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Stuck With a High Deductible Health Plan? Here’s How to Save

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

child and doctor talking in clinic

The majority of Americans receive health care through an employer-provided health plan, new Census Bureau data shows. But thanks to rising premium costs and ever-increasing deductibles, health coverage — even if your employer covers part of your tab — can easily feel more financially burdensome than beneficial.

Annual premiums rose most significantly for employer-provided family plans in 2016, according to a survey released Wednesday by the Kaiser Family Foundation. The average annual workplace family health premium rose to $18,142 in 2016, a 3% increase. This is a slowdown from last year’s 4% hike, but family premiums are still 58% higher than they were just a decade ago.

But sticker prices on annual health plan premiums — $18,142 for families and $11,480 for individuals — only tell half the story.

Employers commonly make contributions toward their workers’ health care premiums. But employers have contributed less and less to annual premium costs over the last decade, leaving families footing larger portions of their coverage. For example, workers now pay 78% more in annual premium contributions for family coverage than in 2006, according to Kaiser.

Here are other ways rising health costs are impacting consumers:

Out-of-pocket costs continue to soar. In 2016, 29% of all workers were in high-deductible plans, up from 20% in 2014. The average annual deductible for individuals climbed 12% year-over-year to $1,478. Families endured even higher out-of-pocket costs.

Premiums have also outpaced inflation and earnings increases over the past five years, 6% and 11%, respectively, according to Kaiser’s report.

What you can do to save if you have a high-deductible health plan.

Look at more than just the sticker price

Plan premiums can be deceiving. Even if a plan’s premium looks more affordable, it will likely have a higher deductible, meaning your out-of-pocket costs could be much more in the long run. Sophie Stern of Enroll America, a health care advocacy nonprofit, recommends reading plan offerings closely before you sign up.

“First and foremost employees should reach out to their employer to gain a better understanding of their plan options and covered benefits, including how much they will have to pay out of pocket for their health care,” Stern says. “If already enrolled in coverage, employees can also contact their insurance company directly.”

Take advantage of health savings accounts

If your deductible is higher than $1,250 for individuals or $2,500 for families, you likely have access to a health savings account (HSA). HSAs let workers set aside pre-tax dollars for medical expenses. Some employers provide Health Reimbursement Arrangements (HRAs), in which case the employer would reimburse its employees for out-of-pocket medical expenses and individual health insurance premiums.

Sign up for a health risk assessment or biometric screening

Many large firms offer financial incentives like cash, reduced premiums, and other benefits for undergoing a health risk assessment or biometric screening. Kaiser found that most large firms offer health risk assessments (54%) and biometric screenings (53%) for workers. Health risk assessments ask questions about your medical history, health status, and lifestyle, while biometric screenings measure things like body weight, cholesterol, blood pressure, stress, and nutrition.

Some things in health care are free

Under the Affordable Care Act, many preventative care services are free to you. Be certain to make sure they are coded properly at your doctor’s billing office so you are not incorrectly billed.

Pay cash

Some health care providers offer to charge a lower fee for some treatments if patients pay cash upfront. You can also ask for a low- or no-interest installment plan if you can’t afford the full cost upfront.

Plan ahead

One of the nastiest surprises at the doctor’s office can be an unexpected bill because your physician is not covered by the insurer’s network. Verify that a provider accepts your insurance before you go, either by calling or by checking your plan provider’s website. Once you find a provider that accepts your insurance, Stern recommends calling before you visit to get a sense of how much your treatment will cost.

Be proactive. Ask how much services will cost before your appointment. Make sure to ask about cheaper options and the pros and cons of comparable services before you get there and about the price of drugs before leaving with a prescription.

Compare and save

Prices for medical treatments are notoriously opaque. Sites like cms.gov and clearhealthcosts.com have made it easier to shop around for certain routine treatments (such as an MRI or teeth fillings). Some services, like smartshopper.com, will even pay you to shop around for lower cost treatments.

Lower your medication costs

Ask for a generic prescription if you’re getting medication. Generic prescriptions cost anywhere from 80% to 85% less than brand name medications, according to the FDA. You can also browse sites like GoodRX.com and needymeds.org to compare and save when it comes to your prescriptions.

If you aren’t covered by your employer and you’re shopping for health coverage, there are resources that can help. Through Enroll America’s Get Covered Connector, you can schedule an appointment with an expert near you who can walk you through the process.

 

 

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Brittney Laryea
Brittney Laryea |

Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at brittney@magnifymoney.com

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Health

The Ultimate Guide to Obamacare (Updated for 2018)

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

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Since Obamacare (or, as it’s officially known, ACA, the Affordable Care Act) created the first federal health insurance marketplace in 2013, some 20 million Americans have become newly insured.

Consumers who don’t qualify for Medicaid or Medicare or who don’t have private insurance through their employer can shop for health coverage either through the federal marketplace — HealthCare.gov — or by way of their state’s exchange.

This year, ACA applicants will have to wade through an average of 30 plans from two or three different insurers to make their insurance choice. The open enrollment period for Obamacare coverage begins Nov. 1 and ends Dec. 15, with coverage due to begin Jan. 1, 2018.

That’s where this guide will come in handy. We will explain exactly what it’s like to enroll, what documents you should have on hand, and, of course, how to sort through all the health insurance options you may find.

Have any burning Obamacare questions? Send us a note at info@magnifymoney.com.

Part I: What is Obamacare?

Most people use the blanket term “Obamacare” when they talk about President Barack Obama’s signature health care legislation, 2010’s Patient Protection and Affordable Care Act (ACA). The ACA touched almost every aspect of the health insurance industry. It had implications for employer-run health insurance plans. For government health plans, too.

One of the most visible features of the ACA was the creation of federal and state health care exchanges that sell health insurance to people who don’t have affordable coverage through other means. Many people who buy health insurance through the exchanges say they purchased Obamacare plans.

Some of the important features of these plans include:

  • Accessibility: All Americans may purchase health insurance through a federal or state-run health exchange even if they have a pre-existing condition.
  • Standardization: All health insurance plans must cover preventive care at 100 percent, and they must cover the costs associated with most medical procedures.
  • Affordability: The ACA offers tax credits and cost-reduction subsidies to limit the monthly premium costs for people earning less than 400 percent of the federal poverty line. Insurers may use age and smoking status to set monthly premium costs, but no other factors may be considered.

It’s also important to note that the ACA has a requirement called the individual mandate. You must get health insurance coverage, or you will most likely pay a penalty at tax time. You can get qualified health insurance through your employer or a government program. However, if you don’t get it there or through some other source, you will need to purchase an Obamacare plan or pay that penalty.

Who can buy insurance through a health care exchange?

Most Americans can purchase health insurance through a health care exchange. If you do not receive insurance through your employer and you don’t qualify for Medicaid or Medicare, then you are likely eligible.

Most long-term, legal immigrants to the United States may purchase insurance. HealthCare.gov maintains a comprehensive list of qualified immigration statuses for purchasing insurance through the marketplace.

Most large employers and some midsize or small companies offer health insurance benefits to their employees. If your employer offers affordable health insurance to you (costing less than 9.56 percent of your total income), you will not qualify for health insurance subsidies through the exchanges.

Incarcerated people and those living outside the United States cannot purchase insurance through the marketplace.

Part II: Obamacare costs and tax subsidies

One major factor to consider when weighing the options is your expected tax subsidy. Most people buying insurance through the health care exchanges will qualify for a health insurance subsidy. This subsidy is applied in the form a credit that immediately reduces the cost of your Obamacare plan coverage.

According to a study from the Centers of Medicare and Medicaid Services, 84 percent of people who purchased insurance through a health care exchange qualified for a health insurance subsidy in 2017. The average subsidy was about $371 in 2017.

With the subsidy applied, nearly eight out of 10 (77 percent) health insurance purchasers paid less than $100 a month for their health insurance premiums in 2016.

To qualify for a subsidy, you must meet three standards:

  1. You must not have access to affordable insurance through an employer (including a spouse’s boss).
    1. Affordable insurance for 2018 is defined as individual coverage through an employer that costs less than 9.56 percent of your household’s income.
    2. You can check that your insurance offers minimum-value coverage by having your human resources representative fill out this form.
  2. You must have a household modified adjusted gross income between 100 and 400 percent of the federal poverty line.
    1. You can calculate modified adjusted gross income using this formula:
      1. Adjusted gross income (Form 1040 Line 37) +
        Nontaxable Social Security benefits (Form 1040 Line 20a minus 20b) +
        Tax-exempt interest (Form 1040 Line 8b) +
        Foreign earned income and housing expenses for Americans living abroad (Form 2555)
  3. You’re not eligible for coverage through Medicaid, Medicare, the Children’s Health Insurance Program (CHIP) or other types of public assistance. Some states have expanded Medicaid to anyone who earns up to 138 percent of the federal poverty line.

How can I calculate my subsidy?

The easiest way to calculate the subsidy you will receive is to use a subsidy estimator from HealthCare.gov or the Kaiser Family Foundation. Both calculators estimate your subsidy based on the information you provide. They also help you understand what factors affect your subsidy estimations.

Your income, household size and the cost of premiums in your state factor into your subsidy. Premium tax credits can help reduce the amount that you will spend on monthly premiums to a set percentage of your income. You will receive the same subsidy, no matter which plan you ultimately choose.

Below you can see the maximum amount you will spend on insurance premiums (for a silver plan) based on your income.

Income (based on 2017 federal poverty line)

Max monthly Silver Plan premium cost after subsidies

Special notes


Lower 48 states:
$12,060-$16,702



Alaska:
$15,060-$20,857



Hawaii:
$13,860-$19,195


Lower 48 states:
$20.20-$46.21



Alaska:
$25.23-$57.70



Hawaii:
$23.22-$53.11

Check if you qualify for expanded Medicaid.


Lower 48 states:
$16,703-$30,209



Alaska:
$20,858-$37,724



Hawaii:
$19,196-$34,718


Lower 48 states:
$47.05-$203.91



Alaska:
$58.75-$254.64



Hawaii:
$54.07-$234.35

You will qualify for cost-reduction subsidies if you purchase a silver plan.


Lower 48 states:
$30,210-$48240



Alaska:
$37,725-$60,240



Hawaii:
$34,719-$55,440


Lower 48 states:
$203.92-$384.31



Alaska
$254.65-$479.91



Hawaii:
$234.36-$441.67

If you earn more than 400% of the poverty line, you will not qualify for subsidies.

Income (Based on 2017 federal poverty line)

Max monthly Silver Plan premium cost after subsidies

Special notes


Lower 48 states:
$24,600-$34,069



Alaska:
$30,750-$42,587



Hawaii:
$28,290-$39,179


Lower 48 states:
$41.21-$94.26



Alaska:
$51.51-$117.82



Hawaii:
$47.39-$108.39

Children will qualify for CHIP. Check if you qualify for expanded Medicaid.


Lower 48 states:
$34,070-$49,200



Alaska:
$42,588-$61,500



Hawaii:
$39,180-$56,580


Lower 48 states:
$95.97-$259.94



Alaska:
$119.96-$324.93



Hawaii:
$110.36-$298.93

Children in 46 states will qualify for CHIP. You may qualify for extra savings if you purchase a silver plan.


Lower 48 states:
$49,201-$61,621



Alaska:
$61,501-$77,027



Hawaii:
$56,581-$70,864


Lower 48 states:
$259.95-$415.94



Alaska:
$324.93-$519.92



Hawaii:
$298.94-$478.33

In some states, children will qualify for CHIP. You may qualify for extra savings if you purchase a silver plan.


Lower 48 states:
$61,622-$98,400



Alaska:
$77,028-$123,000



Hawaii:
$70,865-$113,160


Lower 48 states:
$415.96-$783.92



Alaska:
$519.94-$979.90



Hawaii:
$478.35-$901.51

In a limited number of states, children qualify for CHIP up to 375% of the poverty line. If you earn more than 400% of the poverty line, you will not qualify for subsidies.

What circumstances might affect my eligibility for a subsidy?

Your subsidy can change if your circumstances change. It’s important to plan for such circumstances.

(Read ahead: “What happens if I don’t qualify for a subsidy?”)

Families with children:

Instead, they will receive free or low-cost insurance through CHIP. You can enroll your children in CHIP through the health insurance marketplace, or by calling 1-800-318-2596. You may need to speak with a Medicaid agent in your state to see if you qualify. You can also learn more about CHIP through InsureKidsNow.gov.

Your children may qualify for CHIP even if you and your spouse qualify for an employer-sponsored health insurance plan, though this rule varies by state. In some states, families that have children and employer-based coverage may receive financial assistance to purchase the coverage.

CHIP does not have enrollment deadlines, so you can apply at any time.

Families where one spouse has work coverage:

Some employers only offer health insurance to their employees. Spouses and children cannot get covered. In that case, you can buy insurance with a subsidy through the marketplace.

Families with expensive employer coverage:

If you can purchase family coverage through your or your spouse’s employer, then you will not qualify for subsidies. If an employee can gain individual coverage for himself or herself for less than 9.56 percent of total household income, the insurance is considered affordable. Coverage for the family isn’t factored into the affordability calculation.

