FrugalFringe.com http://www.frugalfringe.com Growing the Frugal Fringe—One Household at a Time Tue, 23 May 2017 18:52:16 +0000 en-US hourly 1 https://wordpress.org/?v=4.7.5 47195129 Calculator: the Future Value of an Annual Savings Stream http://www.frugalfringe.com/calculators/calculator-the-future-value-of-an-annual-savings-stream/ Mon, 24 Apr 2017 09:30:15 +0000 http://www.frugalfringe.com/?p=6440

This website promotes a basic truth: if you save now, you’ll prosper in the future.

But for this truth to change your life, it’s not enough just to read about it.

For frugality to change your life, you need to convince yourself of its powerful reality—and getting yourself convinced requires active investigation.

In order to convince you how much frugality can change your life I’ve prepared a new kind of interactive calculator:  FVAnnualSavingsCalc.

FVAnnualSavingsCalc lets you actively investigate how a greater level of frugality might affect your own finances. It works by answering this central question:

how much will you prosper when you permanently lower household spending and invest the resulting savings each and every year?

Household spending is a great source of savings. Why? Because lurking somewhere in the dark financial recesses of most households is a festering pool of hidden waste and inefficiency. When you learn the tricks to spot and correct these common flaws, your bills drop immediately—and, more importantly, the savings keep piling up for years to come.

It’s easy to understand that wealth will accumulate when you reduce spending, deposit the proceeds, and leave them untouched.

Everyone knows that.

But the burning question is this: how much will you earn if you make these changes now and how much time will it take for those savings to grow big enough to change your life?

That’s where FVAnnualSavingsCalc steps in.

FVAnnualSavingsCalc Instructions

To work the calculator, you only make three entries:

1. Your Annual Household Spending. A ballpark estimate works fine, but if you want more accuracy here’s a quick approach that produces an accurate annual spending figure in about an hour.

2. Percent Saved on Household Spending. The typical frugal newbie can expect to save about 20 percent per year. That’s how much is gained by cutting out waste and inefficiency. But by making even more aggressive cuts, it’s possible to slash annual living costs by 50 percent or more. You’ll be astounded by the amount of wealth that aggressive frugality creates. So let the calculator work its magic. Try inputting different percentages that reflect ever larger spending cuts and see how that affects the future value of your wealth.

3. Annual Rate of Return. This input predicts the rate your savings will grow each year. For a conservative estimate, enter five percent or less. If you’re interested in exploring the effects of higher rates, consider this: many financial planners project 8 percent as an average return for portfolios heavily invested in stocks.

FVAnnualSavingsCalc

1. Annual Household Spending: $
2. Spending Reduced By X Percent: %
3. Rate of Return on Investments: %


Years Accrued Compound Future
From Now Savings Interest Value
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Notes

1. FVAnnualSavingsCalc is designed to show the effects of making percentage cuts to your annual household spending. If you want to calculate cuts in terms of dollars instead of percentages, you can do so by making an easy adjustment. Just enter 100,000 into the first box of the calculator. Next, enter your desired savings stream stated as a percentage of $100,000. For example, to figure out the future value of $18,547.50 per year in savings, enter 100,000 into the first box and 18.5475 into the second box.

2. FVAnnualSavingsCalc assumes that you deposit your savings at the start of each year. The cumulative total of these deposits is reported in the column entitled: “Accrued Savings.”

3. The “Future Value” column reports the year-end future value (FV) of your annual payment stream (P) at the interest rate (ir) you inputted for however many years (n) you make deposits (up to 50 years). Here’s the formula:

FV = P * ((1 + ir)n – 1) / ir) * (1 + ir)

For example, if you deposit $10,000 on January 1 for 20 straight years at an interest rate of 5.5 percent, at the end of the final year your savings stream will have a future value of $367,860.76. Here’s how the formula works as shown by several simplifications:

$10,000 * ((1 + .055)20 – 1) / 0.055) * (1 + 0.055) =
$10,000 * ((1.9177574906) / 0.055) * (1.055) =
$10,000 * (34.86831801090909) * (1.055) =
$10,000 * 36.78607550150909 =
$367,860.76

4. Try moving your mouse over the blue dots on the chart. Cool animations will ensue.

*   *   *

If FVAnnualSavingsCalc motivates you to cut your household spending, then it’s served its purpose well.

To help you get started on the road to frugality, I’ve prepared more than 50 checklists that suggest cuts you can make to every line item of your household budget. The checklists are free to use. A good way to start using them is to review my easy-to-read introduction (which incidentally features my all-time favorite knock-knock joke).

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In Praise of Prius: After 7½ Years, We Still Count the Savings http://www.frugalfringe.com/case-studies/in-praise-of-prius-after-7%c2%bd-years-we-still-count-the-savings/ http://www.frugalfringe.com/case-studies/in-praise-of-prius-after-7%c2%bd-years-we-still-count-the-savings/#comments Mon, 17 Apr 2017 09:30:46 +0000 http://www.frugalfringe.com/?p=6249

On July 27, 2009, we bought a 2010 Toyota Prius III. The $28,670 gross price (with sales tax) was offset by: (1) a $4,500 payment from the federal “Cash for Clunkers” program; (2) a $2,880 Colorado tax credit for buying a hybrid vehicle; and (3) a $161.60 sales tax deduction on our Form 1040 Schedule A. With these offsets, our final net purchase price was a reasonable $21,128.40. Amount saved: $7,541.60.

We bought the Prius hoping that it would last at least ten years (as long as we avoided a major accident). Five years later, I posted this article about our cheap ownership costs—Halftime Report: Our 2010 Toyota Prius and the Benefits of Long Range Planning.

