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September 28, 2007

Small Business Owners Beware of Housing Woes

Small business owners should pay attention to the rapid decline in recent months of 2007 for housing and mortgage lending. Dr. William B. Conerly, a leading economist, explains why everyone should pay attention to the housing market’s status in his book called “Businomics”:

“Housing is a very pronounced leading indicator of the economy…When the housing market weakens, it usually does so before the economy as a whole turns down. Similarly, housing is almost always the first sector to recover from recession.”

So if you’ve read in the news lately that the housing industry is suffering, start paying attention. Look at your business plan and see what you can do to avoid unnecessary spending, cut costs, and scale back plans for expanding in the months to come. Here are more reasons to be a prudent budgeter during late 2007 and early 2008.

According to the Small Business Administration (SBA), a small business owner has a negligible chance of succeeding in the first five years of conducting a new business because 50% of such businesses will fail during this time frame. In addition, the SBA cites two reasons that a business will fail as stated by Michael Ames in his book, insufficient capital and poor credit arrangements.

You need to have a strong plan that can weather an economic downturn. One way to get personal help is to visit your local small business development office for planning assistance. This center may be operated by the county or city government or a local university.

Be smart with your money. Try to secure and preserve capital reserves for a possible recession. You need to arrange credit that can help to bail you out if things get really rough.

In a section about forecasting, the SBA web site describes strategic thinking (which is necessary for planning how your business will survive a recession): “It is also a tool to help you confront change, plan for and make transitions, and envision new possibilities and opportunities.”

The ability to confront change will test your skill as a small business owner. Don’t become another statistic. Start following the economic indicators in the news. Plan for how you can keep your business afloat. It might also be a good time to hold off on expansion. This economic slump could last a few months more or it could drag on for over a year. No one will be looking out for your business but you. Make the most out of the economic doom that you read in the media. Make smart business decisions to stay in business in 2008.

September 26, 2007

How Does Credit Counseling Help Me?

According to the National Foundation for Consumer Credit (NFCC), “In FY 2006, 93.1 percent of NFCC clients within the HUD Intermediary who received housing counseling and for whom the NFCC has confirmed outcomes, avoided foreclosure.” This is a powerful statistic.

When you get desperately deep into debt and fear bankruptcy or foreclosure, you may be wondering where you can get free or low-cost help for your financial problems. Whatever your financial situation, the affordable option of credit counseling from a local professional can benefit you. This article offers explanations of two aspects of credit counseling -- a definition of the term and a brief discussion of some benefits of this type of counseling.

First, you need to understand what credit counseling is. According to the NFCC, when you meet with a Certified Consumer Credit Counselor, you will receive an objective review of your financial situation. The counselor can offer suggestions to solve your credit problems by helping you “develop a spending plan that covers your living expenses and payments to your creditors.” That is reassuring because, without talking to a credit counselor, you may not be able to devise a plan for paying back your monthly debts. Credit counseling is a confidential way to get professional help before you make the wrong decisions that will affect your credit poorly for the next seven to ten years.

What are some other benefits of credit counseling besides getting relief for your immediate situation?

A study conducted by the Georgetown University Credit Research Center (CRC) in 2002 found that:

“Most [credit] counseled borrowers improved their risk scores relative to other borrowers with similar initial risk scores in the three-year evaluation period following their counseling. And, the large majority of counseled borrowers had significantly fewer accounts, lower debt, and fewer delinquencies relative to other borrowers, behavior that is consistent with the advice provided in credit counseling.”

In other words, once you get your financial situation under control with the assistance of a professional credit counselor, you are more likely to maintain a healthier credit situation for several years after using the service.

These powerful examples of positive results should encourage you to try credit counseling. It may cost you a little bit of money, but obtaining counseling has the added benefit of helping to keep your creditors at bay. Once your credit counselors find out you are undergoing credit counseling, they might confirm this first and then back off while you develop a plan. Also, remember that credit counseling is necessary before you file bankruptcy. Contact a local agency and get help with your financial problems today. It is a smart way to avoid ruining your long-term credit.