This so-called “family glitch” affects two million to four million people and requires them to pay high prices for premiums. If you are caught in this situation, your children may qualify for CHIP. However, uncovered spouses and children must purchase insurance or pay the individual mandate penalty unless coverage for the family costs more than 8.05 percent of your household income. Even in those cases, you will still not qualify for premium assistance.

Senator Al Franken, D-Minn., has proposed a Family Coverage Act that may rectify the tax code, but it has not been passed.

Individuals getting married in 2018:

If you’re getting married next year, your subsidy depends on your combined income. In the months preceding your marriage, your income is one-half of your and your spouse’s combined income. Once you get married, your subsidy is based on your joint income and your qualifying family.

You need to report a marriage to be eligible for a special enrollment period on HealthCare.gov or through your state’s insurance exchange.

Individuals getting divorced in 2018:

If you get divorced or legally separated in 2018, you must sign up for a new health insurance plan after you separate. Your subsidy will be based on your income and household size at the end of the year. However, you will need to count subsidies received during your marriage differently than subsidies received when you’re legally separated.

For the months you are married, each spouse divides advanced subsidies received to each new household. If spouses cannot agree on a percentage, the default is 50 percent. If the plan only covered one taxpayer and his or her dependents, then the advanced tax credits apply 100 percent to that spouse.

Divorce reduces your income, but it also reduces your household size. These factors change your estimated subsidy. How much will depend on the magnitude of each change.

Reporting a divorce makes you eligible for a special enrollment period. When you enroll in a new plan, the exchange website will help you estimate your new subsidy for the remainder of the year.

Giving birth or adopting a child:

You have 60 days from the birth or adoption of your child to enroll him/her in a health care plan. If you miss this window, your child will not have health coverage, and you will pay a penalty. However, if you enroll your child in a timely manner, you can expect your subsidy to increase.

Report the birth or adoption of a child to be eligible for a special enrollment period on HealthCare.gov or via your state’s insurance exchange.

A newborn or adopted child may be eligible for CHIP rather than subsidized health insurance.

Turning 26:

If you’re on your parents’ insurance, generally you can stay until you have turned 26, but you should check your plan to be sure. You will have a 60-day special enrollment period to get your own plan from the health care exchange when you turn 26.

You may also be eligible for a special enrollment period from an employer-sponsored health plan. If you fail to have health insurance for more than three months, you will pay a penalty.

Losing employer coverage:

If you lose employer-based health coverage, you can either enroll in COBRA or purchase a plan through the health care exchange. Once you enroll in COBRA, you become ineligible to purchase subsidized coverage through the exchange.

You need to report job status changes to be eligible for a special enrollment period on HealthCare.gov or your state’s insurance exchange.

Changes in income:

Premium tax credits are based on your annual income. If you increase your income, you will be expected to pay back some or all of the advance premium you received. If you earn more than 401 percent of the federal poverty line, all premiums need to be repaid. If you earn less than 400 percent of the federal poverty line, you may have to pay back $2,500 of advanced premiums per family or $1,250 for individuals.

You need to report income changes to avoid under- or overpaying on your premiums throughout the year.

Moving states or counties:

Most insurance plans that you purchase through the marketplace are state- and county-specific. If you move, you need to report the relocation through the insurance exchange. You may have to change insurance plans after moving. Moving to Alaska or Hawaii will allow you to claim a greater subsidy amount than you can claim in the lower 48 states. If you move from Alaska or Hawaii, you can continue to claim the higher subsidy amount for the whole year.

Part III: Bronze, silver, gold, platinum: Choosing the right Obamacare plan for your needs

The health care exchanges — both federal- and state-run — classify health insurance plans into four categories: bronze, silver, gold, and platinum. Metal categories are based on how you and your plan split the costs of your health care.

According to a 2016 study by the Department of Health and Human Services, 76 percent of consumers who bought a silver plan in 2016 stood to save an average of $58 a month by switching to the lowest-premium plan in 2017.

But that doesn’t meant the cheapest plans are necessarily best for you. They often come with higher out-of-pocket expenses, like deductibles, which can make them very expensive if you end up needing lots of medical care through the year.

Think of this way — the higher the premium, the more comprehensive the coverage will be and the lower your out-of-pocket costs. If you expect that you’ll need fairly frequent medical care or treatment, you might be better off choosing a more comprehensive plan despite the higher monthly premium.

Obamacare ‘Metal’ Plans: Explained

Bronze Plan

Cheapest premium, 60% coverage

Bronze health plans offer the least amount of estimated coverage. Insurers expect to cover 60 percent of the health care costs of the typical population. These plans feature the lowest monthly premiums, the highest deductibles and high out-of-pocket maximum expenses. Just under one-quarter (23 percent) of health insurance enrollees opted for a Bronze plan in 2017.

Silver Plan

Moderate premium, 70% coverage

Silver health plans offer moderate estimated coverage. Insurers expect to cover 70 percent of health care costs, and plan members cover the remaining 30 percent. If you qualify for cost-reduction subsidies (also called “extra savings”), you must purchase a silver plan. In 2017, 71 percent of all participants in the health care exchanges opted for a silver plan.

Gold Plan

High premium, 80% coverage

Gold health plans offer high levels of estimated coverage. Insurers expect to cover 80 percent of health care costs, while plan members cover the remaining 20 percent. These plans feature high monthly premiums, but lower deductibles and out-of-pocket maximums. Only 4 percent of all health insurance consumers on the health care exchanged opted for a gold plan in 2017.

Platinum Plan

Highest premium, 90% coverage

Platinum health plans offer the highest level of protection against unexpected medical costs. Insurers expect to cover 90 percent of medical costs, and plan members cover the remaining 10 percent. These plans have the highest monthly premiums and the lowest deductibles and out-of-pocket maximums. Just 1 percent of all health insurance exchange participants purchased a platinum plan in 2017.

Catastrophic Plans

Cheapest premium, lowest coverage

Catastrophic health plans: People under age 30 or with hardship exemptions may purchase individual catastrophic health insurance plans. These plans are not available for families. Catastrophic plans do not have a cost-sharing component. Your out-of-pocket maximum will be $7,350. Once you reach $7,350 in medical expenses, your insurance company will pay the remaining costs.

Catastrophic plans cover most preventive services. Catastrophic plans generally offer the lowest monthly premiums, but you can’t use a premium tax credit to reduce your monthly cost.

Now that you know all the types of plans offered, it’s time to choose the one that fits your needs.

What to consider before choosing a plan

Choosing a health plan can seem like a daunting task, but you can get all the help and information you need to make an informed decision. Your health and your pocketbook matter, and we want to help you protect both.

Your tax subsidy: Before you choose a plan, you’ll decide whether to receive advanced or deferred subsidies.

If you take your subsidy upfront, it will reduce your premiums right away. If you defer it, then it will be given to you as a tax credit when you file your taxes. If you over- or underpay your premiums throughout the year, the will have to reconcile the amount owed at tax time.

Most people with predictable income and household size should take most or all of the subsidy upfront. However, if you expect to undergo a major life change (such as an increase in income, a marriage or a divorce), consider taking less of your subsidy in advance.

Time to shop. For people shopping for 2018 coverage, the average number of plans available is 30. Rather than comparing every plan, we recommend creating criteria around the following variables:

  1. Monthly cost: Consider how the monthly premium will affect your budget. This does not mean you should choose the plan with the lowest premiums, but you should consider the price. People without chronic conditions who have adequate emergency savings may want to at least consider opting for an option with low monthly premiums.
  2. Deductible and co-insurance: Do you have the emergency fund or income you need to cover a small medical emergency? A broken arm, stitches or an unexpected infection can result in hundreds of dollars in medical costs. If you have a high-deductible plan, you’ll need to cover these costs without help from the insurance company. If possible, choose a plan with a deductible that you could comfortably cover out of your savings or income.
  3. Maximum yearly cost: Add the annual cost of your premiums and your out-of-pocket maximum to determine your maximum yearly cost. In a worst-case scenario, this is the amount you will pay out of pocket. People with chronic conditions that require heavy out-of-pocket fees should try to limit their maximum yearly cost. A plan with a higher maximum yearly cost may represent a higher risk.
  4. Services and amenities: All insurance plans from the marketplace cover the same essential health benefits, but some offer more unique services such as medical management programs, vision and dental coverage.
  5. Health savings accounts: If you choose a high-deductible plan, you may want to opt for one lets you contribute to a tax-advantaged health savings account. Any money you contribute to this account (up to annual established limits) reduces your taxable income, and will not be taxed upon withdrawal when it used for medical expenses.
  6. Network of providers. It’s important to be sure that your preferred medical providers contract with the plan you choose. Not every doctor is “in network” with every insurance plan. You can check each plan’s provider directory before making a selection.

Once you have a firm grasp of your particular criteria, look for plans that fit your needs and ignore the rest.

Using the exchange website, you can filter and sort plans based on these factors. Most people need to balance cost and coverage to find a plan that works for them.

If you are part of the minority that need to buy their own health insurance plans, you should know that not every state uses HealthCare.gov to host their state’s health insurance exchange. Residents in the following states should use their specific state exchange to look for health insurance:

California; Colorado; Connecticut; Washington, D.C.; Idaho; Maryland; Massachusetts; Minnesota; New York; Rhode Island; Vermont; Washington.

Part IV: How to enroll in Obamacare

Applying for insurance takes 30-60 minutes if you have all the necessary information in hand.

Your Obamacare enrollment checklist:

  • Names, birthdates and Social Security numbers for all members of the household
  • Document numbers for anyone with legal immigration status
  • Income information for all coverage-holders
  • Information about employer-sponsored health plans
  • Tax return from previous year (to help predict income)
  • Student loan documents
  • Alimony documents
  • Retirement plan documents
  • Health Savings Account documents

State or federal marketplace?

If your state does not offer its own health care exchange, you should use HealthCare.gov. As mentioned in the previous section, each state has the right to choose whether to run its own or use the federally run exchange and some do use their own.

The state-run exchanges perform the same functions as the federally run exchange. They allow you to estimate your tax credit and purchase insurance. As a consumer, you must provide the same information to your state as you would on the federal exchange.

While the online user experience will vary when states adopt their own online marketplace, the Affordable Care Act is a federal law and program. This means that the requirements and benefits do not change from state to state, even if the exchange platform changes.

The website interface for the federal exchange is simple, but answering the questions may be confusing. It’s important to fill out the application as accurately as possible so you can enroll in the best health insurance plan for you.

We’ve done our best to clarify the confusing portions in our step-by-step process below.

Filling out your Obamacare application

Family and household info

Start the application by filling out contact information and basic information about members of your household. Even if a member of your family will not need coverage, include that relative in your application.

The website will help you determine if a member of your household has insurance options outside the health care exchange. It will also help you determine if a person is a dependent. For the purpose of the health care exchange, your family includes all the people included on your income tax filing.

You need to know Social Security numbers, birthdates, immigration and disability status, and whether each household member can purchase health insurance through an employer plan.

Income and deductions

Next you’ll estimate your income for the coming year. Include all the following forms of income:

  • Jobs
  • Self-employment income (net)
  • Social Security benefits
  • Unemployment income
  • Retirement income
  • Pensions
  • Capital gains
  • Investment income
  • Rental/royalty income
  • Farming and fishing income
  • Alimony received

Afterward you’ll enter deductions. The application calls out student loan interest and alimony paid, but you should estimate all “above-the-line deductions” that should be included. These include:

  • Retirement plan contributions: 401(k), 403(b), 457, TSP, SEP-IRA, simple IRA, traditional IRA
  • Contributions to a Health Savings Account
  • Self-employed health insurance premiums
  • Tuition and fees paid
  • Educator expenses (up to $250 per teacher)
  • Half self-employment tax
  • Moving expenses
  • Early-withdrawal penalties from a 1099-INT

Do not double-count income or deductions since you’ll fill out these forms for each person. If you make a mistake, you can edit it when you review your household summary.

Additional information

Finally, you’ll fill out a few other miscellaneous details that will allow the application to confirm that you are eligible for subsidies or marketplace insurance.

It’s especially important that you have accurate information about job-related coverage for you and your family. This information will determine your eligibility for subsidies and other government programs.

Completing Obamacare enrollment

After you complete the application, you can review and submit it. At this point, the system will suggest which members of your household should complete CHIP or Medicaid applications. The remaining family members can enroll in a health insurance plan.

Part V: Where to get help enrolling In Obamacare coverage

Because of the complex nature of the marketplace exchange, there are marketplace navigators. These professionals provide free, unbiased help to consumers who want a hand filling out eligibility forms and choosing plans.

Marketplace navigators. You can find local marketplace navigators through the health care exchange website.

Be advised: The Trump administration has slashed budgets for health care navigators, leading some states to close down the programs altogether. As a result, it may make it difficult to find help locally from a navigator in some states.

Nonprofit organizations. Outside the exchange, nonprofit organizations are working to help people gain coverage by teaching them about their insurance options. Enroll America offers free expert assistance to anyone who makes an appointment. You can use the connector below to make an appointment with one of their experts.

