The Money 2007 Planner
Get all you have coming to you next year with this clip-and-save guide to the new laws, key deadlines and smartest moves
(MONEY Magazine) – Q1 This winter, take steps to protect your identity.
Freeze your credit. It's your best defense against ID theft. On Jan. 1, new laws take effect in Hawaii, Illinois, Kansas, New Hampshire, Oklahoma, Rhode Island and Wisconsin, bringing the number of states that allow a freeze to 24 (some for ID theft victims only). In March, order the first of the three free credit reports you can get each year. Call 877-322-8228 or go to annualcreditreport.com.
Save gas, earn cash. Buy a hybrid gas-electric car in early 2007 so you can be sure to snag a $250 to $2,600 tax credit. The break phases out for each car maker once it has sold 60,000 eligible vehicles. Credit for Toyotas will be cut in half after March 31.
Splurge at the drugstore. You may have until March 15 to use up 2006 flexible spending account bucks (check your firm's policy with HR). Buy new eyeglasses, book an appointment with a chiropractor or load up on aspirin.
Book a free trip. It's harder than ever to spend frequent-flier miles. The best time to snag an awards seat is six months before you fly. So if you know where you're going next summer, act now. Domestic economy fares are expected to rise 3% to 5% in 2007.
Pack your passport. Starting Jan. 8, you will need a passport to fly anywhere outside the U.S., including Mexico, Canada and the Bahamas. For land and sea travel, these tighter restrictions don't take effect until at least 2008, but some cruise lines are already recommending a passport. Go to travel.state.gov/passport for details on how to renew or apply. Don't wait until the last minute: You'll pay a $60 rush fee (plus delivery) on top of the $97 application fee to get a passport within two weeks.
• Jan. 1 kicks off the fall college financial aid season. It's the first day you can submit the Free Application for Federal Student Aid at fafsa.ed.gov.
• In 2007 the maximum 401(k) contribution rises to $15,500, or $20,500 if you're 50 or older. Use every penny.
• Your boss must send you W-2 tax information by Jan. 31. If you don't have the form within a few days of that deadline, verify your address with your company. Still nothing? Call the IRS at 800-829-1040.
Q2 Once you pay your taxes, spring-clean your finances.
Do Your Duty! If you can't make the Monday, April 16 tax-filing deadline (April 17 if you live in Maine, Maryland, Massachusetts, New Hampshire, New York, Vermont or D.C.), submit Form 4868 to qualify for an automatic six-month extension (get the form at irs.gov). New this year: a rebate for a federal long-distance tax that's been discontinued. The standard rebate will be $30 to $60, but if you have old phone bills that prove you paid more than that over the past few years, you can get more back.
Fund your future. You have until April 16 to contribute to a traditional or Roth IRA for 2006. The max you can save for 2006 and 2007 is $4,000, $5,000 if you're 50 or older. Those caps will rise by another $1,000 in 2008.
Once a year
Empty your desk drawers. Prune your papers by ditching 2006's pay stubs, undisputed medical insurance claims, monthly credit-card and brokerage statements, and credit-card and ATM receipts. Hang on to year-end investment records indefinitely and tax records for at least seven years.
Last call for camp. Book your kids' summer camp before May, when many popular choices will be full. This year, educational venues like soccer camp qualify for a tax credit worth up to $2,100, good for children under the age of 13 (before, fewer types of camps qualified).
Weather the storm. Rates for homeowners insurance are expected to climb 4% nationally in 2007, far more in coastal areas. You may get a discount if you install storm shutters and take other steps to hurricane-proof your home. Plus, update your home inventory by videotaping your belongings.
Do It Now
• Get a big tax refund? Adjust your W-4 withholding by adding another allowance.
• Free up time in '07. Sign up for online bill pay at your bank.
• Lower your risk of ID theft by stopping credit-card solicitations. Call 888-567-8688. (Note: You have to supply your Social Security number. But that's okay.)
• Cut down on unwanted catalogues (and save a few trees). Pay $1 to have your name removed from mailing lists at dmaconsumers.org.
Q3 As the summer winds down, get a jump on energy savings.
Save your energy. Unless Congress acts, this is the last year certain energy-friendly home upgrades, such as installing new windows and insulation, will entitle you to a federal tax credit worth up to $500 (find details at ase.org). Even if you can't claim the credit, plugging drafts, adding insulation and switching to compact fluorescent bulbs can save you hundreds on utility bills this winter.
Tally your medical bills. If you've already spent most of your health insurance deductible, try to advance some of next year's doctor visits and procedures into the second half of 2007 so that your insurer will foot the entire bill.
Hit the seas. For the best berth and price, you generally have to book cruises nine to 12 months in advance. But you can find a cheap spot on a repositioning cruise on much shorter notice. These trips often go from Europe to the Caribbean between late September and mid-December, as cruise companies move their ships to warmer spots for the winter. Repositioning cruises offer discounts of 75% or more on high-season prices, and with fewer families crowding the ships, you might nab an upgrade too.
Fund a 529. Money in these college savings plans grows tax-free, and you won't pay taxes on the withdrawals now that Congress has made that perk permanent. Also new: Indiana and Maine join the 29 other states that offer locals a tax break.
Insure your life for less. Rates on term life insurance are expected to drop 4% in 2007. If you have a policy and you're in good health, you may be able to save by shopping around. Compare prices at insure.com and quickquote.com.
• Order your second credit report of 2007 in July. Go to annual creditreport.com.
• Have your furnace inspected; once cold weather hits, repair pros will be busier.
• Buy a bike. Most manufacturers ship next year's models in September. To clear out '07 inventory, stores may knock 15% to 25% off the price.
• Look for computer deals. With the early 2007 wide release of Microsoft's Vista and faster chips from Intel, older models should be discounted.
Q4 When fall fades away, be rewarded for being an angel.
Look in on your investments. Once a year you should make sure your stock and bond allocations match your plan. If not, sell winners and buy losers to restore your optimal mix. You can rebalance any time of year, but fall is an especially good time if you invest outside tax-sheltered retirement accounts. That's because you can sell dud investments before year-end and cut your 2007 tax bill. If your losses outstrip your gains, you can deduct up to $3,000 worth of losses against ordinary income.
Hit your boss up for cash. Pay raises are expected to average 3.7% in '07 (about the same as last year). Raise your chances for more dough by asking in the fall, when the head honchos are tinkering with the 2008 budget.
NEW in '07
Spread holiday cheer. Donate to your favorite charity by Dec. 31. Starting in 2007, you'll need a receipt for all cash gifts, no matter how small. That could be a letter from the charity, a canceled check or a credit-card statement. Plus you'll need an appraisal for any donated item worth more than $500.
Read all e-mails from HR. Typically, November is open-enrollment season, and once again you may see new choices like a health savings account, which lets you put away pretax money for medical costs. To fund an HSA, you must pick a high-deductible insurance plan (at least $2,200 for families).
Grab tax breaks at work. Depending on your company's policies, you may be able to stash several thousand dollars pretax in a flexible spending account that you can tap to pay for medical expenses; you can put aside another $3,000 for day-care costs; $105 a month for mass transit and $205 for parking.
Beat the Clock
• If you filed for an extension on your taxes in April, your new deadline is Oct. 15.
• If you are 65 or older, re-enroll for the Medicare drug plan for '08 between Nov. 15 and Dec. 31.
• You can give up to $12,000 tax-free to any number of people by Dec. 31. A couple can together give $24,000.
• Order your last free credit report of 2007 in December.
• Shop online for gifts before Dec. 14 to get free shipping from major e-tailers.