More than 2½ years have passed since I last reported on the Prius, so as our third quarter of ownership ends, it’s time to provide an update. Is our Prius still a big money-saver? Should you consider owning one yourself?

7½ Years of Prius Ownership Costs

Everything our household spends on vehicles is through credit cards, so it’s easy to track costs. This chart covers July 27, 2009 – January 27, 2017:

Year Depreciation Gas Insurance Reg & Tax Body Work Tires Repairs Oil
2009 $757.08 $431.88 $584.20 $593.23 $0.00 $0.00 $0.00 $0.00
2010 $1,816.99 $1,094.94 $421.74 $454.99 $0.00 $0.00 $0.00 $74.65
2011 $1,816.99 $1,230.88 $645.15 $368.01 $0.00 $320.18 $0.00 $100.06
2012 $1,816.99 $1,230.18 $650.40 $299.32 $0.00 $0.00 $0.00 $81.64
2013 $1,816.99 $838.31 $670.30 $207.34 $1,283.95 $493.89 $0.00 $66.65
2014 $1,816.99 $402.17 $599.95 $173.86 $0.00 $0.00 $0.00 $65.13
2015 $1,816.99 $769.64 $692.82 $174.00 $40.63 $0.00 $458.97 $54.95
2016 $1,816.99 $546.85 $810.04 $174.00 $0.00 $0.00 $75.00 $84.26
2017 $151.42 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 $0.00
$13,627.40 $6,544.84 $5,074.60 $2,444.75 $1,324.58 $814.07 $533.97 $527.34

The bottom line: our operating costs during 7½ years of ownership have totaled $30,891.55, for an average of $343.24 per month. Here are the details.

Depreciation

Depreciation is what a vehicle loses in market value over time. To figure actual depreciation, I visited KBB.com in late January and entered the relevant data about our Prius including its mileage (112,837) and overall condition (very good, but not excellent). I then subtracted the car’s estimated market value ($7,501) from its original net purchase price ($21,128.40) to arrive at a figure for accumulated depreciation. I spread that amount evenly over 7½ years of ownership.

Gas

Mrs. Moose retired in August, 2012. This eliminated 16,000 commuting miles per year, but was partially offset by a welcome increase in vacationing miles. In late 2014, we moved from the mountains into town, which further reduced our annual mileage.

Registration and Tax

Newer vehicles trigger higher taxes, so during the first five years the Prius cost a bundle. But now the car is older. Starting in 2018, this line item will drop to $74 per year.

Body Work

In 2013, we suffered from my clumsiness. I had a small accident that cracked the front bumper cover, which is made of plastic. Why were the repairs so expensive? Answer: the new bumper cover had to be painted to match the rest of the car—and that involved big labor costs.

In 2015, the front passenger wheel well cover (also plastic) came loose at 70 MPH. It was promptly shredded by the fast-spinning tire. To avoid another body shop bill, I watched a YouTube video and did the work myself. Total cost: $40.63 for a replacement part from RockAuto.com.

Repairs

In 2015, we replaced the 12-volt accessory battery, transmission fluid, and air filter. Cost: $458.97. In 2016, we had a mechanic give the car a once-over before leaving for a 2,500 mile road trip. Cost: $75. Though 7½ years, this car has been a miracle of maintenance-free motoring. We’ve never even replaced the brake pads!

Oil

All oil changes have occurred as scheduled. The reported expenses may include occasional tire rotations and air filters.

Prius Costs vs. Average Sedan Costs

Since 1950, the American Automobile Association (AAA) has published the annual ownership costs for the average sedan. Using these reports, I’ve charted what the AAA’s typical sedan would have cost over the last 7½ years as compared to our actual expenses:

Year AAA Sedan Our Prius $ Saved
2009 $4,722.58 $2,366.39 $2,356.19
2010 $8,294.00 $3,863.30 $4,430.70
2011 $8,445.00 $4,481.27 $3,963.73
2012 $8,225.00 $4,078.52 $4,146.48
2013 $8,214.75 $5,377.43 $2,837.32
2014 $5,278.00 $3,058.10 $2,219.90
2015 $5,165.00 $4,008.00 $1,157.00
2016 $4,830.00 $3,507.14 $1,322.86
2017 $400.67 $151.42 $249.25
Totals: $53,575.00 $30,891.55 $22,683.45
Cost Per Year: $7,143.33 $4,118.87 $3,024.46
Cost Per Month: $595.28 $343.24 $252.04
Cost Per Day: $19.57 $11.28 $8.28
Cost Per Mile: $0.48 $0.27 $0.20
% Saved: 42.34%

According to the chart, we’ve spent 42.34 percent less than the AAA projections for savings of $22,683. But this overstates the benefits of owning a Prius because of two huge factors that had nothing to do with our particular car model: (1) we benefited from a scheme of governmental incentives; and (2) we paid cash and thereby avoided interest costs.

When I adjust for the incentives and avoided interest, is the Prius still a good value? The answer remains a resounding YES because we still save an impressive 25.53 percent versus the AAA’s average sedan:

Year AAA Sedan Our Prius $ Saved
Totals: $53,575.00 $39,897.65* $13,677.35
Cost Per Year: $7,143.33 $5,319.69 $1,823.65
Cost Per Month: $595.28 $443.31 $151.97
Cost Per Day: $19.57 $14.57 $5.00
Cost Per Mile: $0.48 $0.35 $0.12
% Saved: 25.53%

More Incentives to Keep Driving this Great Car

Apart from low operating costs, we have plenty of other reasons to hold on to our Prius:

1. Our New Big-City Sales Tax. When we bought the Prius in 2009 we lived in a county where the sales tax was 2.9 percent. Once we moved to town, the sales tax skyrocketed to 8.845 percent. On a $20,000 car purchase, this would mean paying $1,189 more in tax. The longer we delay this painful event, the better we’ll feel.