Insurance brokers. Brokers can offer another form of help. Brokers aim to make it easier for consumers to compare insurance plans and apply for coverage. Insurance brokers have relationships with some or all of the insurance companies on the marketplace. Using a broker will not increase the price you pay for a plan, and it will not affect your subsidies. However, here’s another important note: Online brokers may not have 100 percent accuracy regarding a plan’s details. It’s important to visit a plan’s website before you enroll in a plan.

If you want to work with a broker, consider some of these top online brokers. PolicyGenius compares all the plans that meet criteria that you establish, and they serve up the top two plans that meet those criteria. HealthInsurance.com makes applications quick and easy, and the site specializes in special enrollment help.

Medicare plan finder. If you're over age 65, use Medicare Plan Finder to find a Medicare plan that works for you.

CHIP: Likewise, if you think your children qualify for CHIP, use Insure Kids Now to enroll them in your state's plan.

PART VI: Frequently asked questions

What happens if I don’t apply for insurance?

In most cases, you must enroll in health insurance or you’ll have to pay a penalty.

The penalty for 2018 hasn’t yet been released, but the 2017 penalty was calculated as the greater of 2.5 percent of your income (up to the national average cost of a bronze plan) or $695 per adult and $347.50 per child (up to $2,085).

This steep penalty means that most people are better off purchasing some health insurance.

However, under certain circumstances you can avoid buying insurance and avoid paying the penalty. These are a few of the most common exemptions:

  • Health care cost-sharing ministry members: Must show evidence of membership
  • Low income, no filing requirement: If you do not earn enough income to file taxes, then you are automatically exempt from paying a noncoverage penalty.
  • Coverage is unaffordable: For 2017, if you, your spouse, or your dependents cannot obtain employer coverage or a bronze plan for less than 8.05 percent of your income (after applicable subsidies), you may opt out of coverage. (However, if your individual coverage from an employer costs less than 9.56 percent of your income, and your employer offers family coverage, nobody in the family will qualify for subsidies).
  • Short coverage gap: You went without insurance for less than three months.
  • Living abroad: No coverage is required if you live abroad for at least 330 days.
  • General hardships:These include homelessness, eviction, foreclosure, unpaid medical bills, domestic violence and more.  (You must get a marketplace exemption.)
  • Unable to obtain Medicaid: If you earn less than 138 percent of the federal poverty line, and your state didn’t expand Medicaid, you don’t have to purchase health insurance.
  • AmeriCorps coverage
  • Members of qualified religious sects: Must be granted exemption through HealthCare.gov.

Although you will not pay a penalty, you may still want to seek out catastrophe insurance or some other coverage to help with high potential health costs.

What happens if my plan was canceled?

For 2018, some insurers dropped their insurance plans from the health care exchange. In some states, major insurers Aetna and Humana are exiting the exchange. As a consumer, you cannot assume that the plan you chose in the past will be around next year.

If you used HealthCare.gov in the past, and your insurance plan remains in place, you’ll automatically be enrolled in the same plan again this year. This is true even if important variables like the deductible and premiums changed from last year.

If your plan was canceled, HealthCare.gov will automatically enroll you into a new health insurance plan with a price and coverage quality comparable to your previous plan’s.

Although the federal exchange will help you opt into a new plan (ensuring that you have some health insurance coverage), it’s far better to select a new plan on your own. You can enroll in a new plan Nov. 1 through Dec. 15. If you do not enroll in a new plan during this time, you will be stuck with the automatic enrollment option.

Whether you’re shopping for a new plan or reviewing an old plan, take these steps before open enrollment ends.

  • Update personal information on your application. Your income, household size, where you live and more will affect plan and subsidy eligibility. It’s important to keep your application up to date. The plan that fit you last year may no longer be appropriate, but you won’t know unless you keep the information current.
  • Review your plan before you re-enroll. You should receive a notification in the mail if your plan has been changed or canceled. Take the time to understand if the changes affect you.
  • Compare plans that fit your needs. Consider enlisting free help from a health care navigator, a nonprofit or a broker to help you decide.
  • Choose the plan that best fits your needs and your budget.

What options do students (and their dependents) have for health insurance?

University students who are enrolled full time have multiple options for health insurance.

Under age 26: All student under age 26 may continue to receive coverage from their parents’ insurance plan even if living in another state. Of course, it may make more sense to gain coverage in the state where you’re living, so review the coverage network with your parents. Many coverage networks only include doctors in a few ZIP codes.

If you visit an out-of-network doctor, you will face higher deductibles and out-of-pocket maximums. As an alternative to staying on your parents’ plan, you can purchase your own health insurance plan through the health care exchanges even if you are a dependent.

Students who are dependents and over age 26 may be required to purchase their own health insurance plans.

University coverage: Many students will opt for a student health plan from their university. In general, student health plans meet minimum qualifying coverage criteria, and are affordable options. However, student health plans are not treated as employer coverage. Because of that, students may still qualify for Medicaid or insurance premiums. Students (especially independent students) should look into these alternatives when reviewing their insurance options.

The spouses and dependents of students must take time to understand their options. These are a few common scenarios:

If a student or spouse has an affordable employer-sponsored plan that covers family members: Student and spouse do not qualify for insurance subsidies or Medicaid. Children may qualify for CHIP. Student and spouse should seek coverage through either the student health plan or the employer-sponsored plan in most cases. All members of the family must have qualified health coverage, or they will pay the individual mandate penalty.

Student health plan doesn’t offer coverage for spouse or dependents, and neither spouse has an employer-sponsored health plan: Spouse and dependents can apply for Medicaid, CHIP or subsidized insurance through the health care exchanges (provided they meet income criteria). Student may choose any coverage option (including Medicaid or subsidized insurance) without paying a penalty.

Student health plan offers coverage of spouse or dependents, and neither spouse has an employer-sponsored health plan: Student, spouse and dependents may purchase the student health plan. They can also apply for Medicaid, CHIP or subsidized insurance through the exchanges (provided they meet income criteria). All family members may choose any coverage option without paying a penalty.

Where if I don’t qualify for a subsidy?

If you don’t qualify for a health insurance subsidy, you can still apply for health insurance through HealthCare.gov or your state’s health insurance exchange. However, some insurers offer more or different options outside the exchange. Anyone who doesn’t qualify for a health insurance subsidy should consider using an online broker instead to look for plans.

People who don’t qualify for a health insurance subsidy should reconsider their health insurance options in 2018. An analysis by the Kaiser Family Foundation said that a number of insurers have requested double-digit premium increases for 2018. Based on initial filings, the change in benchmark silver premiums will likely range from -5 to 49 percent across 21 major cities. (These rates are still being reviewed by regulators and may change, the analysis said.)

With rapidly rising costs, enrollees without subsidies may want to consider the lower-cost bronze plans to see if they meet their health insurance needs.

Part VII: The ultimate Obamacare glossary

Understanding basic health insurance terminology can help you make a more informed decision about your options. Here are common terms you should know.

This credit can be taken in advance to offset your monthly premium costs. The subsidy is based on your estimated income and can be taken directly from your insurer when you apply for coverage. You must repay credits if you qualify for a smaller subsidy once taxes have been filed. You can learn more about repayment limitations here.

This program was designed to provide coverage to uninsured children who are low-income but above the cutoff for Medicaid eligibility. The federal government has established basic guidelines, but eligibility and the scope of care and services are determined at the state level. Your children may qualify for CHIP even if you purchase an insurance policy through the health care exchange. You can learn about CHIP eligibility through the marketplace or by viewing this table at Medicaid.gov.

Your share of the costs of a covered health care service. This is the percentage you must pay out of pocket after you have met your annual deductible. You pay a specific coinsurance amount until you meet your out-of-pocket maximum.

If you earn between 100-250 percent of the federal poverty level, you may qualify for additional savings. This extra savings reduces your out-of-pocket maximum, and it offers assistance with copays and coinsurance.

Disclaimer: There is ambiguity surrounding whether or not Congress and the White House will appropriate funds for the cost sharing subsidies. In October, President Trump used an executive order to cut off funding for the subsidies. However, the Affordable Care Act still requires that health insurers must issue them to all people earning 100-250 percent of the federal poverty line. As a result of this Trump executive order, many insurers raised premiums for silver plans. The premium increases will not affect the prices that people with subsidies will pay, but they will affect the prices you pay if you do not qualify for a subsidy.

Until the Affordable Care Act or the cost sharing subsidies are repealed, insurers will continue to pay cost reduction subsidies in 2018.

A fixed amount you pay for a covered medical service, typically when you receive the service or prescription. Also commonly referred to as a “copay.”

The amount you pay for covered health services before your insurer begins to cover part of your costs. According to the IRS, a high-deductible health insurance plan is any plan with a deductible over $1,300 for an individual or $2,700 for a family.

Medical services are only covered if you go to doctors, specialists or hospitals in the plan’s network (except in an emergency).

These plans focus on integrated care and focus on prevention. Usually, coverage is limited to care from doctors who work for or contract with the HMO. Generally, out-of-network care isn’t covered unless there is an emergency.

Health Savings Accounts (HSAs) allow you to save and invest money for current or future medical expenses. You do not have to pay any taxes on money you contribute to an HSA, and you can withdraw the money tax- and penalty-free if you use the funds for a qualified medical expense.

You can only contribute to an HSA if your insurance meets the standards for a high-deductible insurance plan. Individuals can contribute up to $3,450 to a health savings account, and families can contribute up to $6,900 in 2018.

If you shop for insurance through Healthcare.gov, plans will indicate whether they are HSA approved. To be an HSA compatible plan, your deductible must be at least $1,350 for an individual or $2,700 for a family. The out of pocket maximums on these plans must be less than $6,650 for an individual or $13,300 for a family.

The out-of-pocket maximums required by the IRS do not line up with Affordable Care Act maximums, so many plans with high deductibles will not allow you to contribute to an HSA. If contributing to an HSA is an important part of your financial plan, be sure to filter for HSA compatibility on HealthCare.gov. And be advised: Not everybody will have an opportunity to purchase a subsidized HSA-compatible health insurance plan.

If you can afford to purchase health insurance and choose not to, you will be charged an individual shared responsibility payment, in the form of a tax penalty. There are a few qualified exemptions, outlined in the guide above, that allow you to avoid the fine. For example, if your employer-sponsored health plan costs more than 8.05 percent for individual coverage, you will not have to pay the fine (though you will not qualify for tax credits).

The fine for 2018 has not yet been released, and Congress has considered removing the individual mandate requirement for 2018. If it is removed, we will update this piece with the required information.

For the 2017 tax year, the individual mandate was calculated two ways:

  1. 2.5 percent of household income (up to the total annual premium for the national average price of the marketplace bronze plan)
    OR
  2. $695 per adult and $347.50 per child (up to $2,085)

You had to pay the greater of the two penalties.

Medicaid: A joint federal and state program that provides health coverage to low-income households, some pregnant women, some elderly Americans and people with disabilities. Medicaid provides a broad level of coverage including preventive care and hospital visits. Some states provide additional benefits as well.

If you were a foster child who “aged out” of foster care, you can continue to receive Medicaid coverage until age 26 with no income limitations.

Medicaid Expansion: Obamacare gives each state the choice to expand Medicaid coverage to people earning less than 138 percent of the federal poverty line. The primary goal of the ACA is reducing the number of uninsured people through both Medicaid and the health insurance marketplace. The Kaiser Family Foundation keeps track of expanded Medicaid coverage by state.

Medicare: Most people who are over age 65 and disabled people who have received Social Security Disability Insurance (SSDI) payment for 25 months in the United States will qualify for a Medicare Health Insurance Plan. Open enrollment for Medicare, which started Oct. 15, runs through Dec. 7. You can learn more about Medicare plans from the Medicare Plan Finder.

The amount you pay each month for your health insurance.

The highest amount you will pay for covered services in a year. In 2018, all health insurance plans sold through the Federal Health Exchange will have a out-of-pocket limits of $7,350 for an individual or $14,700 for a family plan.

You pay less for medical services if you use providers in the health plan’s network. You need a referral from your primary care doctor to see a specialist.

You pay less for medical services if you use the providers in your plan’s network. You may use out-of-network doctors, specialists or hospitals without a referral. However, there is an additional cost.

All health insurance plans purchased through the health care exchange cover some preventive care benefits without additional costs to you. These benefits include wellness visits, vaccines, contraception and more.

Most insurance plans have preferred pricing with a group of health care providers with whom they have contracted to provide services to members.

The federal subsidy for health insurance that helps eligible individuals or families with low or moderate income afford health insurance purchased through a health insurance marketplace.

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Featured, News

5 Ways Your Obamacare Coverage Could Change This Year

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5 Ways Your Obamacare Coverage Could Change This Year

Humana’s announcement last week that it is dropping out of the Affordable Care Act (also known as Obamacare) exchange and President Donald Trump’s tweet Friday that the Obamacare repeal is “moving fast” capped a frenzied week for the embattled law.

The proposed rule the Trump administration issued last week could mean major changes and increased costs for those who have Obamacare as well as other coverage. Congress would have to act to change Obamacare.