September 24, 2007

Repair My Credit

Knowing how to stay out of bad financial situations might be the smartest thing that consumers can learn. However, simply knowing how to avoid problems doesn’t always mean that an individual will be able to stay out of trouble. The path of life sometimes involves unexpected expenses that create financial ruin and play havoc with an individual’s credit history.

If the worst does happen and your credit score takes a nosedive, the best thing you can do is attempt to repair your credit one step at a time. While this might take some time to correct, it is relatively easy to do as long as you remain consistent in your efforts. It’s essential to repair your credit so that you can obtain future loans and open new credit card accounts.

Probably the first thing that you should do is to contact any credit card companies or lenders that hold accounts on which you are delinquent. Discuss whether or not the company will work with you and develop a new payment plan that is affordable for your current situation.

Next, you should check your credit report for any inaccuracies so that you can have them removed. It’s important to understand that negative information that is correct will remain on your credit report. A credit report can be obtained free from one of the three main credit bureaus as well as numerous other smaller credit bureaus for a fee. The three major credit bureaus are Experian, Equifax, or Trans Union. If there are a number of problems on your report, consider hiring a credit repair agency. Although in the short run you will be spending more money, if they are good at what they do their experience with the law and credit bureau procedures should expedite eventually cleaning up your report and raising your credit score.

Now, it’s time to revamp your strategy for buying and paying for things. In fact, until you have your finances under control, the best thing that you can do is to stop spending money on anything other than necessities. Charge only what you absolutely need to survive and pay off each bill as soon as it arrives. Doing this will prevent the unfortunate occasional late payment and save the expense of late fees and additional interest charges.

If possible, you should use only one credit card for your expenses so that you only have one bill to worry about. Plus, the minimum payment on one credit card bill is typically lower than the total of several different minimum payments.

Continue to check your credit report at least several times a year to verify its accuracy. Continue to purchase necessities only in an effort to lower your expenses. Reduce the number of credit cards that you carry, especially if you carry an inordinately large number of cards.

Follow through with these strategies until you think that you have managed to bring your credit score up. Acquire a new credit report and compare its results with the previous one. Remember that you will need to continue to practice the above strategies in order to maintain any improvement to your score that you have been able to achieve.

September 21, 2007

Three Tips for Avoiding Foreclosure

This article addresses a common concern faced by people during an economic slump: fear of foreclosure. The U.S. Department of Housing and Urban Development (HUD) provides free advice for mortgage holders who are trying to avoid foreclosure. Three of HUD’s tips are developed here.

HUD offers these tips: becoming informed about your mortgage rights, seeking assistance through loss mitigation, and reorganizing your payment priorities.

Your Rights

If you consult the paperwork that you signed when you purchased your home loan, you can read about your legal rights under the terms of your mortgage. Look for a document related to disclosure, the information that the state requires the lender to give to all customers. You may also receive some important information in the mail from the lender which may include your mortgage rights. The next resource for understanding your rights is the local or state housing agency. Track down their contact information online or in the phone book.

Assistance from Loss Mitigation

The government offers important information about foreclosure prevention on the HUD web site. Read these suggestions as well as the suggestions provided to you by your lender. The more resources that you can learn about and take advantage of, the better chance you will have of staving off foreclosure. If you just wait for the end result of losing your home and do nothing, then that will happen.

Reorganize Your Budget

This step is very personal to you and your family budget. Only you and your spouse know your most essential expenses. You know where to trim the budget, how to reduce spending, and how to liquidate your reserves if you really want to keep making your mortgage payment. Reserves include: savings, retirement savings, and bonds. You may also find out that refinancing your mortgage for a lower monthly payment will get you out of this problem. It’s worth a trip down to your lender’s loan officer to find out if the bank has any refinancing options for you.

September 19, 2007

Why Choose the Open House Method?

If you consider that for the majority of us the most expensive asset we own is our house, then when we decide to put it on the market we obviously want to get the best price that we can. If you fall into both categories then it makes total sense when you decide to sell, to put a lot of effort into getting your home exposed to the maximum amount of potential buyers.