2. Ownership Taxes. Colorado charges lower ownership taxes for older vehicles. For 2017, the tax for our Prius is $103. In 2018, it will drop to $3 per year and remain at that low level forever. If we replaced our used Prius with a newer model, say one from 2015, our taxes would jump by about $750 over the next 2½ years.

3. Collision and Comprehensive Insurance. Now that the Prius is older—and worth a mere $7,500—we worry less about insuring it. We recently raised the deductibles for collision and comprehensive coverage from $1,000 to $2,500. If we upgraded to a newer model, we would return the deductibles to $1,000. This would cost an extra $1,200 in premiums over the next 2½ years.

4. If it Ain’t Broke, Don’t Replace It. We’ve had good luck with this car. If we updated to a used 2015 Prius, it would cost about $9,175 net after selling our current model in a private party transaction ($16,676 – $7,501 = $9,175). There’s no reason to pay $9,000+ for the dubious privilege of prematurely replacing the best car we’ve ever owned.

*   *   *

If our 7½ years worth of data doesn’t convince you, read these other sources that also endorse the Prius.

Bankrate.com has declared that the Prius is the cheapest car to own and operate. YourMechanic.com has concluded that the Prius is the cheapest model to maintain over ten years (at a mere cost of $4,300). The Prius has appeared repeatedly on lists of vehicles most likely to last 200,000 miles or more. Consumer Reports has tested a 2002 Prius driven 206,000 miles. After noting the car’s strong performance in acceleration and fuel economy, the reviewers were “amazed how much the car drove like the new one we tested 10 years ago.”

The evidence is clear: the Prius delivers a tremendous value in transportation. If both the car and I are still around 2½ years from now, I’ll post another data-intensive update that reviews a full decade of ownership.

* This figure adds the AAA’s projected five year finance charges of $3,895. It also adds the governmental incentives we received ($7,541.60) minus an adjustment for the lower price we would have negotiated had those incentives not created such a huge demand for hybrids in the first place ($2,430.50).

Great Prius Pic Joi Ito!

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Update: Adjusted Gross Income Ranking Calculators http://www.frugalfringe.com/calculators/update-adjusted-gross-income-ranking-calculators/ Mon, 10 Apr 2017 09:30:35 +0000 http://www.frugalfringe.com/?p=6194

Last week I reworked several posts that let you compare your Adjusted Gross Income (AGI) to IRS data. Although these posts have garnered more than 13,000 reader views, they’re a tad clunky because they present AGI percentiles in five lengthy charts. Using Javascript, I’ve modernized the presentation by adding interactive calculators (but the charts are still there if you prefer to use them).

Here’s a screenshot of an AGI calculator in action:

 

 

To use these new calculators yourself, click any of the following links:

Photo by digital cat

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Latest Calculator Updates! http://www.frugalfringe.com/calculators/latest-calculator-updates/ http://www.frugalfringe.com/calculators/latest-calculator-updates/#comments Mon, 03 Apr 2017 09:30:34 +0000 http://www.frugalfringe.com/?p=6105

I spent most of this past week in the land of Javascript. After much fiddling with code, I’ve rolled out major additions to two popular Frugal Fringe calculators.

New Printable Table for Labor Cost Calculator (LCC)

At this writing, the LCC is closing in on 20,000 reader views. It’s been featured on Lifehacker, Travel+Leisure, Mental Floss, Rockstar Finance, Business Insider, and many other websites. The LCC takes any upcoming purchase you might have and shows how many working hours you’ll swap for it based on your salary, state and federal tax brackets, and hours spent at work and on commutes.

Using the magic of Javascript, I’ve added a new printable chart that shows how much of your life you trade away at various spending levels—all the way from $1 to $100,000. Here’s a screenshot based on someone who earns about $77,000 per year:

To create and print your own LCC chart, click here.

New Interactive Calculator for Census Bureau Income Tables

At this writing, this site’s income percentile tables have received more than 50,000 views. The income tables allow you to compare your annual household or individual income with actual Census Bureau data from the years 2013 – 2015. Using Javascript, I’ve added an online interactive calculator that delivers your results much faster than tables can (although the tables will still be there if you prefer that approach). Here’s a screenshot:

To test drive the new income ranking calculators yourself, click any of these links: 2013 Census data, 2014 Census data, and 2015 Census data.

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Worthometer Updated to Include Interactive Calculator http://www.frugalfringe.com/worthometer/worthometer-updated-to-include-interactive-calculator/ http://www.frugalfringe.com/worthometer/worthometer-updated-to-include-interactive-calculator/#comments Mon, 27 Mar 2017 09:30:34 +0000 http://www.frugalfringe.com/?p=5971

As part of this website’s ongoing remodel, I’ve updated the popular Worthometer, which at this writing has garnered more than 35,000 views.

Users will now have the option to look up their household net worth ranking on either: (1) a two-column table; or (2) a brand new interactive calculator.

Here’s a screenshot:

To try this new feature yourself, click here.

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This latest revision reflects my continuing forays into the magical world of Javascript and its rich landscape of arrays, functions, and methods. I hope to provide further updates in the coming weeks.

Photo Credit: Hollerith Census Machine by Marcin Wichary. To see original at Flickr, click here.

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2017 Obamacare Premium Tax Credit Calculator Version 2.0 http://www.frugalfringe.com/calculators/2017-obamacare-premium-tax-credit-calculator-version-2-0/ Mon, 20 Mar 2017 09:30:41 +0000 http://www.frugalfringe.com/?p=5287

This year the federal government once again offers a Premium Tax Credit (PTC) to qualifying taxpayers who buy health coverage from an approved health insurance exchange.