Amid the uncertainty about what will happen to Obamacare, here are five potential ways you and your health care spending could be impacted if the changes succeed.

The main changes would include:

  • Giving insurers the ability to offer more products that also cost more.
  • Removing the federal government’s oversight of insurers’ hospital and doctor networks.
  • Cutting in half the open enrollment period.
  • Requiring paperwork in advance that proves eligibility for enrolling outside of the open period.

1. You might need to find a new health plan

Humana last week announced it will drop out of the exchange, saying it would no longer provide individual plans in 2018.

“That’s been a pretty consistent phenomenon for the last two years, where you might have a particular insurance provider and then they pull out of the exchange, and so now you’ve got to go find another one,” says Chris Rylands, a partner in the Atlanta, Ga., office of Bryan Cave LLP, an international law firm. His practice focuses on employee benefits.

Humana analyzed the customers who had signed up through the exchange and found too much risk

2. Your costs for women’s health benefits could rise

With the Trump administration’s vow to overhaul Obamacare, some American women are feeling insecure about their birth control options.

In one example, Cecile Richards, president of Planned Parenthood, told CNN’s Christiane Amanpour in January that Planned Parenthood’s patient requests for IUDs has jumped by 900%.

Sneha Bhakta, 22, is among the women who plan to look into requesting an IUD.

She and her parents pay about $500 each month for the three of them to have insurance through Obamacare.

“I follow the news extremely closely. Yes, my parents are concerned about the changing policies. Mostly because it's all up in the air,” Bhakta says.

Bhakta, who lives in Atlanta, Ga., attended the Atlanta March for Social Justice and Woman in January, which was among hundreds of events the same weekend as the Women’s March on Washington. She says she’s scared about the possibility of losing coverage, especially the reproductive health care benefits, such as free birth control and pap exams.

3. Your deductible could go up

Proposed changes to the Affordable Care Act will create more leniency in how plans are classified. The greater leniency will allow for more diverse choices in the health care market, but could increase co-payments and deductibles for consumers.

All participating insurance plans have to cover 60% of out-of-pocket costs to qualify as a bronze-level plan, 70% for a silver plan, and 80% for gold. While the insurance plan pays for 70% of out-of-pocket costs for a silver plan, consumers would pay the remaining 30% through a combination of deductibles, co-pays, and co-insurance. Under the Obama administration, a two-point disparity was permitted, meaning that a plan could cover 68% of the costs and still qualify as a silver plan.

With Trump’s proposed changes to the Affordable Care Act, the disparity has been increased from 2% to 4%. Plans with only 66% coverage would still qualify as a silver plan.

It gives insurers a little more room to vary their plan terms,” Rylands says.

He adds that although there’s the potential for higher deductibles or out-of-pocket costs, the fact that the proposal extends it by only 2 percentage points means those increases will not be significant.

Already, Americans are showing they’re willing to pay for a plan with high deductibles in order to save money on premiums.

Over the last two years, enrollment in high-deductible health plans with a savings option by workers with employee-sponsored health insurance has increased 8 percentage points, to 29%, according to the 2016 Employee Health Benefits Survey by Kaiser Family Foundation and the Health Research and Educational Trust.

The survey found average premiums for those plans were “considerably lower” than the average for all plan types, at $5,762 for single coverage and $16,737 for family coverage.

4. You may have to be a bit more on the ball to enroll

The Trump administration’s proposal would cut the open enrollment period, typically three months, in half.

Under the new guidelines, those who need to enroll in health care for 2018 would have from between Nov. 1 and Dec. 15, 2017. Insurance coverage will end on Dec. 31, 2017, for all participants, no matter their enrollment date.

Not only would the open enrollment period be shorter, but the president has already slashed the advertising budget for Obamacare. Upon taking office, Trump cut $5 million in advertising days before the Jan. 31, 2017, enrollment deadline.

Enroll America, a nonprofit, nonpartisan organization that serves as the nation’s leading health care enrollment coalition, criticized the decision and its timing during the critical final days of the enrollment period for 2017. In a January statement, Anne Filipic, president of Enroll America, said, “their decision to halt outreach will have real impact on real people’s lives.”

Also last week, the Trump administration announced plans to place more stringent guidelines for the special enrollment period, in an effort to reduce the number of consumers registering outside the open enrollment period. For 2017, the enrollment period ran from Nov. 1, 2016, to Jan. 31, 2017.

The special enrollment period was originally meant for people who experience unexpected changes, such as unemployment, a new baby, or moving states. The Affordable Care Act allows consumers to enroll and submit proof later that they qualify for the special enrollment.

Insurance agencies have found that people signing up under the special enrollment period have higher health care costs, leading agencies to believe that Americans are signing up when already sick.

Under the proposed revisions, consumers will be required to provide proof before signing up for special enrollment.

Your providers could change

Proposed changes to the Affordable Care Act will also remove federal review of insurance networks. The networks were created by the Obama administration in response to complaints that there were too few providers accepting insurance policies purchased in the exchange.

The requirement for a minimum number of providers within a set distance from enrollees could be removed.

While this could reduce consumers’ access to health care within a reasonable distance, Rylands is hopeful it could allow more health insurance companies to continue providing services on the exchange.

“We’ll just have to wait and see if that happens though,” Rylands says.

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Featured, Health

3 Ways to Keep Medical Debt from Ruining Your Credit

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3 Ways to Keep Medical Debt from Ruining Your Credit

Turns out, your physical well-being isn’t the only thing at stake when you go to the hospital. So too is your financial well-being. That’s because no debt is more common than medical debt.

The numbers are staggering in their scope. According to the Consumer Financial Protection Bureau, more than half of all collection notices on consumer credit reports stem from outstanding medical debt, and roughly 43 million consumers – nearly 20% of all those in the nationwide credit reporting system – have at least one medical collection on their credit report.

Now, you might be inclined to think that because you’re young or have both a job and health insurance, medical debt poses you no risk. Think again. According to a recent report from the Kaiser Family Foundation, roughly one-third of non-elderly adults report difficulty paying medical bills. Moreover, roughly 70% of people with medical debt are insured, mostly through employer-sponsored plans.

Not concerned yet? Consider that a medical collection notice on your credit report, even for a small bill, can lower your credit score 100 points or more. You can’t pay your way out of the mess after the fact, either. Medical debt notifications stay on your credit report for seven years after you’ve paid off the bill.

The good news (yes, there is good news here) is you can often prevent medical debt from ruining your credit simply by being attentive and proactive.

Pay close attention to your bills

Certainly, a considerable portion of unpaid medical debt exists on account of bills so large and overwhelming that patients don’t have the financial wherewithal to cover them. But many unpaid medical debts catch patients completely by surprise, according to Deanna Hathaway, a consumer and small business bankruptcy lawyer in Richmond, Va.

“In my experience, it’s often a surprise to people,” says Hathaway. “Most people don’t routinely check their credit reports, assume everything is fine, and then a mark on their credit shows up when they go to buy a car or home.”

The confusion often traces back to one of two common occurrences, according to Ron Sykstus, a consumer bankruptcy attorney in Birmingham, Ala.

“People usually get caught off guard either because they thought their insurance was supposed to pick something up and it didn’t, or because they paid the bill, but it got miscoded and applied to the wrong account,” says Sykstus. “It’s a hassle, but track your payments and make sure they get where they are supposed to get. I can’t stress that enough.”

Stay in your network

One of the major ways insured patients wind up with unmanageable medical bills is through services rendered – often unbeknown to the patient – by out-of-network providers, according to Kevin Haney, president of A.S.K. Benefit Solutions.

“You check into an in-network hospital and think you’re covered, but while you’re there, you’re treated by an out-of-network specialist such as an anesthesiologist, and then your coverage isn’t nearly as good,” Haney says. “The medical industry does a poor job of explaining this, and it’s where many people get hurt.”

According to Haney, if you were unknowingly treated by an out-of-network provider, it’s not unreasonable to contact the provider and ask them to bill you at their in-network rate.

“You can push back on lack of disclosure and negotiate,” Haney says. “They’re accepting much lower amounts for the same service with their in-network patients. They may do the same for you.”

Work it out with your provider BEFORE your bills are sent to collections

Even if you’re insured and are diligent about staying in-network, medical bills can still become untenable. Whether on account of a high deductible or an even higher out-of-pocket maximum, patients both insured and uninsured encounter medical bills they simply can’t afford to pay.

If you find yourself in this situation, it’s critical to understand that health care providers themselves usually do not report unpaid bills to the credit bureaus – collection agencies do. After a certain period of time, most health care providers turn unpaid debt over to a collection agency, and it’s the agency that in turn reports the debt to the credit bureaus should it remain unpaid.

“If you can keep it out of the hands of the collectors, you can usually keep it off your credit report,” says Hathaway.

The key then is to be proactive about working out an arrangement with your health care provider before the debt is ever sent to a collection agency. And make no mistake – most providers are more than happy to work with you, according to Howard Dvorkin, CPA and chairman of Debt.com.

“Trust me, no one involved with medical debt wants it to go nuclear,” says Dvorkin. “The health care providers you owe know very well how crushing medical debt is. They want to work with you, but they also need to get paid.”

If you receive a bill you can’t afford to pay in its entirety, you should immediately call your provider and negotiate, says Haney.

“Most providers, if the bill is large, will recognize there’s a good chance you don’t have the money to pay it off all at once, and most of the time, they’ll work with you,” he says. “But you have to be proactive about it. Don’t just hope it will go away. Call them immediately, explain your situation, and ask for a payment plan.”

If the bill you’re struggling with is from a hospital, you may also have the option to apply for financial aid, according to Thomas Nitzsche, a financial educator with Clearpoint Credit Counseling Solutions, a personal finance counseling firm.

“Most hospitals are required to offer financial aid,” says Nitzsche. “They’ll look at your financials to determine your need, and even if you’re denied, just the act of applying usually extends the window within which you have to pay that bill.”

If all else fails, negotiate with the collection agency

In the event that your debt is passed along to a collection agency, all is not immediately lost, says Sykstus.

“You can usually negotiate with the collection agency the same as you would with the provider,” he says. “Tell them you’ll work out a payment plan and that in return you’re asking them to not report it.”

Most collection agencies, according to Haney, actually have little interest in reporting debt to the credit bureaus.

“Think about it,” Haney says. “The best leverage they have to get you to pay is to threaten to report the bill to the credit agencies. That means as soon as they report it, they’ve lost their leverage. So, they’re going to want to talk to you long before they ever report it to the bureau. Don’t duck their calls. Talk to them and offer to work something out. They’ll usually take what they can get.”

At the end of the day, according to Haney, most people can keep medical debt from ruining their credit by following one simple rule.

“Just be proactive,” he says.

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Life Events

The First 7 Financial Moves You Should Make When Changing Jobs

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The First 7 Financial Moves

Changing jobs can be exciting and overwhelming all at the same time.

There’s the thrill of beginning a new opportunity and advancing your career. But transitioning into a new role can also be a logistical nightmare, especially when it comes to your finances.

While we can’t help with everything, we can help you make the most of this transition from a financial perspective so that you avoid some common pitfalls and keep every last dollar you’re owed.

Here are the first 7 financial moves you should make when changing jobs.

1. Get the Skinny on Your New Paycheck

In addition to a change in your take-home pay, there may be a change the frequency and/or timing of your paycheck, either of which may require a change in habits.

As an example, maybe you're currently paid twice per month on the 1st and 15th, but your new company will pay you every two weeks. That kind of change could mean a couple of things:

  1. Even if you are getting a raise, your paycheck may not be as big as you think, because your salary will now be spread over 26 paychecks per year instead of 24.
  2. You may need to adjust certain spending and savings habits to account for the fact that you'll be getting paid on a different schedule. You should especially be careful about updating any auto-bill pay or auto-saving withdrawals through your bank account. If those were tied to your previous paycheck cycle, you could risk overdrafting your account.

Of course, you'll also want to know how much you'll actually be taking home with each paycheck after everything is taken out. Here are a few things to consider:

  • Your gross salary per paycheck. This is your annual salary divided by the number of paychecks you'll receive over the year.
  • How much will be taken out for company benefits like health insurance and 401(k) contributions? More on this below.
  • How much will be taken out for taxes?

The website paycheckcity.com can help you estimate your new take home pay. Michael Solari, CFP®, the founder of Solari Financial Planning, recommends paying special attention to your withholdings on your W4, which may need to increase in order to avoid a large tax bill, or could decrease if you're moving to a state without an income tax.

2. Split Your Raise 50/50

If your job change comes with a raise, congrats! Now it's time to put that new money to work.

The key here is striking a balance between allowing yourself to live and being responsible. You don't want to waste the money, but you don't need to completely deprive yourself either.

Pam Capalad, CFP®, the founder of Brunch and Budget, advises her clients to put 50% of their raises towards spending and 50% towards savings and debt.

“If your net paycheck goes up by $400 each month, give yourself permission to spend $200 of that,” Capalad says. “Now you’ve given yourself some leeway to spend a little more each month, which is what would happen anyway, but you’re also committing a good chunk of your new earnings to savings."

