Most of us dread tax season, and feel “taxed” enough in the current economic climate. So, it is good to hear that there are a few areas where you might be able to reduce your tax consequences, either now or in the future. Check with your tax advisor to see if any of the below might apply to your situation:

1. Extended Home Buyer Tax Credit –

A. First Time Home Buyer Credit – Many are aware of the up to $8,000 tax credit available to first time home buyers. There are limitations, though, such as the home must be purchased after November 6, 2009 and before April 30, 2010, and the buyer must live in the home for 3 consecutive years after the purchase. The credit amount is based upon the price of the home and the buyer’s income, and is a terrific savings, if one qualifies.

B. Existing Home Buyer Tax Credit – What has been less discussed is the new Existing Home Buyer Tax Credit, which grants homeowners up to a $6,500 credit. Like the First Time Home Buyer Credit, there are limitations. Homeowners must have lived in the existing primary home for 5 consecutive years out of the last 8 years, and purchased another primary residence after November 6, 2009 and before April 30, 2010. Again, the buyer must live in the home for 3 consecutive years, and the credit amount is based upon the price of the home and the buyer’s income. While not as large a credit as the above, it is still substantial.

2. Home Loan Points - Generally speaking, one can deduct points paid for a new mortgage or home equity loan. There are some exceptions for refinancing, where amortization may apply instead. However, it merits review as a possible deduction.

3 .Student Loan Interest Deduction – While some time ago Congress eliminated interest on personal expenses as a deduction, the student loan deduction remains. There are limitations, such as income, and all of the interest may not be deductible. Still, it is worth considering.

4. Converting your IRA to a Roth IRA – As of 2010, there are no income limitations on converting traditional IRA’s into Roth IRA’s. Unlike traditional IRA’s, which grow tax deferred, Roth IRA’s grow tax free. While a Roth is subject to certain restrictions, it could provide tax-free retirement income. Converted amounts are subject to ordinary income tax, since they were invested on a pre-tax basis. For 2010 conversions, the taxpayer can spread the tax consequences over 2010, 2011 and 2012. While this option is not advisable for everyone, it should be investigated.

5. 401K’s and Company Matches – If your employer’s 401K plan offers a company match, then at a minimum contribute to the company’s match. Failure to do so will result in the loss of “free” money. All 401K contributions are made on a pre-tax basis, with the result that gross taxable income is reduced. Due to the reduction of gross taxable income, the subsequent tax owed is also reduced, and thus provides additional savings.

Just as everyone’s personal financial situation is unique, so too is proper tax planning. To insure that you are taking appropriate tax planning steps, please consult with your tax advisor.

Brenda Brinz VanDeWeghe, J.D.

President

BBV Consulting LLC, Hamden, CT

BrendaTalkingMoney@sbcglobal.net

1.Interest Rate Increases - Credit card companies are still allowed to raise interest rates. However, the issuers must provide you, the cardholder, with written notice 45 days before the intended hike. In addition, rate increases on existing balances may come into play if the card holder is late on a payment, a promotional rate period expires, or if the card is issued with a variable rate. Interest rate hikes on new transactions can come into play once the account is over a year old.

The cardholder does retain the ability to opt out of the rate increase, but that means the account would close. Keep in mind that closing your account could impact your credit score. If you still wish to close your account, it might be prudent to obtain a new credit card first to insure you have a replacement.

2. Payments – Previously, consumers were charged fees based on ever changing due dates and times. The new rules attempt to limit fees by preventing card issuers from imposing arbitrary payment schedules. That means that the payment due date must fall on the same date every month. Payment delivery is accepted until 5 PM on the due date, and if the due date falls on a holiday, weekend, or day when the issuer’s business is closed, no late fees can be imposed. Additionally, one must be provided with at least 21 days to pay the bill after it is delivered.

3.Minimum Payments – Many consumers have misunderstood the impact of simply making minimum payments. The new law requires that issuers disclose how long it would take consumers to pay off their balances, under a minimum payment scenario.

If a cardholder wishes to pay off his/her balance in 36 months, the issuer must provide the holder with the required monthly amount, as well as how much of the payment would go towards principle and how much towards interest.

4. Payment towards higher interest rate balances first – Under the new requirements, all payments are applied toward the highest interest rate balances first. This is designed to shorten the time to pay off entire balances.

5.Credit Cards for individuals under 21 – The new law prevents issuing cards to applicants that are under the age of 21, unless co-signed by an adult, or the applicant provides proof of income. It also requires that credit card companies remain at least 1,000 feet from college campuses.

6. Over- limit Fees – In the past, if a consumer’s transaction put them over their credit limit, the card issuer could simply raise the limit, and impose an over- limit fee. Under the new rules, the consumer must opt in to the over-limit fee.

7. Double Billing Cycle – Under the new law, finance charges on outstanding balances can only be computed based on the consumer’s current billing cycle. This rule is aimed at helping consumers that have recently paid off their balances. They will no longer contend with charges that were based on past balances/cycles accruing to their current billing cycle.

