More Purchases are Now Eligible for the Home Buyer Tax Credit

The federal home buyer tax credit was extended and expanded last week, giving home buyers more time and making more people eligible for the credit.  The Worker, Homeownership, and Business Assistance Act of 2009 extends the home purchase deadline to April 30, 2010, raises income limits for eligibility, and allows some existing home owners to take advantage of the credit as well.

For first-time home buyers, the tax credit is calculated as 10% of the home’s purchase price, up to $8,000.  You are considered a first-time home buyer if you (and your spouse) have not owned a house in the last 3 years.  If you already own a home, however, you may be eligible for the credit as an existing home owner.  To qualify under this category, you (and your spouse) must have owned a home and lived in it for at least five consecutive years out of the eight years prior to making this new home purchase.  The credit for existing home owners is also equivalent to 10% of the purchase price, but is capped at $6,500.  For both groups, the home’s purchase price cannot exceed $800,000.

The income limits have also been increased under this new Act, and, for first-time home buyers, apply retroactively, up to the beginning of 2009.  That is, the first-time home buyer tax credit applies to purchases made between January 1, 2009 and April 30, 2010, inclusive, although the credit for existing home owners only covers purchases made on or after November 6, 2009, up to April 30, 2009.  The retroactivity on the first-time home buyer credit may make some people who bought homes earlier this year but who were ineligible for the tax credit then now eligible through the income limit increase.  With the WHBA Act, the tax credit is available to individual taxpayers with a modified adjusted gross income (MAGI) of up to $125,000 (or $225,000 if married filing jointly).  Individuals with MAGIs between $125,000 and $145,000 (and joint filers with MAGIs between $225,000 and $245,000) may claim partial credit.

If you are thinking of taking advantage of this home buyer tax credit, here are a few more things you should know:

-  You must live in your new home for 36 months after the purchase date.  If you fail to do so, you are required to pay back the credit when you file your income taxes for the year in which you move out.  (Deployed military personnel are excluded from this restriction, as long as they do not sell their new home.)

-  If you are claiming the credit as an existing home buyer, you do not need to sell your old home as long as you make your new home your primary residence.

-  If you cannot meet the April 30, 2010 deadline, you have to at least enter a binding sales contract by then and make the purchase by June 30, 2010 to be eligible for the credit.

-  The tax credit is also available for constructing a home in a lot that you already own, and the April 30, 2010 deadline applies to the date of occupancy.

-  For a purchase in 2009, you can choose whether to claim your credit by amending your 2008 taxes (use IRS Form 1040X to do so) or through your 2009 taxes.  Similarly, if purchasing in 2010, you can include the home purchase in either your 2009 or 2010 income taxes.  This flexibility may be useful if your MAGI is below the limit in one year but not the other, and you may decide according which gives you the highest credit.

Legislators expect that, with the expansion of the eligibility criteria for this tax credit, home sales will pick up again.  If they are at all right, this increase in demand may bring increases in housing prices.  So if you are thinking of buying a home in the next year, jumping in early might get you a better deal – and a hefty tax credit to go with it.

Parking Wars

Parking Wars is a reality television series that follows “the everyday people on the front lines of parking enforcement in Philadelphia and Detroit.”  While most of our parking violations won’t even be half as dramatic, I hope none of our readers has accepted a parking citation without putting up a fight.

The first thing you should always do when you receive a parking ticket is to DECLINE it.  Depending on where you live, the exact procedure might differ, but you usually have 30 days to contest either through an online database (as in Massachusetts) or by writing a letter (such as in Washington DC to the DMV’s Adjudication Services).    Regardless, the general idea is that you have the opportunity to explain any extenuating circumstances to the DMV and put forth any reasons you should be excused from having to pay a fine.  Below are some suggestions; remember to provide pictures, where appropriate, for visual effect:

• The sign was obscured, so you thought you were parking in a legal spot.
• You have parked in the exact spot on multiple other occasions and have never received a citation.
• The officer miscalculated how close you parked to a fire hydrant or how far you parked from a curb.
• The parking meter was broken.
• You went an hour over the meter, because you were wearing a watch that haven’t been changed to account for Daylight Savings.
• You had a medical emergency and it would have been unsafe and irresponsible for you to move the car and be out on the road.