3. Prepare Ahead for Any Decrease in Income

New jobs don’t always mean higher pay. You may take a pay cut at a new job either out of necessity or in pursuit of a more enjoyable job.

Whatever the case, you should start preparing for the change as soon as possible, preferably before you actually change jobs.

  1. Estimate your new take-home pay and the expected difference in income.
  2. Start living on that decreased income ahead of time if possible.
  3. While earning your old income, put the difference into a savings account.

Following these steps allows you to adjust to the change ahead of time and build up some savings to help with any bumps in the road.

4. Know Your Health Insurance

Depending on the specifics of your coverage and your particular medical needs, your new health insurance plan could end up saving you money or forcing you to pay more out of pocket. Getting up to speed on how all of that works will help you prepare either way.

"Get familiar with the new deductibles," says Capalad. "Make sure you know the new costs of any regular prescriptions you take, and talk to your doctor if you need to switch to brand name or generic, depending on what the new insurance will cover."

If you are stuck with a high deductible plan, see if your employer offers access to a health savings account or flexible savings account, which allow you to cover medical expenses with pre-tax dollars. A health savings account can even be used as a retirement account. FSA accounts can also be used to help pay for childcare expenses.

5. Take Advantage of Employee Benefits

Companies offer all kinds of employee benefits, from life and disability insurance to free fitness equipment and child care reimbursement. These are valuable benefits that can save you money and add some security to your financial life.

Capalad recommends looking into worker benefits in your first week on the job, just to make sure you don't forget and leave a valuable perk behind.

6. Rollover Old Retirement Accounts

Did you have a retirement account with your previous employer? If so, now is the time to decide whether to move the money.

Many 401(k)s are laden with high fees that eat away at your investment returns. But you don't have to keep your money there once you leave. You can choose to roll it over to an IRA, or even into your new 401(k) if it's a good one.

7. Make a Backup Plan

As hopeful and excited as you are about your new job, there's the unfortunate possibility that it might not work out. You may not like it and want to leave, and you could also be laid off.

That's why Eric Roberge, CFP®, the founder of Beyond Your Hammock, encourages people to have a backup plan.

"You really need to have a plan B," he says. "You don't want to get locked into a bad situation. You'll end up resenting the move and your job performance will suffer."

In addition to thinking about other potential opportunities, Roberge recommends building up a healthy emergency fund.

"That extra cushion will allow you to take a lower paying job that is more fulfilling, or cover you in case the unexpected happens and you lose the next job."

Hopefully all that happens here is that you end up with a little extra money in savings, but no matter what you’ll be able to sleep better at night knowing you have cash on hand if you need it.

 

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News

9 Things Financial Advisors Want You to Know About Having Kids

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9 Things Financial Advisors Want You to Know About Having Kids

When it comes to having kids, wouldn’t it be nice if all first-time parents could have their own personal financial advisor to help guide them through the intricacies of financially preparing for their little bundle of joy?

While it might not be possible for each set of parents to have their own personal advisor, it is possible to gather some general information — and we can help. We checked in with multiple finance experts and asked: “What’s the most important thing you would want first-time parents to know about finances when it comes to having kids?”

Here’s what they had to say.

Tip No. 1: “Add term life insurance before getting pregnant.”

Source: Sophia Bera, CFP®, founder of Gen Y Planning

The reasoning: Believe it or not, once you're pregnant it could be harder to qualify for a preferred rate because they do a weight/height calculation that will factor into the amount you pay, says Bera. To that end, if you haven’t been able to get a policy before conceiving, signing up for a plan within the first few months of your pregnancy should be totally fine, too.

Tip No. 2: “Figure out a plan for paying your medical bills.”

Source: Ed Snyder, CFP®, ChFC, Oaktree Financial Advisors, Inc.

The reasoning: Even if you do have health insurance, chances are some of the tests and procedures you can opt for (like genetic testing, for example), may not be covered by your plan. At the very least, you should assume you’ll probably meet your out-of-pocket deductible. Luckily most providers will let you set up a monthly payment plan with no interest if you can't pay the full amount, says Snyder. Consult with your health insurance about what is and isn’t covered, then chat with your doctor’s office to find out what options you have. (Check out this piece for five more ways to save on some of the biggest parenting expenses.)

Tip No. 3: “Plan for the pregnancy, as well as the baby.”

Source: Bellaria Jimenez, CFP®, Managing Director of MetLife Solutions Group 

The reasoning: When considering having a baby, it’s important to plan for additional costs during the pregnancy, as well as the cost of caring for the baby, says Jimenez. If you have a good insurance plan, the cost of prenatal care might just mean the cost of co-payments, but without good insurance this can cost you thousands out of pocket (or even with it). On top of that, prenatal vitamins purchased over the counter can range from $10 to $20, and if you are like many moms-to-be, eating healthy and organic during pregnancy can mean an increase in monthly grocery bills, as well. Some other things to consider: The cost of an uncomplicated cesarean section was about $15,800 in 2008, and $9,600 for vaginal birth, according to WebMD. Many moms hold baby showers to prepare for the upcoming baby, but be smart about your gift registry to help save you money down the line. For example, requesting gift cards in lieu of gifts can assist you with purchasing diapers and formula if you choose not to breast-feed. There are subscription services and bulk purchases for baby items that help. Several websites also offer “cost of raising a child” calculators that can be helpful for planning. (For more on this aspect of financially planning for baby, check out this piece.)

Tip No. 4: “Sign up for your FSA.”

Source: Sophia Bera, CFP®, Founder of Gen Y Planning

The reasoning: Doing so will often allow you to use pretax dollars to pay for daycare costs.

Tip No. 5: “Sign up for your HSA.”

Source: Ed Snyder, CFP®, ChFC, Oaktree Financial Advisors, Inc.

The reasoning: We’ve already talked a little bit about healthcare costs, but if you have a high deductible health insurance plan, Snyder suggests pairing it with a Health Savings Account so that your medical expenses — and the baby's — are tax-deductible. (Confused about the differences between an HSA and an FSA? Check out this piece.)

Tip No. 6: “Familiarize yourself with the tax laws.”

Source: Molly Stanifer, CFP® 

The reasoning: Certain tax breaks could really help you out, especially that first year when you have the baby. The childcare tax credit, for example, allows you to use a credit to net against taxes you owe in a given year, says Stanifer. “The idea behind the credit is to offer parents with children aged 12 years or younger a little help so they are able to work. The amount of childcare expenses you can use toward the credit are limited to $3,000 per child, but no more than $6,000. After that the credit is limited by your income. Work with an advisor if you’re unsure exactly of how the laws work in your favor.”

Tip No. 7: “Use nicknames for your savings accounts.”

Source: Mark Thorndyke, CFP®, Managing Director, Wealth Management Advisor, Thorndyke Wealth Management Group, Merrill Lynch

The reasoning: It might sound silly, but assigning nicknames to savings accounts has actually proven a very effective way to save for defined goals, says Thorndyke. For example, when Thorndyke started nicknaming his own accounts with specific goals seven or eight years ago, he found that it provided him with a strong psychological motivation to continue to save. “Parents [I’ve seen] have defined goals as college, education, retirement, travel, emergency fund, vacation/second home, kids wedding, automobile, etc. Their children, on the other hand, have specific goals like college savings, checking, general savings.”

Tip No. 8: “Think twice before putting funds in a child’s name.”

Source: Cecilia Beach Brown, CFP®

The reasoning: Depending on where you live, you may have access to UTMA (Uniform Transfer to Minor Accounts) and UGMA (Uniform Gift to Minor Accounts). “These have long been used as a tool to keep taxes lower on account earnings, however, when the child reaches the age of majority for your state, they have full access to the funds,” says Brown. “You as a parent give up control. Weigh the actual tax benefits to you before putting funds in a child’s name — it might not be worth giving up control.”

Tip No. 9: “The new way to hire a babysitter could end up saving you tons of money.”

Source: Lynn Ballou, CFP®, Managing Partner and Board Ambassador for Ballou Plum Wealth Advisors

The reasoning: Babysitting co-ops have taken the country by storm, and for good reason. “A babysitting co-op can mean the difference between affording a night out or staying in,” says Ballou. The concept is simple. “Find parents whose values are in line with yours and alternate Saturday nights out.” Swapping babysitting duties with other parents means your child will have playmates, you’ll get to go out for free and you’ll be doing someone else a favor at some point as well. It’s a pretty great deal.

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8 Work Benefits to Make Sure You Cash In On

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8 Work Benefits to Make Sure You Cash In On

When it comes to work, there’s a lot more on the line than just your salary. If you don’t pay close attention to what your employer offers up, you could be leaving valuable benefits (many of which are monetary) on the table.

Take, for example, the following: According to research from the U.S. Travel Association, Americans workers on average fail to use even five vacation days a year, leaving about $224 billion in unused vacation time to be wasted.

Besides taking the rest of the year off to make up for wasted vacation time, here are a few other things you can do right now to make sure you’re cashing in on everything your job has to offer.

1. Ask about employee wellness initiatives

Many employers these days offer wellness initiatives as a way to alleviate some of the lifestyle factors that may lead employees to develop health issues and to help combat the accompanying increase in health care costs. According to a RAND Employer Survey, approximately half of U.S. employers offer wellness promotion initiatives that include things like wellness screening activities to identify health risks and interventions to reduce risks and promote healthy lifestyles, onsite weight loss intervention programs, weight loss competitions, smoking cessation activities and personalized phone support from health coaches. Onsite vaccinations and healthy food options were also high on the list of health incentives. Besides the fact that these initiatives are employer-sponsored measures aimed at keeping you healthy, some come with the added benefits of health care discounts or cash-back prizes, so it would be foolish to not take part.

2. Always meet your match

It’s time to check in on your retirement account (and make it a regular habit). Contributions made to an employee account are made on a pre-tax basis, which means there are tax incentives for joining, and if your company matches an amount — either in full or at a percentage — that’s free money that your company is offering up to you.

Want more on retirement? Learn how to save a million dollars for retirement on a $50,000 annual salary.

3. Find out about freebies

Discounts or cash-back on a gym memberships. Matching charitable contributions. Employee discounts on company merchandise or stock options. Many large corporations offer some or all of these benefits to their employees, so it’s worth doing a little digging to find out if yours does.

4. Take advantage of tax breaks

If your company offers access to flexible spending accounts (commonly referred to as FSAs), you’ll be able to set aside pre-tax dollars for qualified healthcare expenses and prescriptions, even daycare and qualified transportation needs. Just be sure that you use up all the money you set aside in this account by the end of the year, since any money that you don’t goes straight back to your employer. If you have a Health Savings Account (HAS) available on a high deductible plan, then the unused money isn’t forfeited at the end of the year. You could even start putting away money for future medical expenses like having a child or funds for retirement. Another less common but sometimes available perk is a transportation savings account, where employees can put aside pre-tax dollars towards an account specifically designed for travel expenses. These are particularly popular in large cities, like New York, where public transportation is common and can be expensive. If your company doesn’t offer a TSA, ask about the possibility of gas reimbursement, instead.

5. Go back to school

Some employers offer to cover some or all of the expenses related to tuition or class fees.. Even if yours doesn’t have a policy, it never hurts to ask. Assuming that the course you’re interested in will further your career and make you more desirable in your current job, they may be willing to help you out.

6. Sign on the dotted line for life insurance

Especially if you have a spouse or kids who rely on your income, it’s a good idea to have a life insurance policy in place in case something should happen to you, and many companies can help. Most offer some sort of term life insurance package for little to no additional cost to you — as long as you’ve signed up for it.

7. Hook your family up

Many companies offer added benefits for your entire family, not just for you. From daycare reimbursement to college savings plans, it’s worth checking with HR about what they can do to help you set your whole family up for financial success. Many 529 plans these days are also offered through payroll deductions, so that cash comes right out of your pay before it even hits your checking account and you have a chance to miss it.

8. Opt for the disability insurance

Disability insurance is a great perk to have (especially when it’s covered by your company) in case something should happen that keeps you from working for an extended period of time. If your company offers either short or long-term disability plans, sign up. For women, this may especially come in handy if they plan to get pregnant in the future. Find out why here.

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College Students and Recent Grads, Life Events

Decoding a Teacher’s Benefits Package

The editorial content on this page is not provided by any financial institution and has not been reviewed, approved or otherwise endorsed by any of these entities.

Depressed man slumped on the desk with his hands holding credit card and currency

Written by Dave Grant of Finance for Teachers

Suzie was exhausted. She had not been this tired since getting used to the social scene as a freshman in college. 

But this was a different kind of tired. The “I earned this Netflix binge” kind-of tired. After finishing her first week of teaching 4th grade, she collapsed on the couch in her dimly lit apartment and eagerly started spooning the Chinese take-out into her mouth.

As the TV screen flickered across the room, she barely saw the characters moving about the screen. The piles of papers on her coffee table distracted her eyes.

“Oh crap.” She muttered under her breath. The papers were those thrown into her lap by the HR Director during her new teacher orientation. Health insurance, teachers union, retirement savings, and pension details – it was so overwhelming when all she wanted to do was teach eight and nine year olds about the world.