To receive a PTC you must split the uprights between making too little and too much income. If you make too little, you drop out of Obamacare and into Medicaid. This precludes any PTC and subjects you to coverage that many believe is inferior to private health insurance. The PTC also disappears if you make too much. This happens when your household income exceeds 400% of the applicable poverty line (the government draws this line based upon your state of residence and household size).

Calculator Instructions

To assist your Obamacare planning for 2017, I’ve reformatted this site’s popular PTC Calculator into an interactive online experience (for the earlier version, click here). The calculator shows how much of your monthly premium will be reimbursed by the government and how much, if any, you’ll have pay yourself. And yes, the output even includes a helpful pie chart. 🙂

To see your bottom line, enter your state of residence, the number of people in your household, and these three numbers:

Line 3: Your Monthly Premium. Plug in your monthly cost of health insurance for 2017. This is the premium you contracted to pay during the open enrollment period that began November 1, 2016 and ended January 31, 2017.

Line 4: The Monthly Premium of the Second Cheapest Silver Plan You’re Offered. Known as the Applicable Benchmark Plan (ABP), see Internal Revenue Code § 36B(b)(2), this amount can be obtained by ranking from cheapest to most expensive all the Silver plans that the health insurance exchange offered to you during the open enrollment period. The ABP is the second cheapest silver plan you were offered. You can also obtain the ABP by calling the marketplace from which you purchased your insurance. Your ABP can vary widely from year to year. For example, for 2014, our household’s ABP was $730.73, for 2015 it was $637.80, and for 2016 it was $886.85. For 2017 it will be a whopping $1,043.39.

Line 5: Your Projected 2017 Modified Adjusted Gross Income (MAGI). For most taxpayers, there exists no difference between Adjusted Gross Income (AGI) and MAGI, because most households don’t experience any of the three narrow circumstances that trigger MAGI calculations: non-taxable social security benefits (see Form 1040, lines 20(a)-20(b)), tax-exempt interest (see Form 1040, line 8b), and excluded foreign earned income and housing expenses for those who live abroad (see Form 2555, lines 45 and 50). If your income stays level year-to-year, you can enter the AGI as reported on your most recent federal tax return (Form 1040, line 37). If your income fluctuates year-to-year, enter low and high estimates for 2017 to see how they affect the results.

Here’s the calculator. If the pie chart below appears as a solid red ball, this means that the PTC will cover 100 percent of your monthly health insurance bill—a very good result indeed.

2017 PTC Calculator

1 Enter Your State of Residence
2 Enter the Number of Persons in Your Family
3 Enter Your Monthly Premium
4 Enter Monthly Premium of Second Cheapest Silver Plan Offered to You
5 Enter Your Projected Modified Gross Income (MAGI) for 2017


6 Your Household's Poverty Line
7 Federal Poverty Line Percentage (FPLP) [Line 5 / Line 6]
8 FPLP Rounded to a Whole Number [Line 7 Rounded]
9 Applicable Percentage [From 2016 Form 8962 Instructions, Table 2]
10 Amount to be Subtracted from Line 4 [(Line 5 * Line 9 )/ 12]
11 Monthly Premium Tax Credit [Line 4 - Line 10; or 0 if Line 10 = 0]
12 Monthly Net Cost of Premiums [Line 3 - Line 11]

Note: values for the Applicable Percentage figure as reported on line 9 are based upon the expected premium contribution levels as listed in the 2016 version of the Form 8962 Instructions. The IRS won't release the 2017 Form 8962 instructions until late 2017.

Tax Planning Notes

Defer or Accelerate Income. The calculator can tell you how much your PTC might change if you accelerate extra income into 2017 or, alternatively, defer receiving it until 2018. For example, if accumulated gains on stocks you now hold would push you over 400% of the Poverty Line (line 8), you might delay selling them until after January 1, 2018 (but of course this strategy exposes you to the risk of any intervening market downturns).

Defer or Accelerate Adjustments to Income. The PTC Calculator might also show that you could benefit by making adjustments to income in 2017, or, alternatively, by deferring them into 2018. Such adjustments include paying student loan installments early, funding Health Savings Accounts, accelerating 2018 tuition payments into 2017, and more. For a full list of possible adjustments, review lines 23 - 35 of Form 1040.

Avoid Medicaid. You can also use the PTC Calculator to avoid Medicaid coverage (if indeed this is something you wish to avoid). Medicaid eligibility is based upon your family's Federal Poverty Line Percentage (FPLP) (see line 8 of the PTC Calculator). Whether you're subject to Medicaid is a complex question because states apply differing FPLPs based upon existing pregnancies or the number of children in the household. A fast starting point for analysis is the Medicaid eligibility chart published by the Centers for Medicare and Medicaid Services (click here). Several cautions apply to using this chart. First, it contains information current as of June 1, 2016. Rules change frequently so check for any updates at your home state's Medicaid website. Second, Medicaid eligibility can vary based upon citizenship, residency, or immigration status. If any of your household members have issues in these areas, consult an expert. Third, all states disregard 5% of FPLP when calculating eligibility. So, for example, if the eligibility chart reports your household's FPLP threshold as 133% for Medicaid, to be on the safe side boost your MAGI until you reach an FPLP of at least 138% (as reported on line 8 of the calculator).

*  *  *

The tax code is a dense labyrinth filled with many traps for the unwary—and this is especially true when it comes to the complex rules that govern Obamacare. The PTC Calculator will point you in the right direction, but confirm what it tells you by consulting a competent tax advisor who knows your circumstances.