The operative word is “effort” because if you ask those people who work in sales and marketing they’ll quickly tell you products don’t just fly off the shelves. Background work includes promotions, fliers, radio ads, discounted coupons, brightly coloured bunting hung around the displays – lots and lots of “Come and look!” That’s the marketing side to pull the person in. Once he’s standing with the product in his hands, the product now will sell itself – if it’s good.

Your advertising campaign will need to be put into place. However your house has its own inherent promotional aspects. That’s what you’ll use in your open house.
The house has to be in the best possible shape you can afford to get it into. Clean, wash, re-paint, scrub, trim, neaten. Scrutinize and when you do, be critical. Look, look and look again for points that can be improved. That’s what your buyer’s eyes will be doing – every time they see a negative they’ll log it as a cross in their head. The open house method is requesting that people come in and see that the house is worth what you’re asking, so make sure it is.

This may be your first bash at selling your home and all this might make you feel a little at sea but remember this, as a consumer you’ve had lots of experience with marketing ways. As a buyer of goods you know what’s appealed to you and what you hated.

As a home owner you can benefit from the entire product peddling blurb you’ve been listening to for years. If you want to get the best price an important rule is:


Expose your house to as many buyers you can. Expose the house not just the advertising campaign. The more people that tour your home the more you improve your chances of obtaining a “sold” sign on your front lawn at a price you’re delighted with.

If you have never sold a home this way then throwing your home open and allowing strangers to waltz in to prod and poke may sound a little nerve wracking. If you feel this way then look at it from the purchaser’s point of view. You need to think like a buyer.

For example, if you want to buy a new car how much time do you spend on research? Once you’ve narrowed down your choice to a few on a short list what do you do next? Visit the dealer? Take the car for a test drive? Do you lift the bonnet and inspect the engine? Grill the salesman on fuel consumption, safety features and maintenance issues? Most buyers do. They are use to hearing the adverts, seeing all the, “Rar rar look how wonderful this is!” surrounding the product, then going in and investigating the merchandise - thoroughly! It’s a familiar scenario in their minds and probably yours too.

Women are especially good sleuths when it comes to purchasing expensive or important products. They like to inspect, compare, inspect again and then decide. Watch your wife or partner the next time she goes shopping for that important or unusual something. Women will almost always ask a tonne of questions about any new product and they’ll have a slight suspicious air about them until the salesman has allayed those concerns by answering all the points they raised. Now extrapolate that knowledge about them into buying a house. See? That’s why letting people touch, feel and experience is a workable method in selling.

Using an open house strategy invites the female component of the buying committee to inspect away. Her husband may want to check out the garage or the study but the rest of the house is usually the woman’s domain regardless of her type, taste or background. You as the seller want your buyer to get a feel of the place. You want them to move around the kitchen, see if the family logistics will fit. You want them to go out into the back yard and see where their children can run around or go upstairs and stand for a few minutes admiring how the light comes streaming through the windows. They can’t do this if you’re hovering downstairs, anxiously looking at your watch because you need to collect the groceries or bath the children or make dinner or…or…or.

Yes, your house could eventually sell without all the marketing and promotional hoopla but when you’re dealing with such an enormous asset, you’d certainly want to do the most you can to see the best return on this investment.

By using the open house method you are satisfying those requirements that buyers feel are important in a purchase of this size. The “Please come in and browse,” option. Usually they take you right up on your offer and that’s why a house on show versus one that’s not, can have the edge.

September 17, 2007

Your Parents and Their Estate Plans

Estate planning can be a difficult subject to discuss with your parents. You don’t want to seem concerned about how much money they may eventually leave you, while they may fear you are interfering with their finances. But to help ensure their estate is settled quickly according to their wishes, family members should have some basic information. You don’t need to know the specifics about who will receive what, but you should find out some basic information such as the following:

Where important estate planning documents are located. Don’t ask for specifics, just make sure documents are in place so their wishes will be carried out. Find out if they have a durable power of attorney and a health care proxy. With a durable power of attorney, they designate someone to control their financial affairs if they become incapacitated. If your parents are concerned that this person may assume control prematurely, suggest leaving the document with their attorney, who can deliver it to the appropriate person when necessary. A health care proxy delegates health care decisions to a third person when your parent is unable to make those decisions. Usually, this document also outlines procedures to be used to prolong life.