Determined to finish her food before diving into this world of confusion, she savored every last bite of her chow mein. But the bottom of the carton came too soon, and she did the responsible thing, and grabbed the looming stack in front of her. 

Suzie’s plight is not unlike those of new teachers I work with every year.

As if starting a job in teaching wasn’t overwhelming enough, deciding what benefits package are right for you when you’re not versed in “Employee Benefits” is enough to push anyone over the edge.

So let’s go through some common benefit choices you can be faced with, and take you through how to evaluate which one could be right for you.

Health Insurance

The first thing you need to determine is whether you are eligible to stay on your parent’s health insurance plan. If you’re under 26, then this is a good possibility and if your parents are willing to still pick up the tab, then that is great news for your wallet.

But if you need to choose a plan for yourself, see if you can find a summary of what your district provides. All districts should provide a PPO, HMO and HSA plan.

Not sure what makes these different from one another?

PPO = Preferred Provider Organization. This is coverage that is typically more expensive in it’s premiums and benefits but gives you the most flexibility in which doctors you use for health care. You can choose which dermatologist, OBGYN, or foot doctor you see without anyone saying that you can’t. They have to be in your insurance’s network, but that’s pretty much the only barrier.

HMO = Health Maintenance Organization. This coverage is cheaper every month, and caps out quite quickly in how much you have to pay, but there are trade offs. Before going to see any type specialist, you have to get a referral from your general practitioner, and only use those on a list of preferred HMO specialists. If the dermatologist your Mom recommends is not on the list, then you insurance won’t cover you paying them a visit.

HSA = Health Savings Account. This account accompanies a health insurance plan that has high deductibles, but the lowest premiums of the three plans. The account that goes along with this plan (the HSA) allows you to save money pre-tax to pay these deductible costs later on.

Determining which plan you use depends on how often you go to the doctor, if your current doctors are in your network, and how much money you can afford to spend on health insurance premiums. Before you decide, check with your district. While they may list premiums, if you’re single and not covering anyone else, they may provide health insurance as a free perk.

Retirement Savings

It’s not every day that you get to choose which account to use to save money for the rest of your life. But, unfortunately, choosing the wrong one can shave thousands off the amount you have to your name when you reach retirement.

You’ll no doubt have been told about the 403(b) plans during orientation. You may have one provider / vendor in your district or you may have as many as 15. Too much choice can be a bad thing!

Let’s explore what a 403(b) is before jumping on the bandwagon. A Traditional 403(b) is used to save for retirement with contributions that have not been taxed. While you won’t pay taxes on the money you contribute now, you’ll pay taxes on it, and the amount it’s grown to, when you withdraw it in retirement.

For those with big paychecks, avoiding taxation now is a great thing to do. But what about those with a first year’s teacher salary? Probably not. You just aren’t paying enough in taxes right now for it to make a big enough impact.

You should be using an account where you pay taxes on your contributions now, but where everything the account grows to can be withdrawn tax-free in retirement. This is called a Roth account. It can either be a Roth 403(b) or a Roth IRA.

If you’re going to use a 403(b) through your school district, use a company that doesn’t sell annuities as a 403(b). Look for a company – and ask them to show you – that has a wide selection of investments to choose from – less than 50 investment choices are providers that aren’t worthy of your time.

Keep in mind that you probably don’t want to walk away from an employer match, unless the options are just truly terrible. If your employer offers to match your retirement contribution, it’s best to at least contribute enough to get the free money. Just know when that contribution vests (when you’ll actually get the money).

Hint: If the company has “Insurance” in the name, then avoid them altogether. Better still, use a company not tied to your district – like Charles Schwab, Vanguard or Fidelity – and open a Roth IRA to save for your retirement. It will be a lot cheaper, you’ll have more flexibility, and if you decide to leave teaching, it’s not an account that is tied to your job. This fact alone can cause problems and further expense down the road.

Paycheck Deductions

When that first paycheck comes, stand out amongst your peers – study and understand it. There’s a high likelihood that there’ll be lots of acronyms on your check and you should be trying to understand what all of things mean.

Play a game of elimination:

  • Find the line of your pension deduction and strike it out. Determine how much of your paycheck goes into funding your pension so you’re aware of how much retirement savings you may already be doing. (That will come in handy when you calculate how much to save later on.)
  • Find the amounts that you pay in Federal and State taxes, and strike them out. Understand if you are contributing to Social Security, or if you live in a state that doesn’t allow you do this along with a teacher’s pension. Medicare will be on there as well, which you are paying now to subsidize your premiums when you enter retirement.
  • There will likely be union dues (if you’re part of a union) – these are to pay for representatives to bargain on your behalf during contract negotiations, help represent you during trial hearings, and other expenses. Strike these out once you find them.
  • You will be left with some that you don’t understand. When you have time, send HR an email and ask them to explain what these acronyms mean and what they pay for. They could be to subsidize retiree health care, pay for early retirement options, or for other district activities. Being aware of this and how much they typically cost will give you peace of mind as to where your money is going.

Never be afraid to ask about where your money is going and what you’re getting in return. It’s your money and you have a right to know!

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Pay Down My Debt

Debt Guide: When to File Bankruptcy

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Below is an excerpt from our Debt Free Forever Guide. Be sure to download the free guide to help dump debt for good.

For some people, bankruptcy may be an appropriate option. In a bankruptcy, you may be able to eliminate some or all of your debts. However, debt forgiveness does not come lightly. Chapter 7 (where all eligible debt is eliminated) stays on your record for 10 years. Chapter 13 stays on your report for 7 years. And, during that time (especially in the first 3-5 years), you may find it virtually impossible to apply for any new credit. And credit is not limited to mortgages and auto loans. It can even include pay-as-you- go mobile phone packages. If you work in the financial services sector, you may find that bankruptcy will make it impossible to get a job. So, this decision should not be taken lightly.

However, for some people, this may be the only option. I will give a few examples of people whom I have met, where bankruptcy made complete sense:

  • A hardworking man had a medical emergency. Unfortunately, he did not have medical insurance. The total bill was over $500,000. And his annual salary was $40,000. There was no chance that he would ever pay off that debt. Bankruptcy made perfect sense.
  • A married couple unfortunately did not plan for the future. They had no life insurance, no savings and credit card debt. The husband was a professional, and the wife stayed at home with the children. The husband died unexpectedly. Between the funeral, the credit card debt from before the marriage and the costs of the transition, the widow had over $75,000 of debt. She was able to get a secretarial job for $25,000. It made sense to eliminate the debt with bankruptcy.

The biggest reasons for bankruptcy are medical and divorce. We always try to work with people to help them prepare for the worst. Everyone should have medical insurance, even if that means paying for a high deductible (low premium) policy that at least insures against bankruptcy. If someone depends upon you (like the husband in the story above), term life insurance is necessity, and it doesn’t cost much. In medicine, it is always better to prevent (via a good diet and exercise) than to fix after something goes wrong. The same is true in financial matters. However, if you are now in the emergency room, a bankruptcy may be the right option.

What can a bankruptcy do for me?

A bankruptcy gives you the opportunity to eliminate a significant portion of your debt. The bank has to write off the debt, and is no longer able to collect on the debt.

In Chapter 7 bankruptcy, all of the eligible debt is eliminated. It takes about 3-6 months to have the bankruptcy discharged.

  • Most or all of your unsecured debt will be erased. Unsecured debt would include things like credit card debt, personal loan debt, medical bills, mobile phone bills and other debt.
  • Certain types of debt are usually excluded from bankruptcy. These include student loan debt, tax obligations, spousal support, child support and some other types of debt can not be eliminated.
  • Some of your property may have to be sold to pay off your debt. However, in most cases, your primary property is exempt.
  • For secured property (like an auto loan), you will be given a choice. You can continue to pay, you can have the property repossessed, or you can make a lump sum payment (at the replacement value).

If your problem is with credit card debt and/or medical debt, than Chapter 7 makes sense. All of that debt will be wiped out. You continue to pay (and keep) your mortgage and auto loan.

In a Chapter 13 Bankruptcy, you are not able to eliminate all of your debt. Instead, you will be forced to make regular monthly payments towards your debt before it is completely eliminated.

Chapter 7 or Chapter 13?

If given the choice, most people would choose Chapter 7. From a credit score perspective, they both have equal (negative) impact on your score. In fact, here is what FICO says:

The formula considers these two forms of bankruptcy as having the same level of severity and, for both types, uses the filing date to determine how long ago the bankruptcy took place. As with other negative credit information, the negative effect of a bankruptcy to one's FICO score will diminish over time.

So, if you get the same penalty, but in one form of bankruptcy all of your debt is wiped out, and you still have to pay back some debt in the other form, then you would probably choose Chapter 7. And most people did, until the law was changed in 2005.

Note: there may be some instances when you will want to file Chapter 13 instead of Chapter 7. For example, if you are behind on your house payments and want to keep your house, Chapter 13 may make more sense. Why? In Chapter 13, you can put your past due mortgage payments into your repayment plan, and pay them back over time. In Chapter 7, your past due mortgage payments may be due right away.

However, in the majority of cases, Chapter 7 is more favorable to the borrower than Chapter 13.

There are now some “means tests” required to see if you can file for Chapter 7. Here are some very basic rules:

  • If your family income is below the median income of your state, you will probably be able to file Chapter 7. The income used is the average of your last 6 months income. You can find the median incomes here.
  • If your income is above the median, you may still be able to file bankruptcy. However, you will have to pass a means test. Your income and expenditures will be looked at, to see if you have the ability to make payments towards a payment plan over 5 years towards the accumulated debt.

In addition, if you tried to be clever, you will likely be caught. Any recent cash advances on your credit card, and any recent luxury purchases can be exempt from the bankruptcy completely.

It used to be very easy to file for Chapter 7 and have all of your unsecured debt eliminated. That is no longer the case. But, if you have low income, you can still proceed. And, if you have a very difficult situation, you can still find a path towards eliminating a significant portion of your debt.

How to Proceed

As part of the bankruptcy legislation, you need to meet with a non-profit debt counselor before you are allowed to file for bankruptcy. So, whether you are thinking about negotiating settlements or filing for ?bankruptcy, it makes sense to meet with a counselor. You can find a list of the approved agencies here.

For further reading on bankruptcy, we recommend this website (NOLO) - they have an excellent library of information.

In Summary

If you are in too deep, bankruptcy may be the only remaining viable option. I have met many people who filed bankruptcy, and went on to live very fulfilling and prosperous lives. Companies file bankruptcy all the time – and I believe that people should have the same legal protections that companies have.

You just need to be realistic about what bankruptcy can and cannot do. If you have student loans, tax liens, spousal support or child support – you will not be able to use this tool. You need to find a way to pay back your debt.

But, if you have been hit with a big medical bill, or your credit card debt is just too large relative to your income, bankruptcy could be the best option. It will be a very difficult 2 years. By Year 3, things will look a lot better. And, 7 years later, your score will reflect the person you have been in the last 7 years. A very good friend of mine had filed bankruptcy. He now has a home (purchased with a mortgage at a low rate). He has a car (purchased with a 0% car loan). And he has a rewards credit card (that he pays off in full every month). His score is high. It was a rough couple of years, but it made sense. Otherwise, he would have been making minimum payments for 30 years and still wouldn’t be out of debt.

Weigh your options carefully. Meet with a non-profit counselor. We are always available at MagnifyMoney to talk as well (just email us at info@magnifymoney.com).

Good luck with your decision.

Download our Debt Free Forever Guide! It’s FREE and will help get you back on track.

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RANKED: The Best Tax Software of 2018

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If you’re like most Americans, you dread filing your taxes. You have to track down the right forms, deal with the IRS and try to remember all your deductions and credits. That’s why so many people turn to online tax software to help file taxes. Great tax software simplifies the filing process without draining your wallet. But choosing the right software can be as much work as filing your taxes.

To help you choose the right software, we’ve tested 10 of the leading online tax software packages.

We’ve ranked each software on the following criteria: usability, helpfulness of support articles, availability of audit support and accessibility of tax and technical support. Then, we compared these criteria to the price to determine which software package is best for your situation.

Which tax software fits your needs? Find out below.

Best tax software of 2018

Best bargain for tax software: H&R Block More Zero

Of the 10 tax software packages we reviewed, only two allow all users to file state and federal taxes for free (Credit Karma Tax and DIY Tax). Unfortunately, Credit Karma suffers from bugs and inadequate technical support, and DIY Tax suffers on usability. This year’s best bargains offer the most functionality for the lowest price.

H&R Block More Zero H&R Block More Zero offers the best free software for the most users in 2018. Not only can you file free online, you can also use the H&R Block Tax Prep app to complete your filing.

Users who qualify for the More Zero package will find an easy-to-use Q+A interface, robust knowledge articles and free technical support alongside free state and federal filing. The More Zero software allows users to import their W-2 and 1099-INT forms. Plus, you can deduct student loan interest, property and real estate taxes and mortgage interest. On top of these deductions, you’ll be free to claim most major credits including the Earned Income Tax Credit, The Child Tax Credit and Dependent Care Credits. Among the top tax filing services, this is the most expansive free option available.