If you'd like to explore my other articles about Obamacare, click these links:

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2016 Obamacare Premium Tax Credit Calculator Version 2.0 http://www.frugalfringe.com/calculators/2016-obamacare-premium-tax-credit-calculator-version-2-0/ http://www.frugalfringe.com/calculators/2016-obamacare-premium-tax-credit-calculator-version-2-0/#comments Mon, 13 Mar 2017 09:30:28 +0000 http://www.frugalfringe.com/?p=5477

In 2016, the federal government once again offers a Premium Tax Credit (PTC) to qualifying taxpayers who buy health coverage from an approved health insurance exchange.

To receive a PTC you must split the uprights between making too little and too much income. If you make too little, you drop out of Obamacare and into Medicaid. This precludes any PTC and subjects you to coverage that many believe is inferior to private health insurance. The PTC also disappears if you make too much. This happens when your household income exceeds 400% of the applicable poverty line (which is based upon your state of residence and household size).

Calculator Instructions

To assist your Obamacare planning for 2016, I’ve reformatted this site’s popular PTC Calculator into an interactive online experience (for the previous 2016 version, click here). The calculator shows how much of your monthly premium will be reimbursed by the government and how much, if any, you’ll have pay yourself. And yes, the output even includes a helpful pie chart. 🙂

To see your bottom line, enter your state of residence, the number of people in your household, and these three numbers:

Line 3: Your Monthly Premium. Plug in your monthly cost of health insurance for 2016. This is the premium you contracted to pay during the open enrollment period that began November 1, 2015 and ended January 31, 2016.

Line 4: The Monthly Premium of the Second Cheapest Silver Plan You’re Offered. Known as the Applicable Benchmark Plan (ABP), see Internal Revenue Code § 36B(b)(2), this amount can be obtained by ranking from cheapest to most expensive all the Silver plans that the health insurance exchange offered to you during the open enrollment period. The ABP is the second cheapest silver plan you were offered. You can also obtain the ABP by calling the marketplace from which you purchased your insurance. Your ABP can vary widely from year to year. For example, for 2014, our household’s ABP was $730.73, for 2015 it was $637.80, and for 2016 it was $886.85.

Line 5: Your Projected 2016 Modified Adjusted Gross Income (MAGI). For most taxpayers, there exists no difference between Adjusted Gross Income (AGI) and MAGI, because most households don’t experience any of the three narrow circumstances that trigger MAGI calculations: non-taxable social security benefits (see Form 1040, lines 20(a)-20(b)), tax-exempt interest (see Form 1040, line 8b), and excluded foreign earned income and housing expenses for those who live abroad (see Form 2555, lines 45 and 50). If your income stays level year-to-year, you can enter the AGI as reported on your most recent federal tax return (Form 1040, line 37). If your income fluctuates year-to-year, enter low and high estimates for 2016 to see how they affect the results.

Here’s the calculator. If the pie chart below appears as a solid red ball, this means that the PTC will cover 100 percent of your monthly health insurance bill—a very good result indeed.

2016 PTC Calculator

1 Enter Your State of Residence
2 Enter the Number of Persons in Your Family
3 Enter Your Monthly Premium
4 Enter Monthly Premium of Second Cheapest Silver Plan Offered to You
5 Enter Your Projected Modified Gross Income (MAGI) for 2016


6 Your Household's Poverty Line
7 Federal Poverty Line Percentage (FPLP) [Line 5 / Line 6]
8 FPLP Rounded to a Whole Number [Line 7 Rounded]
9 Applicable Percentage [From 2016 Form 8962 Instructions, Table 2]
10 Amount to be Subtracted from Line 4 [(Line 5 * Line 9 )/ 12]
11 Monthly Premium Tax Credit [Line 4 - Line 10; or 0 if Line 10 = 0]
12 Monthly Net Cost of Premiums [Line 3 - Line 11]

Tax Planning Notes

Defer or Accelerate Income. If your income for 2016 is malleable—that is if you can exercise some control over its size—the calculator can tell you how much your PTC might change if you accelerate extra income into 2016 or, alternatively, defer receiving it until 2017. For example, if accumulated gains on stocks you now hold would push you over 400% of the Poverty Line (line 8), you might delay selling them until after January 1, 2017 (but of course this strategy exposes you to the risk of any intervening market downturns).

Defer or Accelerate Adjustments to Income. The PTC Calculator might also show that you could benefit by making adjustments to income in 2016, or, alternatively, by deferring them into 2017. Such adjustments include paying student loan installments early, funding Health Savings Accounts, accelerating 2017 tuition payments into 2016, and more. For a full list of possible adjustments, review lines 23 - 35 of Form 1040.

Avoid Medicaid. You can also use the PTC Calculator to avoid Medicaid coverage (if indeed this is something you wish to avoid). Medicaid eligibility is based upon your family's Federal Poverty Line Percentage (FPLP) (see line 8 of the PTC Calculator). Whether you're subject to Medicaid is a complex question because states apply differing FPLPs based upon existing pregnancies or the number of children in the household. A fast starting point for analysis is the Medicaid eligibility chart published by the Centers for Medicare and Medicaid Services (click here). Several cautions apply to using this chart. First, it contains information current as of June 1, 2016. Rules change frequently so check for any updates at your home state's Medicaid website. Second, Medicaid eligibility can vary based upon citizenship, residency, or immigration status. If any of your household members have issues in these areas, consult an expert. Third, all states disregard 5% of FPLP when calculating eligibility. So, for example, if the eligibility chart reports your household's FPLP threshold as 133% for Medicaid, to be on the safe side boost your MAGI until you reach an FPLP of at least 138% (as reported on line 8 of the calculator).