How to contact their advisors. Ask for a list of names, addresses, and phone numbers of lawyers, accountants, and financial advisors.

Their rationale for distributing their estate. Often, when heirs understand why an estate is being distributed in a particular manner, it can prevent problems among those heirs. If your parents are reluctant to discuss these things now, suggest they leave a personal letter with their estate planning documents explaining their rationale for distributions. This is a good place to explain unequal bequests or large charitable contributions.

Preferences for the future. Find out where your parents would like to live if they’re not physically able to live in their current home. Do they want to move in with relatives or live in an assisted-living facility? Discuss in detail what procedures they want performed to prolong life in the event of a terminal illness. Determine their preferences for funeral arrangements.

While these topics are sometimes not easy to discuss, they are important to know to ensure that your parents’ estate is properly handled.

September 14, 2007

Selling Your Home at a Loss

With the real estate market slowing, more taxpayers may find themselves in a situation where the sale of their home results in a tax loss or their net sale’s price is less than the amount of their outstanding mortgage.

When selling a home, the basic tax rule is you can exclude gains of up to $250,000 if you are a single taxpayer and up to $500,000 if you are married filing jointly, provided the home was your primary residence in at least two of the preceding five years. But what happens if you have a loss on the sale? Since your primary home is not considered investment property, you cannot deduct a loss on your income tax return.

Although not a short-term solution, one way around this is to convert your home to rental property. Then, when the property is sold, the loss can be deducted as a capital loss, as long as you can prove the home was permanently converted to income-producing property. Your basis for calculating the loss is the lesser of your actual cost or the property’s fair market value when it was converted to rental property.

When calculating your gain or loss on the sale of your home, don’t confuse your mortgage balance with the basis in your home. Your basis is the amount you paid for the home plus any improvements. It is possible for your mortgage and equity loans to exceed the sales price. If you sell the home for less than your mortgage amount, then you will owe more than you received but it is still possible to have a gain for tax purposes.

Due to the home sale gain exclusion, you can exclude up to $250,000 if you are a single taxpayer and $500,000 if you are married filing jointly, provided the home was your primary residence in at least two of the preceding five years. If you move out of the house and it takes longer than three years to sell your home, your gain could be taxable.

September 12, 2007

Undoing a Roth Conversion

When converting a traditional individual retirement account (IRA) to a Roth IRA, transferred amounts must be included in income if taxable when withdrawn (e.g., contributions and earnings in traditional IRAs and earnings in nondeductible IRAs), but are exempt from the 10% federal income tax penalty. Your adjusted gross income (AGI) cannot exceed $100,000 in the conversion year, excluding any converted amounts.

To use this strategy effectively, you need to decide when to convert. Taxes are paid based on your investments’ values on the conversion date. If those values decline after you convert, you end up paying taxes on more than the current market value.

If you’re in that situation, consider recharacterizing your conversion. For conversions made in 2007, you can recharacterize until October 15, 2008, meaning you can convert back to your original traditional IRA. Just make sure not to take possession of the funds. The transfer from the Roth IRA to the traditional IRA should be a trustee-to-trustee transfer. After the recharacterization, it is as if you did not convert, so you owe no taxes. If you already filed your 2007 tax return and paid the taxes, you can file an amended return to get a refund. You can then reconvert at a later date, provided your AGI does not exceed $100,000 in the conversion year. (Keep in mind that starting in 2010 there is no income limitation for Roth IRA conversions.) The reconversion can be completed at the later of 30 days after the recharacterization or the beginning of the tax year following the first conversion.

You can recharacterize just a portion of the conversion. However, if you have several investments in the IRA, you can’t simply choose the ones with the largest losses. In that situation, a pro-rata portion of all the investments in the account will be considered in the recharacterization. You can bypass this rule by setting up separate Roth IRAs for each investment. Then, if one declines substantially, you can recharacterize that one Roth IRA account, leaving the other accounts intact.