Unfortunately, not all users will qualify for H&R Block’s More Zero offer. If you need to declare investment income, self-employment income or you need to itemize beyond home ownership, H&R Block will charge you.

Runner-up: FreeTaxUSA

FreeTaxUSA offers free federal tax filing, but state filing costs an additional $12.95 for all users. FreeTaxUSA offers a question-and-answer interface, and in-software calculators that make it easy enough for beginners to file their taxes. FreeTaxUSA supports most major forms, so even people with rental properties, self-employment income or credits to claim get the same prices.

FreeTaxUSA doesn’t have as many import options, but it does allow you to import your previous returns (even from a competitor) to make comparisons easier. Plus, all users get email support for tax questions and technical support. For people who don’t qualify for H&R Block’s More Zero offer, FreeTaxUSA offers a bargain-priced alternative.

Best for Simple Filing: TurboTax Absolute Zero

Simple filers are W-2 employees who claim the standard deduction. You don’t earn money on the side, and your only other income comes from bank interest or dividends. You typically file as single or married filing jointly, and you want filing your taxes to take as little time as possible.

TurboTax Absolute Zero If you earn less than $100,000, and you don’t need to itemize your taxes, TurboTax Absolute Zero is likely the best software. You can use the highly-rated TurboTax app to snap pictures of your W-2 and file your taxes from your home. The Absolute Zero service supports student loan interest deduction, the saver’s tax credit and child-related tax credits.

Runner-up: H&R Block More Zero

H&R Block’s More Zero offers free state and federal filing for qualified users. Since H&R Block doesn’t limit their More Zero package to people earning less than $100,000, this is a great software for simple filers with higher incomes. With More Zero, you can claim all the deductions and credits that TurboTax offers, plus you can itemize your homeownership expenses.

The H&R Block user experience isn’t quite as easy to navigate as TurboTax’s (and it’s app isn’t as highly rated), but it is still an excellent choice for many filers.

Best for Maximizing Deductions and Credits: TaxSlayer Classic

Charitably-inclined people, most homeowners, parents who pay for child care, and people who qualify for the earned income tax credit may want to maximize deductions and credits.

TaxSlayer Classic TaxSlayer Classic offers federal filing for $17 and state filing for $22. The software offers a clean interface with a straightforward interview style for filing. For maximizing deductions and credits, you’re not likely to find a better software for the price. TaxSlayer gives you access to technical support, but you need to upgrade to ask tax-related questions.

Runner-up: FreeTaxUSA Free

FreeTaxUSA uses an interview-style interface to help users maximize deductions and credits. Unlike most software packages, FreeTaxUSA doesn’t force you to upgrade to itemize deductions or search for all major credits. You will pay nothing for federal filing and $12.95 per state. The interface is clean, and the interview questions aren’t stuffed with jargon. Even first-time filers should feel comfortable using the software.

FreeTaxUSA doesn’t have the same visual appeal or super-simple navigation of top competitors, but it offers a decent user experience at a fraction of the price of some of the top competitors.

Easiest for New Filers: H&R Block More Zero

Filing taxes for the first time can be intimidating, but a great tax software can put new filers at ease. When making recommendations for new filers, we prioritized the simplicity of the user interface and easy access to tax professionals.

H&R Block More Zero Many new filers will qualify for H&R Block’s More Zero free federal and state filing. H&R Block offers an easy-to-use interface that will make sense for first-time filers, plus it has lots of easy to understand articles and help buttons.

If you’re not feeling confident that you completed your taxes correctly, you can opt for the $49.99 Tax Pro Review. The certified tax professionals can review your return and offer expert guidance to be sure it’s done properly.

Runner-up: Credit Karma Tax

New filers who need to itemize their taxes, have self-employment income, capital gains or rental income won’t qualify for H&R Block More Zero. For these categories, Credit Karma Tax offers a free alternative for new filers. If you run into issues using Credit Karma Tax, you can chat with a live tax product professional. Plus, qualified filers can get an interest-free federal tax refund advance loan of up to $1,000 using Credit Karma’s Early Bird Advance.

Unfortunately, this recommendation has to come with a warning. Credit Karma has struggled with tech-related issues this year, and its customer service is overburdened. If you run into issues, you may want to consider an alternative option.

Best Audit Protection: FreeTaxUSA Deluxe

The IRS has the right to audit anyone, but people who have tax profiles that differ from the norm are more likely to get audited. No tax software (or accountant) can prevent you from getting audited, but some services will give you help during an audit. The best audit assistance from a tax software includes personal help from a tax specialist or an accountant. When you purchase audit assistance, you can expect that a tax specialist will help you understand IRS instructions if you get audited. They will also help you write responses to IRS notifications, and develop a plan to prepare for the audit.

FreeTaxUSA Deluxe FreeTaxUSA Deluxe costs $6.99 for the software, and an additional $0 for federal filing and $12.95 for state filing. The Deluxe upgrade doesn’t change the underlying software, but Deluxe users get an audit assistance guarantee. If you’re audited you’ll get personal assistance from a tax professional. The tax professional will help you understand IRS directions, and help you prepare for your audit. While the software isn’t quite as easy to use as major filing services (like H&R Block or TurboTax), the audit assistance is the lowest price on the market.

Runner-up: TaxSlayer Premium

TaxSlayer Premium uses an interview style and info bubbles to guide users through their returns. In addition to the excellent user experience, TaxSlayer Premium (and Self-Employed) offer audit assistance. If the IRS audits you, a trained tax professionals will help you prepare for the audit, and understand what the IRS needs from you. TaxSlayer Premium costs $35 for federal filing and $22 for state filing. TaxSlayer costs more than FreeTaxUSA, but it offers a slightly better user experience.

Best for Investors: H&R Block Premium - Online Version

If you buy and sell stocks, bonds, or options outside of your tax-advantaged retirement accounts, you need a tax software that can handle all your information. The best tax software for investors allows you to connect directly to your brokerage accounts. It should easily differentiate between dividend income, and short and long term capital gains.

H&R Block Premium H&R Block Premium online software costs $54.99 for federal filing and $36.99 for state filing. Although this is more expensive than other software services, the price is justified. H&R Block connects directly to your brokerage account to calculate the tax you owe. Connecting to your brokerage not only saves you time (a must if you’re an active trader), it can save you money too. H&R Block calculates your cost basis for you. This makes it possible for the software to accurately calculate gains and losses and differentiate between short and long term capital gains. H&R Block offers an easy way for investors to accurately calculate what they owe (and not pay a penny too much).

Runner-up: TurboTax Premier

TurboTax offers an exceptionally strong user experience for stock market investors who need to report stock sales, mutual fund sales or deal with Employee Stock Purchase Plans. TurboTax connects to thousands of brokerages, and they make it easy to accurately report your income. Plus, they calculate your cost basis in a stock which can minimize your taxes. TurboTax Premier online software costs $59.99 for federal filing and $36.99 for state filing. It’s a little bit more expensive than H&R Block, but it also offers a slightly better experience for investors.

Best for real estate investors: TurboTax Premier

Taxes for real estate investors can be confusing. Real estate investors can deduct tons of expenses, and they need a great software to help them calculate their deductions. In particular, a great tax software needs to help you depreciate your property, find and deduct real estate expenses and calculate amortization expenses.

To determine the best software, we prioritized features like helpful support articles, intuitive depreciation and amortization calculators and access to expert tax support.

TurboTax Premier TurboTax Premier costs $59.99 for federal filing and $36.99 for state. TurboTax has robust calculators and easy to understand articles that help users minimize their taxes. The step-by-step instructions make TurboTax a top choice for both new and experienced real estate investors. On top of that, QuickBooks users can upload their expenses directly to TurboTax, and TurboTax will do the hardest work for you.

Runner-up: TaxSlayer Premium

TaxSlayer Premium costs $35 for federal filing and $22 for state filing. The real estate portion of TaxSlayer has real estate calculators that are still simple enough for most real estate investors. If you get confused, or you’re not sure how to classify an expense, you can speak to a tax specialist who can guide you to the right decisions.

TaxSlayer doesn’t allow you to import any real estate forms, and the step-by-step guidance isn’t as robust as TurboTax’s. However, TaxSlayer costs 40 percent less than TurboTax and comes with audit assistance. For the right real estate investor, TaxSlayer could be a bargain.

Best for the self-employed: TaxSlayer Classic or Self-Employed

Are you a freelancer or contractor? If so, you may need help deducting many business-related expenses. This means that taxes can get messy in a hurry. The best tax software for self-employed people makes it easy to claim business deductions. It will also offer robust explanations that will help you understand amortizing equipment expenses and whether you qualify for a home-office deduction.

TaxSlayer Classic TaxSlayer Classic uses a simple interview filing system that makes it easy for the self-employed to declare their income and minimize deductions. TaxSlayer Classic supports all forms needed to minimize deductions. At a cost of just $17 for federal filing and $22 for state filing, TaxSlayer offers a top software experience at a reasonable price. If you prefer to get help from a professional (and get audit assistance), you can upgrade to TaxSlayer Self-Employed for $55 (federal and state filing included).

Runner-up: TurboTax Self-Employed

TurboTax makes it easy for those who are self-employed to find deductible expenses using its interview-style interface. It offers dozens of articles that can help self-employed folks understand their taxes better. Self-employed filers who use QuickBooks for their bookkeeping can effortlessly import their expenses. Once you import your data from QuickBooks, TurboTax does the work of categorizing expenses, and deducting them.

TurboTax Self-Employed is one of the most expensive tax software options online; it costs $89.99 for federal filing and $36.99 for state filing. It comes with a complimentary one-year subscription to QuickBooks Self-Employed accounting software (offer not valid if you’re a QuickBooks subscriber already on a payment plan).

Best for getting your return fast: Credit Karma Tax

Credit Karma Tax is offering an “Early Bird Advance” of up to $1,000 for qualified filers. The advance comes on a prepaid debit card (American Express Serve® Card).

Credit Karma Tax Technically, the advance is an interest-free loan issued through Credit Karma’s bank partner, MetaBank. If you accept the advance, the IRS will send your full refund to MetaBank. MetaBank will repay the loan using the refund, then send the remainder to you.

Credit Karma Tax is a completely free filing service, and it has a decent user interface. Unfortunately, it has had several technical glitches this year, and Credit Karma has struggled to respond in a timely manner. If you run into trouble, you may want to try a different filing service.

Runner-up: TurboTax Self-Employed

TurboTax makes it easy for those who are self-employed to find deductible expenses using its interview-style interface. It offers dozens of articles that can help self-employed folks understand their taxes better. Self-employed filers who use QuickBooks for their bookkeeping can effortlessly import their expenses. Once you import your data from QuickBooks, TurboTax does the work of categorizing expenses, and deducting them.

TurboTax Self-Employed is one of the most expensive tax software options online; it costs $89.99 for federal filing and $36.99 for state filing. It comes with a complimentary one-year subscription to QuickBooks Self-Employed accounting software (offer not valid if you’re a QuickBooks subscriber already on a payment plan).

Best for small businesses: TurboTax Business

Sole proprietors and single-member LLCs can also use tax software for self-employed filers. As long as the software supports a Schedule C, it will work for your small business needs.

If you’re part of a partnership, a corporation or a multi-member LLC, then you need more than the standard tax software that we reviewed above.

Corporations need software that supports Form 1120. S Corporations (with more than one member) need tax software that supports Form 1120S. Partnerships and multi-member LLCs need software that supports Form 1065.

If you need business tax software, consider one of these options.

TurboTax Business

Total cost:

  • $159.99 for federal software (up to five federal e-files)
  • $49.99 per state software
  • $19.99 per state e-filing fee.

TurboTax Business offers the same interview-style interface that consumers love, but it offers increased functionality. Small-business owners can use it to create unlimited W-2 forms and 1099-MISC forms.

H&R Block Premium and Business

Total Cost:

  • $79.95 for federal software (up to five federal e-files)
  • $39.95 per state (first state free)
  • $19.95 per state filing.

H&R Block offers an excellent interview-style user interface with increased functionality such as creating employee forms. On top of this, you can chat with a live tax expert after you purchase the software. This software supports the major forms for businesses, estate and trusts and nonprofit organizations.

TaxAct for Small Businesses

Total costs:

  • $97 State and Federal Bundle
  • $60 Federal filing only

TaxAct has a slightly more stripped-down user interface than H&R Block or TurboTax, but business owners can easily complete everything they need to do. TaxAct comes with unlimited tax support from a professional when you purchase the product.

Tax Software Pricing, Plans, and Insights

1040.com

1040.com - Tax Software Pricing According to 1040.com, tax filing should be smart and simple. 1040.com is on point by offering free live chat and email-based technical support. They also have support articles that are approachable and informative. Simple filers will have an easy time using 1040.com. Plus if you qualify for a 1040EZ (meaning you have W-2 income and no dependents and you don’t need to itemize), you can get completely free filing.