*  *  *

The tax code is a dense labyrinth filled with many traps for the unwary—and this is especially true when it comes to the complex rules that govern Obamacare. The PTC Calculator will point you in the right direction, but confirm what it tells you by consulting a competent tax advisor who knows your circumstances.

If you'd like to explore my other articles about Obamacare, click these links:

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]]> http://www.frugalfringe.com/calculators/2016-obamacare-premium-tax-credit-calculator-version-2-0/feed/ 2 5477 Here’s a List of Every Tax My Family Paid Last Year—What it Shows Can Save You Thousands http://www.frugalfringe.com/tax-planning/heres-every-tax-my-family-paid-last-year-what-it-shows-can-save-you-thousands/ http://www.frugalfringe.com/tax-planning/heres-every-tax-my-family-paid-last-year-what-it-shows-can-save-you-thousands/#comments Mon, 06 Mar 2017 10:30:38 +0000 http://www.frugalfringe.com/?p=5212

Governments are clever. They rarely collect taxes directly—that would draw too much attention from voters. Instead, they deputize others to do the collecting for them: employers to withhold income taxes from paychecks, stores to add sales taxes on receipts, banks to escrow property taxes from mortgage payments, and utilities to include city surcharges in monthly bills.

Because private surrogates so often collect the money, it’s easy to overlook the scheming taxman behind the curtain. This is classic misdirection—the pickpocket’s favorite tactic. Someone bumps into you on the bus and the next thing you know your wallet’s gone.

So let’s get these hidden taxes out in the open where they belong.

In order to expose the wizards of tax, I’ve dug deep into our 2016 records. I’ve scrutinized thermal paper receipts, examined online statements, and thumbed through weathered check registers.

After much bean counting, I’ve compiled what I believe is a complete list of the taxes and fees we paid last year, an amount which exceeds $10,400. Frankly, I’m amazed the dollars are so YUGE—to use a popular term—but that’s how everything adds up.

In the chart below, I link to spreadsheets that show my calculations. More importantly, I link to checklists that will not only help cut your taxes, but will help you cut the outlays that trigger those taxes in the first place (thereby saving you thousands each year).

2016 Taxes and Governmental Fees

 # Type of  Amount   Supporting Checklist or
Taxes or Fees Paid Spreadsheet Blog Post
1 Real Estate Taxes $8,403.39  Click Here
2 Sales Taxes $1,153.58 Click Here  Click Here
3 Use Taxes $32.00  Click Here
4 Auto Ownership Taxes $106.00  Click Here
5 Auto License Fees $140.17  Click Here
6 Gasoline Taxes $168.05 Click Here  Click Here
7 Utility Taxes and Fees $60.04 Click Here  Click Here
8 Cell Phone Taxes and Fees $23.55 Click Here  Click Here
9 Landline/Internet Taxes and Fees $125.72 Click Here  Click Here
10 Lodging Taxes $104.21 Click Here  Click Here
11 Alcohol Taxes $30.00
12 Trash Removal Tax $42.00  Click Here
13 Dog Tag Fee $15.00  Click Here
14 Admissions Taxes $1.10  Click Here
15 Federal Income Taxes $0.00  Click Here
16 State Income Taxes $0.00  Click Here
17 Tobacco Taxes $0.00
18 Marijuana Taxes $0.00
19 Sugared Beverage Taxes $0.00
20 Totals $10,404.81
21 2016 Deductions for lines 1-4 above -$1,418.37
22 Net Total Taxes and Fees $8,986.44

Explanatory Notes

Line 1: Real Estate Taxes. We own 1½ houses. A house in Colorado is owned 50-50 by my wife with her brother (and that’s the way they split real estate taxes). I own 100 percent of a house in Maine. Before you dock me frugality points for the Maine place, know this: since I bought it in 1999 its appreciation has outpaced its cumulative carrying costs. That said, if we sold it now we’d save about $5,800 per year in taxes.

Line 2: Sales Taxes. I kept all our receipts last year—no easy task but well worth it for many reasons. The supporting spreadsheet contains 362 entries—so in 2016 we averaged almost one payment of sales tax per day.

Line 3: Use Taxes. In most states, whenever a seller doesn’t collect sales tax the buyer must pay a “use tax,” which is something the state charges to recover its lost revenue on untaxed sales. Colorado includes a line on income tax forms that requires taxpayers to report transactions subject to the use tax. In 2016, this line snared us for $32.00.

Line 4: Auto Ownership Tax. We own a 2006 Toyota RAV4 (tax = $3.00) and a 2010 Toyota Prius (tax = $103.00). Savings tip: buy used cars. In most states, the older the auto the less you pay in tax.

Line 5: Auto License Fees. In Colorado, this charge is based upon the age and weight of the vehicle. We pay less than average because our cars are older and lighter.

Line 6: Gasoline Taxes. For 2016, the federal gas tax was $0.184 per gallon. Colorado charged $0.22 per gallon. For a comprehensive list of state gas taxes, click here.

Line 7: Utility Taxes and Fees. The utility charged us for occupation taxes, climate action plan taxes, and sales taxes (see line 2 above). As discussed in a prior post, we limited these surcharges by limiting our use of gas and electricity.

Line 8: Cell Phone Taxes and Fees. We own two cell phones. One is a flip phone that uses an AT&T pay-as-you-go plan. The other is an iPhone that uses a no-contract plan from Ting.com.

Line 9: Landline/Internet Taxes and Fees. In Colorado, CenturyLink provides internet and a landline. Each month, we’re charged ten different types of taxes and fees: (1) federal excise at 3 percent; (2) state sales at 2.9 percent; (3) county sales at .985 percent; (4) city sales at 3.86 percent; (5) special district sales at 1.1 percent; (6) local 911 at $0.75 per line; (7) Colorado universal service charge; (8) federal universal service fund at 16.7 percent; (9) Colorado Relay Service Fun at $0.05 per line; and (10) city occupation tax at 4.094 percent. For television, we use an indoor antenna that pulls in 45+ channels for FREE. In Maine, where TV reception is lacking, we buy internet/phone/TV from Time Warner for three months. We pay charges similar to Colorado.