There are other situations where you might want to recharacterize. You might have converted to a Roth IRA, thinking your income for the year would be less than $100,000. If you later find out that your income is over that threshold, you can recharacterize the conversion. Otherwise, in addition to the income taxes due, you would also have to pay a 10% federal income tax penalty and a 6% excise tax.

You can also recharacterize annual IRA contributions. Perhaps you contributed to a traditional IRA, but find your income is over the thresholds. You could recharacterize to a Roth or nondeductible IRA contribution.

September 10, 2007

Figuring Out Your Real Marginal Tax Rate

If you answer that question by looking at the tax rate tables that show income tax rates of 10%, 15%, 25%, 28%, 33%, and 35%, you could be understating your real marginal tax rate. Your marginal tax rate could be higher due to numerous provisions that phase out or limit certain deductions, credits, and other tax benefits. Some of the more significant provisions include:

Limitation on itemized deductions — Once adjusted gross income (AGI) exceeds $78,200 in 2007 for married couples filing separately and $156,400 for all other taxpayers, itemized deductions, with the exception of medical expenses, investment interest, and casualty losses, must be reduced by 3% of the excess over this AGI amount. The maximum reduction is 80% of itemized deductions. In addition, medical expenses can only be deducted to the extent they exceed 7.5% of AGI, while miscellaneous expenses must exceed 2% of AGI and casualty losses must exceed 10% of AGI.

Phase out of personal exemptions — The personal exemption amount of $3,400 in 2007 is reduced by two-thirds of 2% of each $2,500 of AGI over threshold amounts. Those amounts for 2007 are $234,600 for married taxpayers filing jointly, $195,500 for heads of household, $156,400 for single taxpayers, and $117,300 for married taxpayers filing separately.

Exclusion of Social Security benefits from income tax — Up to 50% of benefits are taxed when AGI plus tax-free interest plus one-half of Social Security benefits is over $25,000 but less than $34,000 for single taxpayers and is over $32,000 but less than $44,000 for married couples filing jointly. Up to 85% of benefits is taxed once income exceeds $34,000 for single taxpayers and $44,000 for married couples filing jointly.

Other phase outs — Numerous credits, deductions, and other benefits are phased out once income exceeds prescribed limits, including the earned income credit, the child credit, the dependent care credit, traditional and Roth individual retirement account (IRA) contributions, Coverdell education savings account contributions, Hope scholarship and lifetime learning credits, the above-the-line higher education expense deduction, student loan interest deductions, rental real estate losses under passive loss rules, the adoption credit, and the elderly and disabled credit.

While these items are not called income taxes, the result is the same — an increase in your total income tax bill.

September 7, 2007

Tax Planning for Major Life Events

Most of life’s major financial decisions have tax ramifications. Major life events such as marriage or divorce, the birth or adoption of a child, the purchase or sale of a home, and retirement all have tax ramifications. Keep the following tax-planning tips in mind as you encounter those events:

Marriage or divorce — Either event should prompt a thorough review of your tax situation. In both cases, your tax filing status will change, which may have an impact on your tax-planning situation. Your filing status is determined as of December 31, so if you are planning to get married or divorced around year-end, review the tax ramifications first. Consider these specifics:

Check income tax withholdings. You may need to adjust your allowances for income tax withholding purposes or review any estimated taxes that are being paid.

Review fringe benefits. In the case of marriage, you will want to coordinate your fringe benefits with your spouse’s benefits. In a divorce, you may have to find another source for fringe benefits you obtained from your spouse’s employer.

Understand the tax ramifications of any divorce agreements. Determine who will claim minor children as dependents on tax returns. Determine whether any payments are classified as child support or alimony, which have significantly different tax ramifications. Review how the division of property will affect your gain or loss when you sell the asset.

