Dear Tax Talk,
I’ve read a number of publications that explain how depreciation works for rental property; however, all the examples I have seen so far are covering situations when modified adjusted gross income (MAGI) is up to $150,000.
Here’s the scenario I am trying to figure out: The rental property was purchased for $800,000 (closing costs included). Depreciating over 27.5 years would be about $29,000 (more…)
Archive for April, 2009
Don’t pay dismissed debt
Wednesday, April 22nd, 2009 Dear Bankruptcy Adviser,
Can a debt that was discharged in bankruptcy over 20 years ago be collected on? I noticed on my credit report recently that a company whose debt was discharged in 1982 has made a report on that same account and indicated it was delinquent. Is this legal? How can a discharged debt be resurrected?
— Dora
Dear Dora,
(more…)
Poor 529 planning opens door to taxes
Wednesday, April 22nd, 2009 Dear College Money Guru,
I paid my son’s tuition for his spring 2008 semester of college from my checking account in December 2007. I didn’t submit the 529 distribution request until April 2008. Then I read the 529 plan’s fine print. Have I created an unqualified withdrawal by not making the withdrawal in the same calendar year as I paid the tuition (even though it was only (more…)
‘Awesome’ husband awful with money
Wednesday, April 22nd, 2009 Dear Debt Adviser,
My husband constantly spends small amounts of money. This month, his spending added up to $345. That amount is on top of our regular monthly spending deficit of $400 a month.
He seems to think he has the right to spend money because he is “stressed” or it’s “not a big deal” because he spends just the little amounts. (more…)
Foreclosure not only drag on appraisals
Monday, April 20th, 2009 Dear Steve,
I want to get my home appraised but there have been only foreclosures and short sales lately in my neighborhood. I can’t see how an appraiser can produce enough “comps” to accurately determine my home’s true market value. What are your thoughts?
— William P.
Dear William,
Unfortunately for you, all sales (more…)
Relocating? Think beyond dollars, cents
Saturday, April 18th, 2009 Dear Dr. Don,
I’ll soon be graduating from college and will (hopefully) be comparing job offers in the next few months.
I’ve been looking at Web sites with cost-of-living calculators, and I was wondering how heavily they should influence my decision on a job offer. I will rent an apartment for at least five to seven years, and it seems like the difference between two cities in rent is not as great as the difference in the cost
Avoiding early IRA withdrawal penalties
Thursday, April 16th, 2009 Dear Tax Talk,
Nine months before my husband’s IRA is available, we are starving. His part-time job and my business aren’t making it. The total we bring home is less than $1,800, and our rent is $1,300.
We have a car plus a personal loan payment of $331 per month, then the rest of the bills. I want my husband to live to see his IRA and I want us to live through this. My thoughts are to withdraw $30,000 (more…)
Don’t copy big-spending mom
Wednesday, April 8th, 2009 Dear Debt Adviser,
My mother, who has always lived for the here and now, is asking my sister and (me) to pay for her lifestyle since she quit her job two years ago. While my husband and I are trying to save every penny in case we lose our jobs, my mother has gone on vacations, racked up all her 12 credit cards, etc. Now, she is telling us that she needs our help financially.
What makes me upset is that (more…)
Deducting state income tax
Saturday, April 4th, 2009 Dear Tax Talk,
My question is about the state income tax deduction. Do you only claim the additional amount you had to write a check for at tax time? For example, I have $50 withheld from my paycheck each month, for a total of $600. The total tax is $1,000. Do I claim the $400 I have to write a check for or the total $1,000?
— Jim
Dear Jim,
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Most accounts need one signature
Saturday, April 4th, 2009 Dear Debt Adviser,
If there are two individuals named on a mortgage with a home equity line of credit, or HELOC, and there is a draw on the HELOC, do both individuals need to sign for the amount drawn? (For example,) husband writes a check for $24,000 against the line of credit and the other individual is not aware.
— Teresa
Dear Teresa,
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Extra payment trims years off mortgage
Saturday, April 4th, 2009 Dear Dr. Don,
I have asked several people this question, and I hope you can give me an answer. I owe $70,000 on my mortgage. The interest rate is 5.75 percent fixed and it has 11 years remaining. I want to shorten the time of the years left because of my planned retirement in nine years.
If I pay $700 a month on my payment, how much do I need to pay toward the principal, and how often, to shorten the years (more…)
Does an unactivated credit card hurt score?
Friday, April 3rd, 2009 Dear Credit Card Adviser,
I heard that closing a credit card has a negative effect on the FICO score and have read your thread. My question is two parts: If I cancel a credit card that has never been activated, does this affect my FICO score? What about canceling a credit card that was unsolicited and sent to me (and) that was never activated? Thanks for your help.
— Elliot
Dear
Shrewd moves net couple $500 a month
Friday, April 3rd, 2009 Dear Dr. Don,
My husband, 47, and I, 44, have no kids and are absolutely debt-free except for our home. We’ve had a $100,000 home equity line of credit in place since 2003. We currently have about $140,000 equity in our home. We plan to stay in our home forever.
We’ve heard about how unused HELOCs are being taken away, so we recently applied the $100,000 to our mortgage principal and had the bank recalculate (more…)
Share values may differ at conversion
Thursday, April 2nd, 2009 Dear Dr. Don,
I’m writing to ask about holding Class B shares of mutual funds long term. All sources of information I’ve found claim that the Class B shares convert to Class A shares after six to eight years. In actuality, the Class B shares are sold and then Class A shares are purchased. So, at conversion, my B shares become A shares.
Shouldn’t the number of newly minted A shares be equal to the number (more…)
Paying tax on canceled debt
Thursday, April 2nd, 2009 Dear Tax Talk,
I renegotiated loans on a second home and a rental property, and the bank reduced the amounts added to principal from negative amortization. The loans are still more than the original amount. I received a 1099-C. Is this actually taxable income to me?
— Bill
Dear Bill,
The IRS has never seen the level of (more…)
Life happens, and so does bankruptcy
Thursday, April 2nd, 2009 Dear Bankruptcy Adviser,
Life happens. I am separated from my wife but continue to pay for her car (it’s in my name, too) and support for my son. Our house got foreclosed on Jan. 2. I haven’t paid a credit card bill in over four months. I probably have around $40,000 in credit card debt. I make good money. I have told credit card companies I couldn’t pay and got a “too bad” kind of response, so I’ve been ignoring (more…)
Divorce doesn’t end debt
Wednesday, April 1st, 2009 Dear Debt Adviser,
My fiancee and I just got our credit reports and are planning on buying a house. To her surprise, her ex still had not taken her name off an account with a $9,000 balance and is using (another) card that is in her name only. They have been divorced for nine years! Help!
— Ted
Dear Ted,
Divorcing a spouse (more…)
Mortgage deduction savings exaggerated
Wednesday, April 1st, 2009 Dear Dr. Don,
I still owe $100,000 on my house at an interest rate of 5.88 percent. I would like to pay off the mortgage, but people keep insisting that I shouldn’t because I’ll lose the mortgage interest deduction.
Do I really save money in the end? I’m in the 25-percent bracket. I feel I could save more by just paying it off and then saving the mortgage payment. The loan is for 15 years. How long can (more…)