The Bottom Line
Small business is important to Central Oregon, and to Mid Oregon. Find tips and resources for business, and information about Mid Oregon’s commercial services and business members.
Year-End Tax Tips For 2020
By Jean Chatzky *
These year-end tax tips offer potential savings for your 2020 returns
Yes, it feels like we just finished filing our taxes. And yes, it’s already time to start thinking about them again. That means getting organized now and making sure you do everything you can to lower your 2020 tax bill before the end of the year.
Lisa Greene-Lewis, a certified public accountant and tax expert, offers these tips to help maximize savings on your 2020 returns:
Donate to Charity
If you are among the 90 percent of taxpayers who now take the standard deduction and don’t itemize your returns, including charitable donations, pay close attention. Under the CARES Act, Greene-Lewis says, there’s a new charitable deduction of up to $300 on your 2020 taxes (the ones you pay in 2021) for cash donations made to a 501(c)(3) organization such as a church or synagogue, even if you don’t itemize and claim the standard deduction.
Something else to note: The CARES Act also temporarily eliminates the limit on the number of cash contributions you can deduct when itemizing. And please don’t forget to ask for a receipt. The Internal Revenue Service requires proof of all cash donations, such as a canceled check or a statement or receipt from the organization where you made a contribution. This will come in handy if you are audited.
Maximize your retirement
Another way to reduce taxable income is to make a contribution to your retirement savings account. Whether your contribution goes to a 401(k) or traditional IRA, you can reduce taxable income (and save more for the future) by making sure you contribute the maximum allowed in your plan by Dec. 31, 2020. (Making a Roth IRA contribution is also good for your future, btw. It just won’t help on lower your tax bill.)
Pay tuition early
Being a lifelong learner has its rewards, especially when the courses you take help to maintain or enhance your job skills. If you are enrolled in an accredited college or other educational program, consider paying for the next semester’s tuition by Dec. 31 which could qualify you for a tax credit of up to $2,000 with the Lifetime Learning Credit.
Consider a home office tax deduction
Because of the COVID-19 global pandemic, many people’s employment status has changed, with a growing number of Americans becoming self-employed. The good news here is that eligibility rules for claiming a home office deduction have been relaxed, Greene-Lewis says, to allow more self-employed filers to claim the tax break. If you have no fixed location for your business, you can claim a home office deduction if you use the space for administrative or management activities, even if you don’t meet clients there.
While you can’t claim your kitchen if you are using your dining table as a desk, you can use a home office if the space is used exclusively for business, says Greene-Lewis, noting that many people have avoided the home office tax deduction because it was considered a red flag for an audit. If you legitimately qualify for the deduction, she says, there shouldn’t be a problem.
Defer your income or bonus
If you are in the enviable position of earning a year-end bonus in 2020, you can ask to be paid in January 2021, if it’s an acceptable practice at your company to pay bonuses the following year. Of course, you will still have to pay taxes on the money, just not in 2020.
Those who are self-employed or do freelance work may have a little more wiggle room with deferring reportable income. One way to lower 2020 income is to delay your invoices until late December so that you won’t receive a payment until January 2021 or later. For those with side gigs, you are required to report income of $600 or more from employers.
Double check your withholding
You can use the Tax Withholding Estimator on IRS.gov to help determine the right amount of tax to be withheld from your paychecks if you work for someone else. If you want to adjust your withholding for the remainder of the year, time is running out. You should submit a new Form W-4, Employee’s Withholding Certificate to your employer as soon as possible.
* This guest article, “Year End Tax Tips for 2020”, is from the “Your Money Blog” in Mid Oregon’s digital banking Credit Savvy resource. “Year End Tax Tips for 2020” is made possible by Savvy Money.
How to Start Looking for a New Car
In an ideal world, a car dealer helps you find the perfect car for you at the perfect price, and you drive away with a smile on your face and many happy years ahead of you. And that’s how it does work for many of those looking for a new car, who did their homework in advance, learning how to navigate the process and how to work with dealers.
Because some dealers put more emphasis on their profits than on their customers’ satisfaction, an educated car-buyer looking for a new car must know what he wants and for how much, so that he makes the transaction smooth and comfortable with no regrets as he leaves the lot.
Know what you want
The more clearly you know what you want, the less likely you are to be steered toward something you discover later you don’t want, or can’t afford. This includes the various options that come with a vehicle. If you don’t know exactly what you want, at least have your preference narrowed down to a few choices.
Research the vehicles on dealer Websites or automaker Websites. Also check out consumer publications such as Motor Trend, Car and Driver, and Consumer Reports‘ annual car-buying issue. Internet sites like edmunds.com are also valuable sources of information on looking for a new car.
Check the selection and pricing of several dealers in your area.
Know how much you want to pay
How much can you afford to pay for a new car, truck, minivan, or other vehicle? Factor that in so that you don’t get sold on something you can’t afford. The dealer will most likely ask you how much you can afford so that he or she knows what to offer you. Having a specific number handy can help you when it comes time to negotiate with a dealer.
