $10 of the bill a business expense.

To claim the standard deduction, use Form 8829, Expenses for Business Use of Your Home, to figure out the expenses you can deduct and then file it with Schedule C, Profit or Loss From Business.

The simplified method doesn’t require you to keep any records, which makes it incredibly easy to claim. You can claim $5 per square foot of your office area, up to a maximum of 300 square feet. So, that caps your deduction at $1,500 (300 square feet x $5) per year.

The simplified method requires you to measure your office space and include it on Schedule C. It works best for small home offices, while the standard approach is better when your office is bigger than 300 square feet. You can choose the method that gives you the largest tax break for any year.

No matter which method you choose to calculate a home office tax deduction, you can't deduct more than your business's net profit. However, you can carry them forward into future tax years.

Also note that business expenses that are unrelated to your home office—such as marketing, equipment, software, office supplies, and business insurance—are fully deductible no matter where you run your business.

If you have any questions about qualifying business expenses, home office expenses, or taxes, consult with a qualified tax accountant to maximize every possible deduction and save money. The cost of working with a trusted financial advisor or tax pro is worth every penny.

Skipping Renters Insurance? Why That’s a Bigger Risk Than You’d Think

As a finance writer, I am surrounded by people who know a lot about managing money. But even those with the most money know-how can still miss financial must-haves. For instance, in a recent conversation, a few of my coworkers stated they didn’t have renters insurance. This puts them among the 59% of renters who… Read More

The post Skipping Renters Insurance? Why That’s a Bigger Risk Than You’d Think appeared first on Credit.com.

What Is a Life Underwriter Training Council Fellow (LUTCF)?

New insurance agents can get a grounding in the basic skills, such as underwriting, needed to succeed in the field by becoming a Life Underwriter Training Council Fellow (LUTCF). After completing the required training, agents will have greater expertise in … Continue reading →

The post What Is a Life Underwriter Training Council Fellow (LUTCF)? appeared first on SmartAsset Blog.