Birth of a child — Each exemption on your tax return reduces your taxable income by $3,400 in 2007, although high-income taxpayers may find these exemptions reduced. Other tax items to review include:

Plan for other tax benefits. A $1,000 child tax credit is available every year until your child is age 17, but the credit is phased out at higher income levels. You may also be eligible for a child care credit if you pay for child care so you can work. Check at your place of employment to find out if child care reimbursement accounts are available, which allow you to pay childcare expenses from pretax earnings.

Start saving for college. It’s never too early to start saving for college. There are a variety of tax-advantaged ways to save for college, including section 529 plans and Coverdell education savings accounts. Once your child starts college, be aware of other ways to reduce the cost of college, including the Hope and lifetime learning credits, the above-the-line education deduction, and interest deductions for qualified higher education loans.

Consider annual gifts to your child. In 2007, you can gift $12,000 ($24,000 if the gift is split with your spouse) to each child on a tax-free basis. This amount can increase annually for inflation in $1,000 increments. This reduces your taxable estate and you avoid paying taxes on any earnings on those assets. Be aware, however, of the “kiddie tax,” which refers to the way children’s investment income is taxed. In the past, it applied to children under age 14, but now applies to children under age 18. In 2007, the first $850 of investment income is tax free, the second $850 is taxed at the child’s marginal tax rate (typically 10%), and any remaining investment income is taxed at the parents’ marginal tax rate. Once the child is age 18 or older (previously age 14 or older), all investment income is taxed at his/her marginal tax rate. Thus, until your child turns age 18, you might want to select investments with lower tax burdens, such as municipal bonds.

Think about individual retirement accounts (IRAs). Once your child starts earning income, consider setting up an IRA for him/her. If the child does not want to use his/her money for the IRA, you can gift the money to the child.

Purchasing or selling a home — The tax benefits of owning a home are significant. Consider these tax aspects of home ownership:

Mortgage interest and property taxes can be deducted on your tax return, reducing the cost of owning a home. Mortgage interest is deductible on up to $1,000,000 of original debt incurred to purchase a principal residence. Additionally, interest paid on up to $100,000 of home-equity debt is deductible on your tax return. You may want to replace loans that generate personal interest, which is not tax deductible, with home-equity loan debt.

When you sell your home, significant capital gains can be excluded from income. You can exclude $250,000 of gain if you are a single taxpayer and $500,000 of gain if you are married filing jointly, provided the home was your primary residence in at least two of the preceding five years. You no longer have to purchase another home to qualify for the exclusion. If you are forced to sell in less than two years due to employment changes, health reasons, or unforeseen circumstances, you can prorate the exclusion amount based on how long you lived in the home.

Planning for retirement — With all the other demands on your income, it’s easy to forget about planning for retirement. However, you should take advantage of tax-advantaged ways to save for your retirement.

Participate in your 401(k) plan. Start contributing to a 401(k) plan as soon as you are eligible. In 2007, you can contribute a maximum of $15,500, plus individuals age 50 and older can make an additional catch-up contribution of $5,000, if permitted by their plan. These contributions reduce your current-year taxable income, although you still have to pay Social Security and Medicare taxes on the contributions. If your employer matches contributions, make sure to contribute at least enough to maximize the match.

Review IRAs. Even if you are contributing to a 401(k) plan, take a look at IRAs as well. In 2007, you can contribute a maximum of $4,000 to an IRA, plus individuals age 50 and older can make an additional catch-up contribution of $1,000. Traditional deductible IRAs will reduce your current year taxable income. Roth IRAs do not reduce current year taxable income, but qualified distributions can be taken income-tax free. For those who are not eligible for traditional or Roth IRAs, consider contributing to a nondeductible IRA. Starting in 2010, all taxpayers, regardless of income level, can convert traditional IRAs to Roth IRAs.

Check your options before retiring. The choices you make regarding distributions from your pension plans and IRAs will have a significant impact on your tax situation after retirement. Make sure you review all your options before deciding how to withdraw those funds.