Line 10: Lodging Taxes. Last year we paid for seven nights of hotel stays. I’m surprised these taxes weren’t higher.

Line 11: Alcohol Taxes. Last year we spent $608.92 on wine and some beer, much of which we shared with others. The receipts don’t break out the taxes for alcohol so this line reflects an estimate based upon the prevailing tax rates for wine: the feds charge $1.07 per gallon, Colorado charges $0.32 per gallon, and Maine charges $0.60 per gallon. For a complete list of state wine taxes, click here.

Line 12: Trash Removal Tax. The garbage haulers passed along our city’s trash tax: $10.50 per quarter.

Line 13: Dog Tag Fee. This charge is modest so I can’t bark about it too much.

Line 14: Admissions Taxes. Amazingly, our city charges a five percent tax on all movie and event tickets. For us, these taxes were limited because we attended only two movies in 2016 (both were matinees). Maybe we should get out more.

Lines 15-16: Federal and State Income Taxes. These taxes are zero for 2015 and 2016, which reflects rock solid tax planning. For a post that discusses how to legally avoid paying income taxes in early retirement, click here.

Lines 17-18: Tobacco and Marijuana Taxes. We don’t smoke.

Line 19: Sugared Beverage Taxes. Our city adopted this tax last November, but it won’t take effect until later this year. Fortunately, it doesn’t apply to diet beverages, which in caloric terms are the only ones I can afford to drink.

Lines 20-22: Offset Deductions. Our tax story is not all gloom and doom. The first four lines of the chart report taxes which are deductible for those who itemize. In 2016, this saved us federal and state taxes of $1,418.38.

*   *   *

What obscure taxes do you pay? Share your pain by leaving a YUGE comment below.

Photo by Paul Stumpr

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Time Sensitive: Save $5 or More on Your Next Costco Visit http://www.frugalfringe.com/uncategorized/time-sensitive-save-5-or-more-on-your-next-costco-visit/ Sat, 04 Mar 2017 18:27:16 +0000 http://www.frugalfringe.com/?p=5472

Last Friday’s mail contained our Costco Visa card reward certificate for 2016.

The amount was just over $200. Yippee!

Like other Costco Visa cardholders, we earn cash back at the following rates: 4 percent on gas purchases, 3 percent on restaurants and travel, 2 percent on purchases at Costco, and 1 percent on all other purchases.

The mailer’s instructions state that we can redeem our certificate for “merchandise or cash” at any Costco location prior to December 31st.

Choosing the “merchandise” option, many cardholders will present their certificate at checkout and use it to buy Costco products.

This is a mistake.

By using the certificate for Costco purchases instead of their Visa card, they give up the 2 percent cash back they’d otherwise receive in next year’s reward mailer.

A better approach: take the certificate to the customer service counter and redeem it for cash there. Use the proceeds somewhere that won’t take reward cards or deposit the money in the bank.

If you hold a $250 certificate, this single move yields a $5.00 reward on next year’s Visa reward certificate.

End of tip!

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5472
Commuter Computer: What the Rush Hour Really Costs You http://www.frugalfringe.com/calculators/the-commuter-computer-what-the-rush-hour-really-costs-you/ http://www.frugalfringe.com/calculators/the-commuter-computer-what-the-rush-hour-really-costs-you/#comments Mon, 27 Feb 2017 10:30:57 +0000 http://www.frugalfringe.com/?p=5056

Commutes sap your time, wealth, and health.

According to the latest US data, the mean average trip from home to work clocks in at 26.4 minutes. Endured twice daily, this sucks away 220 hours per year from the average commuter’s life—that’s a total of 27.5 uncompensated work days.

Commuter pocketbooks also take a major hit. Over 85 percent of US workers travel to work in privately owned vehicles. This costs money in gas, tire wear, maintenance, and vehicle depreciation. Many commuters also incur highway tolls and parking bills.

Road warriors compromise their health as well. Daily stints in the car can lead to higher cholesterol, blood sugar, and blood pressure. Long term commuters also suffer from increased anxiety, lower life satisfaction, and problematic backs.

This post introduces a new way to assess the true costs of your daily commute: the Commuter Computer. If you drive yourself to work each day, this calculator quantifies how much you’re paying in vehicle costs. It also places a value on the hours you spend in traffic.

Run multiple scenarios. See what happens if you cut your commute in half, switch to a hybrid car, or telecommute several days each month. Such changes can pay big dividends financially and greatly boost the quality of your life.

Commuter Computer Instructions

Like all other interactive tools on this website, the Commuter Computer is completely confidential. No record is kept of your inputs or of calculator outputs.

Line 1: Average Time of Commute (One-Way). Enter your average time for a one-way commute in minutes not hours (e.g., 90 not 1.5). During the year, you sometimes lose time due to traffic jams or bad weather. The average you enter should reflect these occasional delays.

Line 2: Commute Mileage (One-Way). If you’re not sure of the one-way distance between your home and office, visit Mapquest or Google Maps.

Line 3: Number of Commutes per Year (One-Way). If you commute 250 days per year, for example, enter 500 as the number of one-way trips you make.

Line 4: Hourly Value of Your Time. Knowing what your time is worth helps resolve all kinds of dilemmas: whether to hire a painter or do it yourself, whether to take a cab or walk instead, or whether to work a side gig or pursue an unpaid hobby. If you’ve thought about this enough to know what your time is worth, enter the hourly value here. If you want to explore this matter further, visit: (a) the shorthand calculator at LearnVest.com; or (b) the drawn out calculator at ClearerThinking.org.