A popular recommendation is that your total monthly car payments should not exceed 20% of your take-home pay.
Have your financing in advance
If you can’t pay for a vehicle in cash or have someone else pay for it, are you preapproved for a loan? Compare the financing options offered by the dealer (if it offers financing) against those offered by your financial institution.
Mid Oregon can be your resource for financing when looking for a new car or truck. Review our Auto loan webpage, or contact a loan officer by email, phone (541) 382-1795, or in person at one of our seven Central Oregon branches.
Learn the pricing language
Several different prices are used in new-car dealings when you are looking for a new car.
Invoice price. This is the price that the manufacturer charges the dealer for the vehicle. It may actually be higher than what the dealer charges you because dealers get rebates, allowances, and various incentives from the manufacturers. In addition to the price of the vehicle, the invoice price should have the destination and delivery cost built into it.
Base price. This is the cost of the vehicle without any options.
MSRP. The manufacturer’s suggested retail price (MSRP) is the price that the manufacturer suggests the vehicle be sold. This price includes the manufacturer’s installed options and the factory warranty. This price is also known as the Monroney sticker price, after the US senator who sponsored legislation to require disclosure of information on new autos. By law, a sticker with the MSRP and the fuel economy information must be affixed to the car window.
Dealer sticker price. The dealer sticker price is the MSRP plus the suggested retail price of any dealer-installed options and any dealer markups.
Ordering a car
Sometimes dealers don’t have exactly what you want, so you can work with a dealer to order a car directly from the automaker and have it delivered to the dealer, where you can pick it up.
Buying on the Internet
You can also buy a new vehicle on the Internet, in which you will work with a dealer by email or phone.
Mid Oregon’s financial workshop, “Take the Wheel, Get The Best Car Deal”, can provide additional information to help you buy the right vehicle for the right price. To see upcoming Mid Oregon workshops, visit https://www.midoregon.com/education/financial-workshops.shtml.
Watch the recorded webinar version.
See workshop handouts and other available webinar videos and handouts.
Give a Financial Gift
Financial Gifts Can Improve Well-Being
Yes, you can grab some gift cards as a last minute gift choice. But how about something different? Give a financial gift.
If you really want to give a meaningful holiday gift this year, think beyond traditional items like clothing and gift cards. A recent survey conducted for Charles Schwab shows that more than half (53%) of those surveyed say cash to help pay off credit card bills would be their top choice as an unexpected holiday gift.
A holiday gift to pay down debt can help someone save on interest payments as well as help the recipient feel more financially secure as he or she grapples with debt.
Other financial gifts to consider:
• Piggy bank—This simple gift can go a long way toward educating even the youngest children about money. They quickly learn the concept of putting coins in the bank, then using the coins to make a purchase later. Buy a cute bank and fill it with coins or a few dollars. Some banks electronically add up coins each time a new one is deposited—seeing the amount grow can be motivating to kids. Another idea: Buy a small three-drawer container and set up a drawer each for saving, spending, and sharing.
• Sessions with a financial adviser—Arranging for a sit-down with a financial planner, if only for one or two sessions, can help someone learn personal finance basics and give him or her the groundwork for starting to invest. Contact Mid Oregon Credit Union for a referral.
• Cash toward a Roth IRA (individual retirement account)—“In addition to using cash to pay off credit card debt, another smart way to use holiday gift money is to encourage a working recipient to put the money into a Roth IRA,” says Michelle Dosher, in the Credit Union National Association’s consumer education and market research department. “Roth IRAs can be really beneficial, especially when people start them at a young age.”
• Electronic gadgets—Gadgets like tablets and smartphones are popular gifts, but you can add a financially savvy twist with personal finance apps, many of which are free or inexpensive. “If you’re going to give someone a gadget, also give suggestions of financial apps that could help teach money management skills, and encourage recipients to use your Credit Union’s mobile banking tools,” Dosher adds. This is a gift that teens and tweens can appreciate as well.
• Books—Help family members and friends learn to manage money by giving them a book about the topic. One idea is “Money Rules: The Simple Path to Lifelong Security,” by Jean Chatzky. It’s an easy read, broken up into sections about making and saving money, spending wisely, and investing.
• A financial jumpstart—Maybe you know a new grad or someone just getting back on his or her feet. You could help by offering your home as a place to stay for a month or two or by helping to pay a security deposit or first month’s rent. This would be a great gift for parents to give young adult children as they learn financial independence.
• Mid Oregon Credit Union membership—Let family members know that because you’re a credit union member they can be members. Tell them about the benefits of credit union membership and about the ease of using credit union services. Mid Oregon Membership is open to those who live, work, worship or go to school in Deschutes, Jefferson, Crook, Wheeler, Lake & North Klamath Counties, and to family of current members (See details at MidOregon.com).