A few final points are worth mentioning. The new law applies to consumer credit cards only, not business credit cards. While the law limits the circumstances of how/when interest rates can be raised, it does not impose caps on interest rates. Also, credit card issuers are coming up with new fees that fall outside the parameters of these restrictions.

Lastly, what you think might be “junk” mail, could in-fact be a notice from your card issuer. So don’t just throw it away. Please remember, be careful and be aware…

Brenda Brinz VanDeWeghe, J.D.

President

BBV Consulting LLC, Hamden, CT

BrendaTalkingMoney@sbcglobal.net

1.  Will

A valid will assures that upon death the decedent’s property is distributed according to his/her wishes.  If one were to die without a will (intestate), the state determines the distribution through its intestacy statute.  Under Connecticut’s statute, your spouse would take the 1st $100K, plus half of the remainder of your estate.  Your children, regardless of their age, would receive the other half.  Most parents with minor children would not want those young children to receive funds outright.  Having a will could prevent this outcome.  In addition, a will provides you the ability to name a guardian for your children.  Without a will, the court would determine that appointment.

2.Life Insurance

While life insurance can be used for many reasons, its most common use is to provide the family with a lump sum payment at the insured’s death.  While many parents struggle to save for college education, a surprising number fail to carry life insurance.  Purchasing a policy when young keeps the premiums at their most affordable.  Owning life insurance can offer your family the security that they will be provided for when you are no longer living.  With proper planning, a life insurance policy may be able to pay for your children’s education, maintain the family’s home, and ensure the family’s stability during an unstable time.

3.Memorandum

Frequently, surviving family members can squabble over who should receive mom’s engagement ring or other treasured items.  While the will is the appropriate vehicle to bequeath personal property, it is not the best method for passing on specific items.  A far better approach is to use a Memorandum.  While not legally binding, the Memorandum allows the Testator (the person who makes the will), to specifically state his or her wishes, and reduces tension during an already tense period.

4.Trust

A trust can be used for many reasons, but one of its most common uses in estate planning today is for a child with special needs.  Unlike a will, which distributes assets upon death, the trust may continue to manage assets long after the parent has passed away.  A Special Needs Trust can be a sound solution for a parent worried about a disabled child.

5.Durable Power of Attorney

A durable power of attorney allows one to appoint an agent to act on his/her financial behalf, in the case of incapacity.  While a durable power of attorney does not expire, many financial institutions will not accept one that is older than a year.  Therefore, it’s best to “update” the document periodically.

6.Health Care Proxy & Living Will

One can appoint an agent to make health care decisions, in the case of one’s incapacity, through a health care proxy.  A living will allows one to give instructions as to what medical measures should be taken, in the case of one’s incapacity.  These two items can be incorporated into the same document.

So, enjoy the present, but please consider your loved ones’ futures and take the proper estate planning steps to protect them.*

*As always, please consult your attorney/advisor.

Brenda Brinz VanDeWeghe, J.D.
President, BBV Consulting, LLC, Hamden, CT
BrendaTalkingMoney@sbcglobal.net

Clearly, responsibly managing one’s money in this tough environment is essential. Below are some simple resolutions we can make to reduce our money challenges:

1. BUILD CREDIT SCORE

The biggest factor in one’s credit score is prompt bill payment. Therefore, paying one’s bills on time is essential. Also, paying off outstanding debt helps raise your score, as well.

2. MANAGE SPENDING

Manage spending by finding less expensive alternatives to even basic items, such as groceries, insurance, entertainment and gifts. One might be surprised at the level of savings, by simply comparing a few prices. And, searching for bargains can be both rewarding and fun.

3. BUDGET

Make a budget plan and stick to it. While making your plan, budget for unexpected expenses, too. We all know that we have them, so set aside some extra money for things like that unfortunate flat tire. Create a gift budget, too. It’s easy to be sidetracked by gift expenses. We don’t want to appear cheap, and so we spend more than we can. Remember, real friends are happy to have you in their lives and are not measuring you by the dollar expenditure of your present.

4. BOOST SAVINGS

If your employer offers a match to its 401K plan, make sure that you contribute at least to the company’s match. Otherwise, you are throwing away free money! Also, try to contribute the maximum to your retirement plan. Lastly, simply saving your change at the end of the day could add many dollars to your monthly budget. Those nickels could help your grocery bills.

5. REVIEW YOUR INVESTMENTS

Just as corporations come out with quarterly earnings reports, take stock of your household’s financial health once a quarter, too. That way, you insure that you are staying on track towards your financial goals.

6. CONSIDER TAX CONSEQUENCES OF ANY MONEY DECISION

Remember there are tax consequences to financial decisions such as short sales or withdrawals from retirement accounts. Be sure to check with your tax advisor.

By making a few Resolutions, you can be on the road to Financial Health in the New Year!