Lines 5-6: Annual Costs of Workplace Parking and Tolls. If you pay out-of-pocket for these expenses, enter the yearly costs.

Line 7: Gasoline Expense. Estimate the average price of gas you’ve paid during the past year. If you want to enter the precise number for your location, visit Gas Buddy.

Line 8: Your Car’s Miles Per Gallon. If you don’t know your car’s fuel efficiency, visit FuelEconomy.gov.

Line 9: Tire Cost. Commutes wear down tires, bringing them that much closer to replacement. Input the cost of new tires, including sales taxes and mechanic’s labor. If you’re unsure of these expenses, visit TireRack.com.

Line 10: Tire Longevity in Miles. Your tires might boast a 50,000 mile warranty, but don’t expect them to last that long. Rely instead upon your personal experience or enter a number that’s at least 10-15 percent below the advertised mileage.

Lines 11-12: Oil Change Expense. Input the cost of oil changes and the miles that pass between them.

Line 13: Repair Costs. Your commute contributes to your mechanic bills. Enter last year’s cost of repairs to your commuting car.

Line 14: Annual Miles on Commuting Vehicle. Enter the total miles you put on your commuting car each year, including not only commutes but all other miles as well. The calculator will allocate part of the repair bill to the commute based upon the ratio of your car’s rush hour miles to its overall miles.

Line 15: Depreciation (Part 1). With each mile of travel, your car loses value, i.e., it depreciates. Although there are several ways to figure depreciation, I picked this one:

depreciation per mile = price you paid for vehicle whether purchased new or used (including sales taxes) / predicted mileage for vehicle from purchase date until it’s junked.*

Pursuant to this formula, on line 15 enter the total price you paid for your new or used vehicle, including sales tax.

Line 16: Depreciation (Part 2). Most cars produced in the last decade enjoy lifetimes of 200,000 miles on average—and perhaps longer for ultra-reliable makes like Honda and Toyota. If you bought your car new, input whatever you expect for longevity (in most cases 200,000 miles). If you bought used, input the difference between the car’s expected longevity and its mileage when purchased (e.g., 200,000 – 65,800 = 134,200).

Commuter Computer

1.  Average Time of One-Way Commute (in minutes):
2.  Length of One-Way Commute (in miles):
3.  Number of One-Way Commutes Per Year:
4.  Value of Your Time Per Hour:
5.  Annual Cost of Parking at Workplace:
6.  Annual Cost of Tolls for Commutes:
7.  Average Cost of Gas for Year (per gallon):
8.  MPG of Commuting Car:
9.  Cost of Replacement Tires:
10. Miles Between Tire Changes:
11.  Cost of Oil Changes:
12.  Miles Between Oil Changes:
13.  Annual Cost of Repairs:
14.  Total Miles Traveled Per Year:
15.  Total Purchase Price of Car (with sales tax):
16.  Lifetime Mileage of Car (from purchase until scrapped):


17.  Annual Cost of Parking for Commutes:
18.  Annual Cost of Tolls for Commutes:
19.  Annual Cost of Gas for Commutes:
20.  Annual Cost of Tire Wear for Commutes:
21.  Annual Cost of Oil Changes for Commutes:
22.  Annual Cost of Repairs for Commutes:
23.  Annual Cost of Depreciation for Commutes:
24.  Your Total Out-of-Pocket Annual Commuting Cost:
25.  X Percent of Commuters Have Shorter Commutes Than You:
26.  Hours Per Year You Spend Commuting:
27.  Work Days Per Year You Spend Commuting:
28.  Your Annual Time Cost of Commuting:
29. Your Grand Total Annual Commuting Cost (line 24 + line 28):

 

Notes

Pie chart: if you hover or click your mouse over the pie slices, cool animations ensue.

Line 25: this line is based upon data from the American Community Survey (ACS) as expanded by a process of linear interpolation for reported commutes between 5 and 89 minutes in length and linear extrapolation for reported commutes of 90 minutes in length. Conducted by the US Census Bureau, the ACS is a massive annual survey that involves more than two million interviews. The results reported here are limited to workers age 16 and over who did not work at home. To review the ACS data for yourself, click here.

Note: for all commutes less than 5 minutes long, line 25 reports a static percentile of 2.89. Similarly, for all commutes more than 90 minutes long, line 25 reports a static percentile of 97.43. This approach limits the calculator’s use of extrapolation, which involves greater uncertainty than interpolation.

Line 26 = (line 1 * line 3) /60.

Line 27 = line 26 / 8.

Line 28 = line 4 * line 26.

*   *   *

The Commuter Computer is designed to nudge you just a little further into the habit of frugality. This site hosts other calculators that seek to do the same thing. To see the full collection in all its parsimonious glory, click here.

If you have questions or remarks about this calculator, don’t keep them to yourself. Please leave a comment below.

Photo by Tom Hilton

* I chose this depreciation formula for several reasons.

First, this method treats your car like the wasting asset it truly is. Whether you buy new or used, eventually your car’s worth reduces to salvage value.

Second, this website is about frugality. Frugal owners tend to drive their vehicles until the wheels fall off. Given this tendency, a wasting asset formula better depicts depreciation than a formula based on fair market value (market values are irrelevant if the owner never sells).

Third, even for owners who plan to eventually resell their cars, the wasting asset formula provides a good proxy for lost market value, especially for cars that are over four years old and have already lost most of their fair market value.

Fourth, the wasting asset formula is easier to use than fair market value estimators such as Kelly Blue Book.

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