I no longer just say information is power. It’s only powerful if it’s the right and most up-to-date information. As we start the new year, I thought I would round up some personal finance information to keep your eye on. I also want to point out personal finance highlights from 2012.
■ Credit reports. This month, the Federal Trade Commission is expected to release a study on the accuracy of credit reports. Errors can cause consumers to be denied credit or other benefits. The credit reporting industry has maintained that only a small percentage of reports contain errors serious enough to cause harm. This report will provide an independent look.
■ Social Security. Look for a number of changes. For some, the news is good. For others, not so much.
There’s good news for nearly 62 million Americans receiving monthly Social Security and Supplemental Security Income benefits. They will see an increase of 1.7 percent this year, the Social Security Administration says. It’s a modest increase compared to the 3.6 percent cost-of-living increase received last year. There was no cost-of-living adjustment the previous two years.
High earners won’t be rejoicing. The maximum amount of earnings subject to the Social Security tax will increase to $113,700, from $110,100. Of the estimated 163 million workers who will pay Social Security taxes in 2013, nearly 10 million will pay higher taxes as a result of the increase in the taxable maximum.
One final thing: By March, everyone getting Social Security benefit payments by paper check will need to sign up for electronic payments. If you don’t choose an electronic payment option before the deadline, you’ll receive your money on a debit card.
■ Medical and dental expenses. You can deduct expenses for unreimbursed medical and dental care for yourself, spouse, and dependents. But you can only deduct expenses for the year that exceed a certain percentage of your adjusted gross income. For tax year 2012, it was 7.5 percent. For tax years beginning after 2012, the percentage benchmark jumps to 10 percent.
■ Mortgage Debt Relief Act. If you borrow money and the lender then cancels or forgives the debt, you generally have to include the canceled amount as income for tax purposes. During the housing crisis, Congress passed a law designed to provide tax relief to folks who had lost their homes. The act allowed people to exclude from income the discharge of debt on their principal place of residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualified for the relief. But the law only allowed debt forgiven in calendar years 2007 through 2012 to be excluded. Unless Congress acts, the tax break will no longer be allowed.
■ Transparency. People in workplace retirement plans are going to receive better information about the fees they pay under rules implemented by the Labor Department. If you have a 401(k) or similar plan, you should have begun receiving detailed information. Don’t ignore it. Fees typically run 0.5 to 2 percent a year. To assess your company’s plan, go to brightscope.com.
Personal finance can be complicated. So resolve in 2013 to stay informed.