September 5, 2007

Re-establishing Your Credit: Pros and Cons of High Interest Credit Cards

If you’ve had a few late payments, charge-offs or similar problems and now your credit is in shambles, don’t despair; there is a way to repair it. Before you choose the course of action that is best for you, there are many things that you need to be aware of during your quest to improve your credit rating. Although your intentions may be good, your efforts may actually be counterproductive when applying for credit cards created specifically for individuals with bad credit. On the other hand, there are some good aspects of credit cards for those with bad credit, so it’s very important that you take several things into consideration before committing to a specific bank for a credit card.

Individuals with bad credit are often desperate to be approved for a credit card, and banks that make special provisions for those with less than perfect credit to be approved for credit cards are aware of consumers’ eagerness. This is why many of them charge a great deal of unnecessary fees—because they know that these individuals will pay them just to be able to have a credit card. Many credit card companies charge consumers outrageous “set-up” fees, participation fees, extremely high interest rates, and also, fees as high as $50 or more, just to receive a credit limit increase. In order for your credit score to rise rapidly with the help of a credit card, the credit card company needs to report to all 3 major credit bureaus. Most banks only report to one credit bureau of their choice. So, if you’re in the market for a new credit card to help improve your overall credit score, it’s a good idea to call the bank before even applying, to ensure that they report to all three agencies: Equifax, Experian, and Transunion. The high fees coupled with the fact that many only report to a single credit reporting agency may cause you to change your mind about accepting a certain credit card offer.

One alternative to the astronomically high fees associated with credit cards for those with derogatory credit is to simply pay off some of the debt that you already have. You won’t believe how quickly your score will shoot up by doing this. Even though the item will still appear on your credit report, the appearance of “paid” and “charge-off” or “90 days past due” make a huge difference. Merely paying off one or two accounts could increase your score enough to be able to be approved for a mortgage or a car. If you can’t pay off all the past due accounts at once, many creditors would be happy to accept reasonable arrangements. They want to be paid, so if they see that you are willing to comply, then most will be pretty flexible with pay-off terms. Some will even accept settlements, and you may get away with paying as little as half of what you actually owe, yet it will be considered paid-in-full.

No matter which methods you choose in order to improve your credit rating, it can be done. You will be better off in the long run by thoroughly researching whichever route you choose to go before committing to anything that you can’t easily get out of later. Good credit it right around the corner, and you just have to work hard at getting it that way. In the end, when you are able to easily qualify to purchase your dream home or car, you will realize that all your hard work and persistence was worth it.

September 3, 2007

Moving Tax Deduction: How Do I Qualify?

Tax laws and regulations are as easy to decipher and understand as a foreign language. When trying to evaluate whether your moving expenses are deductible on your income tax return there are a few tests you will need to pass.


Not all relocations will be eligible for moving expense tax deductions. In order to be eligible for moving expense tax deductions you will need to be relocating for a new job. Unfortunately moving for any other reason aside from job relocation renders you ineligible for moving expense tax deductions.


The timing test is the most simple of the tax laws. Moving expenses will be eligible for tax deduction if they are incurred within one year of reporting to work in your new location. The only aside for this rule will be allowed if just cause is shown for the delay in moving expense.


The distance test is far more complicated that any of the other tax laws. If the distance from your new home to your new job location is shorter than the distance from your old home to your new job location


Your new job is at least 50 miles farther from your old home than your old job (if the distance between your old home and your old job is 8 miles then the distance between your new job and your old home must be at least 58 miles).


If you can not meet this first distance test but you can prove that you are required to move to a new home to accept the new job or your cost of commuting is lessened by moving to the new home location. If you are claiming this reason for the tax deduction be prepared to substantiate the claim in writing.

Congratulations, you have passed the tax law moving deduction time and distance tests and you can take deductions of your moving expenses from your tax return upon the completion of one final test.


The final test simply states that you must work at least 39 weeks within the first year of accepting your new job at the new location or 78 weeks within the first two years in order to qualify for deductions.

After reviewing and passing these three tests you will finally be certain of your eligibility for deducting your moving expenses from your tax return. These tests apply to anyone moving into or within the United States. Tax deductions for persons moving outside of the United States must meet a different set of criteria.


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