Once you deny your ticket , it will take several weeks before you hear back from the DMV.  If they refuse to accept your bulls**t explanation, you still have to pay the ticket, but at least you have some time to start saving up.  On the other hand, they might lower your fine or dismiss your ticket entirely.  I have contested four parking citations so far and have gotten all four dismissed.  (Perhaps the bigger lesson here is to learn to park properly, but this is neither here nor there.)  Finally, if you are unable to pay the fine at once, you can contact the DMV again to work out a payment plan.  Just like you should always call your credit card companies, cell phone providers, and utilities services to try to waive any installation or late payment fees, it’s worth a shot to try and haggle with the DMV over a parking violation – it may save you some money, or you might end up not paying at all.

Amtrak Adds Bonus Points to Double Points Deal, If You Got the Email

In previous posts on travel deals, we have encouraged readers to pre-register for any free promotion on airlines or Amtrak that may potentially be relevant to them.  Many times, airlines will send emails to frequent flier customers advertising a bonus miles campaign.  If there is any likelihood that you might be eligible for the promotion (e.g., travel to a specific destination during a predefined period), you should sign up for the deal as soon as it hits your inbox.   That way, if and when you plan your trip, you won’t risk missing out on any bonus deals.  Also, some promotions are only available to customers who received an email about it and have to be redeemed through links included therein.  Therefore, if you delete that email or forget to look for it before booking your travel, you may also miss out.

Amtrak’s latest move to lure more travelers to trains during the holiday season drives this point home.  In September, we told you about Amtrak’s Double Days promotion, through which you can get double Amtrak Guest Rewards points until December 19^th.  This past week, Amtrak emailed all customers who had signed up for the promotion and offered them an extra 250 bonus points for taking a trip on Acela or 100 bonus points for a trip on any other Amtrak train between November 4 and December 19, 2009.  Now, if you did not sign up for the Double Days promotion mentioned earlier, you did not get an email about this bonus, and there are no links on the Guest Rewards website for it.

If you think you might travel by train sometime between now and December 19^th, sign up for the Double Days promotion today.  Maybe Amtrak will surprise you with extra offers too.

Better Save Now than Later

The recession might have ended, but we are still a long way from recovery.  Back in July, we wrote about some of the better online savings options that were available.  We hope that you took advantage of those “high” interest rates then, because since then all the institutions covered have reduced their savings interest rates.

Here are the current rates (APY) as of November 1, 2009:

• Discover Online Savings – 1.85% ($500 minimum deposit required)
• American Express High-Yield Savings – 1.70%
• HSBC Direct Online Savings – 1.35%
• ING Direct Orange Savings – 1.30%
• Emigrant Direct American Dream Savings – 1.30%

There are, however, still a few institutions that offer interest rates over 2.00% APY, such as SFGI Direct’s Online Savings at 2.25%  with a $500 minimum deposit and ShoreBank’s Direct’s Online Savings at 2.15% with a $1 minimum deposit.  These places may be unfamiliar to you, but rest assured that they are FDIC-insured.  So if you haven’t started saving yet, start today before these interest rates fall as well.

If you have already opened a savings account and are discouraged by the falling interest rates, remember that your money still worked harder for you sitting in a savings account and collecting some interest rather than in a checkings around collecting no interest.  And nothing is standing in the way of closing your current account and opening a new one with a higher interest rate.  Happy Savings!

