Wed. Sep 27th, 2023
    Selling a Vacation Home and Avoiding Capital Gains

    When it comes to selling a vacation home, there are certain tax implications that need to be considered. Unlike primary homes, vacation homes do not qualify for the tax break that allows individuals to exclude up to $250,000 in capital gains from their income. Additionally, if the vacation home was used strictly as a vacation or second home and not as a rental property, it cannot be exchanged for another property in a 1031 exchange, which allows for the deferral of capital gains on real estate investment properties.

    If you are one-third owner of the vacation home and want to sell your share to your siblings, it won’t eliminate the capital gain, but it could spread out the tax bill. Selling your interest over several years may be an option to consider. However, it is important to discuss your specific situation with a tax professional to determine the best approach for minimizing capital gains.

    Source: Liz Weston, NerdWallet

    Keeping Credit Cards Open for Credit Scores

    If you have multiple credit cards, you may be wondering if it’s a good idea to close some of them. However, having more active credit accounts can actually help you achieve and maintain high credit scores.

    The scoring formulas used to calculate credit scores do not penalize individuals for having too many accounts or too much available credit. In fact, having at least four active credit accounts can be beneficial. However, it is important to avoid utilizing too much of your available credit at one time. To maintain a good credit score, try to keep your balance on each card below 10% of its available limit.

    Source: Liz Weston, NerdWallet

    Settling an Estate: Consolidating Financial Accounts

    When a loved one passes away, settling their estate can often become a complicated and time-consuming task. If your elderly mother has multiple financial accounts at different institutions, it may be beneficial to consolidate those accounts now to make the process easier later on.

    However, before closing any accounts, it’s important to review the rules for FDIC insurance to ensure that her accounts would remain adequately covered. If all of her accounts are already at the same institution and within FDIC limits, there may be less urgency to close her CDs prematurely. Closing them too soon could result in losing out on interest.

    Source: Liz Weston, NerdWallet

    Understanding Delayed Social Security Retirement Credits

    Delayed retirement credits can provide individuals with increased Social Security benefits, but it’s important to understand how these credits work. The 8% delayed retirement credit is based on an individual’s benefit at full retirement age, rather than an 8% increase every year based on the previous year’s amount.

    For example, if your full retirement age benefit is $3,000, your benefit will increase by $240 each year if you delay claiming Social Security. Over the course of three years, your benefits would increase by a total of 24%. It’s important to keep this in mind when considering when to start claiming Social Security.

    Source: Liz Weston, NerdWallet

    – Liz Weston, NerdWallet