Unfortunately, people with more complex filing needs will find 1040.com unusable. It doesn’t have built-in calculators that real estate investors or stock market investors need to file accurately. The higher-priced levels don’t offer the functionality to justify the price.

If you qualify for the free edition of 1040.com, consider using it, but other filers will need to walk away.

 

Free $24.95 $44.95
Price $0 Federal
$0 Free
$24.95 Federal
$19.95 State
$44.95 Federal
$24.95 State
Best For 1040EZ (No Dependents, income under $100,000) Itemizers, people with children, stock market investors Self-employed, real estate investors, people with income

Superlatives: None

Credit Karma Tax

Credit Karma Tax Credit Karma Tax offers free federal and state filing for all users. Even though Credit Karma is completely free, it supports almost all major forms, so you can be confident that it has what you need.

Credit Karma’s refund dashboard shows you how income, deductions and credits influence your tax refund. In addition to the helpful refund tracker, Credit Karma offers an Early-Bird Advance. Early filers may qualify for an interest free loan of $500, $750 or $1,000 on a Serve card. Right now, Credit Karma is the only free online filing service that offers refund advances. Credit Karma also offers 24/7 live chat support from tax specialists.

As far as free filing services go, Credit Karma Tax looks great on paper. Even though it did away with the interview-style navigation, it still has a decent user interface. Unfortunately, during testing, we found a few bad gateways, and the default settings “hide” certain forms from users which makes navigation difficult. Credit Karma Tax doesn’t allow users to import forms (other than prior year tax returns and W-2 forms), which can be a pitfall for active traders and real estate professionals.

Adding to those negatives, Credit Karma seems to struggle with their tech support. Users can request tech support via email, but Credit Karma has posted that response time may be delayed due to the high volume of help requests.

Superlatives: Best for getting your refund fast, runner-up easiest for new filers

DIY Tax

DIY Tax DIY Tax offers 100% free federal and state filing for everyone. The software is accurate, and it allows you to import your prior year’s taxes for your reference.

However, DIY Tax has a cluttered user interface. With so much jammed on every page, you might miss something important while filing. Real estate investors and small business owners need to be careful with this platform, since the depreciation and amortization calculators can be confusing. The software offers free technical support via live chat or email, but they push Liberty Tax Service offices for tax support (Liberty Tax is their parent company). As you file, you will see ads for their offices in the software. Often, these ads include a coupon for an office visit. Remember, filing in a Liberty Tax office isn’t free.

Superlatives: None

eSmart Tax

eSmart Tax eSmart Tax and DIY Tax are the same software package. However, you have to pay for eSmart Tax. Why would you pay? The Deluxe and Premium packages offer unlimited phone or email support from tax specialists, which can prove helpful. But in most cases, eSmart Tax isn’t a great option.

 

Free Basic Deluxe Premium
Price $0 Federal $29.99 State $24.95 Federal
$35.95 State
$38.95 Federal
$35.95 State
$49.95 Federal
$35.95 State
Best For 1040EZ Homeowners, people with dependents, sole proprietors, freelancers without inventory and with less than $5,000 in expenses Stock market investors with dividend income, self-employed people with home office deductions or inventory expenses Stock market investors with capital gains or losses, real estate investors, people who sold a home in the previous years

Superlatives: None

FreeTaxUSA

FreeTaxUSA Deluxe FreeTaxUSA isn’t actually free, but it’s one of the best bargains in the tax software market. The software guides users through an interview process that makes filing easy. The interface is clean, so you don’t have to worry about missing something important. FreeTaxUSA makes it easy to import your tax return from a competitor, so you can review year-to-year changes in your taxes. You can also chat with tax and technical specialists if you run into issues. This kind of support makes FreeTaxUSA stand out among other bargain priced software services.

FreeTaxUSA offers two pricing tiers. At either level, you’ll pay at least $12.95 for state filing, and you can upgrade to a Deluxe software package for an additional $6.99. The Deluxe upgrade gives you priority support (meaning you get to cut in line if you need tax help). Upgrading also gives you access to a tax specialist if you’re audited.

 

Free Deluxe
Price $0 Software fee
$0 Federal
$12.95 State
$6.99 Software fee
$0 Federal
$12.95 State
Best For All major schedules supported Anyone who wants audit support

Superlatives: Best Audit Protection, best bargain for self-employed workers

H&R Block Online

H&R Block H&R Block is one of the biggest names in tax software for good reason. People with complex tax returns will love the value that H&R Block offers. H&R Block offers unlimited technical support to all filers, and phone and chat tax support for those who pay. H&R Block’s More Zero option is one of the most inclusive free filing options on the market. Homeowners, parents, and savers with W-2 income can maximize their refund using the free option.

H&R Block offers easy navigation, helpful interview questions, and robust articles that can help you untangle even the most complex filing situation. You can also import information from your brokerage account which makes filing capital gains taxes a snap. If you run into issues, you can either ask a tax professional, or you can upgrade to the $44.99-$89.99 Tax Pro Review. With a Tax Pro Review, an H&R Block Tax Professional will review your return before you file, and fix any errors.

The only disappointment is that H&R Block online filing customers do not get a guarantee of audit assistance. To get audit assistance from H&R Block you must purchase a desktop software or visit one of the offices.

H&R Block’s software isn’t quite as easy to use as TurboTax, but it’s a bit less expensive. In particular, freelancers and self-employed people with basic expenses will see huge value since they can purchase the Premium edition.

As an added bonus, you can get up to a 5% boost on your refund if you choose to have your refund loaded to an Amazon gift card.

 

More Zero Deluxe Premium Self-Employed
Price $0 Federal
$0 State
$49.99 Tax Pro Review
$34.99 Federal
$36.99 State
$79.99 Tax Pro Review
$54.99 Federal
$36.99 State
$89.99 Tax Pro Review
$74.99 Federal
$36.99 State
$89.99 Tax Pro Review
Best For Homeowners, parents, people with W-2 income Stock market investors dividend income only, self-employed with basic expenses, other itemizers Real estate investors, self-employed with less than $5000 in expenses and no inventory, stock market investors with capital gains Self-employed people, Uber drivers

Superlatives: Best bargain, easiest for new filers, best for investors, runner-up best for simple filing

OLT.com

OLT.com OLT.com offers bargain basement pricing, and it supports all major filing situations. Unfortunately, the low price shows in the interface. It’s cluttered, difficult to navigate and doesn’t allow many imports. OLT.com has a large volume of support articles, but it stuffs the articles with confusing tax-jargon.

The one bright spot for this software is the $7.95 Premium upgrade that brings audit support and tax help from a professional. Even with this value, we don’t recommend OLT.com for most situations. This year, you can find a better software at lower prices.

 

Free Premium
Price $0 Federal
$9.95 State
$7.95 Federal
$7.95 State
Best For All major schedules supported Anyone who wants audit support

Superlatives: None

TaxAct

TaxAct TaxAct uses a question-and-answer style to guide you through your taxes. It offers helpful articles, and you can receive phone and email support from tax and technical professionals. If you want audit assistance from TaxAct, you must upgrade to the expensive Premium level.

If you’re a stock market investor, you can use TaxAct’s stock market assistant to help you minimize your capital gains taxes. This feature becomes available at the self-employed level. It’s a helpful tool, but not as good as connecting directly to your brokerage accounts.

For the most part, TaxAct simplifies tax filing, but it costs more than it should. TaxAct costs nearly as much as industry leaders H&R Block and TurboTax, but it does not provide the same value.

 

Free Plus Self-Employed Premium
Price $0 Federal
$0 State
$29.95 Federal
$37 State
$44.95 Federal
$37 State
$59.95 Federal
$37 State
Best For 1040EZ, 1040A Itemizers, stock market investors with only dividend income, real estate investors Self-employed, stock market investors with capital gains and losses People seeking audit defense

Superlatives: None

TaxSlayer

TaxSlayer TaxSlayer has an incredible user interface and helpful support articles. When it comes to itemizing deductions or finding credits, it is one of the easiest to use tax software packages on the market. In addition to a great software experience, TaxSlayer also premiered refundNOW in 2018. Qualified filers can get an interest-free advance of up to $1000 from TaxSlayer’s partner bank, River City Bank. The tax refund comes either via a prepaid debit card or a direct deposit.

Unlike most tax software, TaxSlayer supports all forms on its second-tier Classic level. If you’re a real estate investor or a self-employed worker, this means that you can complete your return at a low price. Their Premium and Self-Employed levels gives you access to live chat support, audit protections and help from tax professionals.

When you’re comparing prices at TaxSlayer note that Classic, Premium and Self-Employed offer the same software but have different support features.. The Classic level doesn’t include help from tax professionals or audit assistance, which are included with Premium or Self-Employed levels. Premium and Self-Employed are virtually identical except for their pricing. The Self-Employed option is $2 cheaper if you have to file both state and federal taxes, but Premium is $20 cheaper if you only need to file federal taxes.

 

Simply Free Classic Premium Self-Employed
Price $0 Federal
$0 First State ($22 each additional)
$17 Federal
$22 State
$35 Federal
$22 State
$55 (Federal and State included)
Best For 1040EZ All others (itemizers, stock market investors, real estate investors, self-employed, etc.) People who want audit assistance or help from a tax professional and DO NOT need to file a state return People who want audit assistance or help from a tax professional and MUST file a state return

Superlatives: Best for maximizing deductions and credits, best for self-employed, runner-up best audit protection, runner-up best for real estate investors, runner-up best for getting your refund fast

TurboTax

TurboTax If you’re looking for the Cadillac of tax software, TurboTax again takes the prize. Their interface is easy to navigate, and it offers superior usability for real estate investors, self-employed workers and stock market investors. Paying customers who get stuck can get help from technical professionals. TurboTax takes their support seriously. With your permission, support staff can “draw” on your screen to guide you through tough situations. However, technical support isn’t tax support. If you need help from a tax professional, you have to upgrade to the overpriced $149.99 TurboTax Live option. This gives you on-demand support from a tax professional, and a tax pro will review your taxes before you file.

1040EZ filers get to use TurboTax Absolute Zero for free, but all other filers will pay a far higher price. If you’re just looking to itemize your taxes, TurboTax isn’t worth the price, but active traders, real estate investors and self-employed people may find that the price is worth it.

Unfortunately, TurboTax premium pricing means that some offerings are not worth the money. If you want audit support from TurboTax you have to purchase TurboTax Max. The price of audit support. TurboTax’s MAX costs $44.99 which is a lot higher than audit support from other companies.

 

Absolute Zero* Deluxe* Premier* Self-Employed* TurboTax Live*
Price $0 Federal
$0 State
$39.99 Federal
$36.99 State
$59.99 Federal
$36.99 State
$89.99 Federal
$36.99 State
$149.99 Federal
$36.99
Best For 1040EZ/ 1040A Itemizers Investors, real estate investors Self-employed People who want a review from a CPA

*Anyone can upgrade to TurboTax’s MAX for $44.99.

Superlatives: Best for simple filers, runner-up best for investors, best for real estate investors, runner-up best for self-employed

Tax software FAQs

The IRS sends 90% of refunds within three weeks of receiving the return. The sooner you file, the sooner you can expect your return.

You can check on the status of your refund starting 24 hours after e-filing using the “Where’s my refund?” page from the IRS. You can also check on your refund status using the IRS2Go app.

Tax-related identity theft is the no. 1 reported form of identity theft. However, most theft isn’t the direct result of using online software. Any time you apply for a credit card or use online banking, your information enters the digital world. If this information gets stolen, you’re at risk. Nobody can eliminate the possibility of identity theft, but you can work to protect yourself.

Part of protecting yourself involves only giving out your information on trusted websites. When you file your taxes, you provide all your personally identifiable information to a software service. You need to know whether or not that information is safe.

Every software company that we reviewed is an authorized IRS e-File provider. This means that these sites comply with the security and business standards set forth by the IRS.

None of the software packages we reviewed will sell your personal information to a third party. They require you to use multi-factor authentication. This makes it difficult for hackers to access your personal information. These websites are as secure as possible, but they are not 100% safe.

If you think you’ve been the victim of tax fraud, contact the IRS immediately at 1-800-908-4490 to work with their resolution specialists. You will need to file an identity theft affidavit that explains that someone filed taxes in your name.

If you don’t want to use tax software, you can choose a paper filing option. Each state requires you to mail your check to a different office.

You can also use the IRS’s free electronic fillable forms. However, these offer limited guidance and can be difficult to use. With so many other free options, these should be a last resort.

Finally, you can hire a professional tax preparer to do your taxes for you. Be sure that the person you hire is in the Directory of Federal Tax Return Preparers with Credentials and Select Qualifications.

An accountant can save you time, headache, and in some cases, money. Tax professionals must follow the tax code, but their specialized knowledge helps them pick up on deductions or credits that you might miss on your own.

In general, the more complex your tax return, the more you may want to hire an accountant. If you choose to hire an accountant, be sure that they are an authorized tax return preparer. They should sign your return as an authorized preparer.

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Hannah Rounds
Hannah Rounds |

Hannah Rounds is a writer at MagnifyMoney. You can email Hannah at hannah@magnifymoney.com

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