At the Showroom, Don’t Forget the Deduction

As 2010 car models start creeping into showrooms and auto dealers lay on incentives in the hopes of beating the continued decline in car sales, buying a new car may start looking like an attractive option again.  And even with the end of the Cash for Clunkers program, the US government is still willing to give you a nudge in the “buy” direction.

For any new passenger vehicle purchase made between February 17 and December 31, 2009, inclusive, you may be eligible to deduct state, local, and excise taxes from your 2009 federal income tax.  The only two restrictions are: (1) the deductible taxes are limited to those levied on the first $49,500 of the purchase price (that is, you don’t get a higher tax deduction simply for buying a Lamborghini), and (2) you can only take the deduction if your modified adjusted gross income (MAGI) is less than $135,000 if you are filing individually or $260,000 if you are married and filing jointly.  The deduction is also phased out for individual filers with MAGIs between $125,000 and $135,000 and joint filers with MAGIs between $250,000 and $260,000.

Other than the limitations above, the deduction initiative is quite generous.  It covers not only cars, but also light trucks (maximum gross weight of 8,500 pounds), motorcycles, and even motor homes.  You can take the deduction for as many new cars as you buy during the period, as long as you are eligible within the two restrictions detailed above.   Furthermore, even if your state does not have sales taxes, you can still deduct fees or other local government taxes associated with the vehicle, as long as they are based on the purchase price or assessed as a per unit fee.

While this deduction may not stir car purchases in the way the now-extinct Cash for Clunkers did, it may still prove to be a nice incentive when coupled with all the markdowns on 2009 models and the extra features added to the 2010 models to boost holiday season sales.

Best Buy Makes Changes to Its Loyalty Program, and You May be Out

In July, we wrote about Best Buy’s Reward Zone loyalty program, showing how it fit into our strategies for double/triple dipping on points and bonuses when shopping.  As of the end of this week, however, the Reward Zone program may no longer be that great of a deal.

On October 31, 2009, Reward Zone rules will change so that any points accumulated through the program will expire at the end of the calendar year and members have to make a purchase every 12 months to maintain their account.  So, while it will still be the case that Reward Zone members receive one point for every dollar spent at Best Buy, and every 250 points can be exchanged for $5 in store credit (effectively a 2% discount), this program will no longer be attractive to those who visit Best Buy only sporadically and don’t make big-ticket purchases.  Of course, Reward Zone is a loyalty program and should focus on its larger, most frequent customers.  Nonetheless, even those customers will likely lose out, since, after the changes, any points over a multiple of 250 will be lost at the end of the year.  That is, if a loyal customer spent $900 at Best Buy one year, for example, she will receive $15 in store credit and the remaining 150 points will be forfeited.

Only the most loyal customers are protected from that.  You can qualify as a Premier Silver member by spending $2,500 within a calendar year at Best Buy, and your membership is carried over through the following year.  Premier Silver members earn an extra quarter-point on every purchase, and their points roll over each calendar year they remain qualified.

Reward Zone is also still a good deal for gamers.  If you enroll your Reward Zone card into the “Gamers Club,” you will get 500 bonus points for every $150 you spend on videogames, computer games, and videogame accessories at Best Buy, on top of the regular points you earn.  If you spend $300 on eligible purchases, for instance, you will receive 300 regular points plus 1000 bonus points, or $5 (with 50 points remaining) plus $20 – essentially an 8% discount.

With these upcoming changes, it is likely that Reward Zone will loose its attractiveness to most people, making it similar to the Borders Rewards, where the principal membership perks are the coupons received rather than the points system.  But unlike Borders, which sends new coupons by email on an almost weekly basis, Best Buy’s Reward Zone coupons only come every few months, and are usually a 10% discount on one item from a very restricted list.

My advice for Best Buy’s less-loyal shoppers: Create or keep your Reward Zone membership just in case you make $250 or more in purchases within a calendar year or you receive a useful coupon; but if you don’t, don’t be disappointed.  Reward Zone is clearly being redesigned for Best Buy’s most loyal customers and gamers.