Well, it depends on who you ask. Its advocates say it has accomplished its goal, which was to stop the predatory policies against middle/lower class consumers by the nefarious money-center banks and credit card companies.

For the life of me, I really can’t see much difference between today and back in the bad old days, can you? Take interest rates, for example, here we are in the lowest interest rate environment in modern history and yet my Visa rate is 15.24% for standard purchases. And if, God forbid, I need a cash advance, well then I have the privilege of paying 25.24% for that loan plus a fee that could amount to 4-5% of the advance.

There is also a clear warning on my bill that states if I fail to pay the minimum balance within the 23 days (my monthly grace period) then my late payment interest rate charge will be 29.99% plus a $35 late fee. My second credit card company charges me even more for transgressions. It is true that the fine print on the back of the bill has gotten bigger and so have the explanations for how they calculate the interest rate they charge me. At last count it was a 19-line explanation that never once actually told me the interest rate I’m paying.

And how about those “Balance transfer” offers we find in the mail every other day or so. You know the drill:

“Save on Interest. Get a low 0.00% APR on balance transfers until 04/01/13. After that, your variable purchase APR will apply, currently 15.240%”

The ad is accurate enough, but what it fails to make clear is that the offer only applies to balances you transfer.  Any new, additional purchases will be charged the 15.24% rate. And if the offer also includes the lower rate for new purchases, the time period is very short, no more than 4 or 5 months. Many times there is also a fee for the transfer itself, often amounting to 3-5 percent of the balance.

There can also be another hitch. You need to qualify for the offer. If your credit rating doesn’t pass the muster, you might simply be transferring the balances from one high charging credit card to another. Don’t even think about being late on your payments either, because even one mishap will send your rate soaring on your entire balance despite the original offer terms.

To be fair, there are fewer late fees today, especially the kind that compounded a credit card holder’s debt through ballooning charges for over-the-limit purchases and the like. There has also been some roll back in debit card fees, but in exchange consumers are losing things that until recently were free within the banking universe.

The debit card reward program is dead and there are little to no price savings anymore for restaurant or other retail purchases. Retailers are actually boosting prices on many small-ticket items as a result of the Durbin Amendment. The legislation was a last-minute addition to the Dodd-Frank Wall Street Reform and Consumer Protection Act that went into effect on October 1, 2011. The amendment capped the debit interchange or “swipe fees” that franchisees pay to accept Visa and MasterCard debit cards by about 70%.The swipe fee cap has had an unintended but disproportionate impact on transactions for small amounts.

A new study by the National Association of Convenience Stores also found that drivers are paying 6 to 10 cents a gallon in hidden bank fees every time they use a credit card to gas up. At the same time, the banks swipe fee goes up with the price of gasoline. Convenience stores paid more than $11 billion in card fees last year, a jump of almost 25%. As gas hit $4/gallon in some markets, the bank’s average cut of swipe fees alone increased to 7 cents, if you pay with a debit card and 10 cents with a credit card. 

The government’s legislation still allows credit card issuers to impose plenty of obscure and hard to understand charges such as fees on purchases abroad ( usually about 3%) or for having a zero balance (punishment for paying off your debt).

Companies can close accounts and reduce or withdraw lines of credit without notice or reason although they must wait 45 days before applying over-the-limit fees or a penalty rate on a newly lowered credit limit. They can raise your interest rates as high as they want, after giving you 45 days’ notice. If you dispute it, the card company will close your account and give you five years to pay off the balance. Finally, you must go through mandatory arbitration to address grievances rather than the courts.

It should come as no surprise that banks have had to look elsewhere once the law made their former abusive and usurious practices illegal. As a result, the credit card issuers are more selective in obtaining new customers and turning down those they don’t want. In order to replace lost revenues, the banks have begun to increase charges on checking accounts and minimum balance requirements. So in today’s checking account environment, the typical customer will not only receive zero interest for the funds they deposit in a bank’s checking account but also pay increasingly higher costs for the privilege of losing money.

The bottom line: all the credit card legislation has done is switch the chairs around the same old slippery deck, in my opinion. Although credit cards are so prevalent that many of us think a credit card is a necessity (some will go as far as say it is a right), it isn’t. You can opt out of the system and pay in cash anytime you want. For some of us it has become a convenience item, which we pay for, in lieu of carrying around bundles of cash. For others it has become much much more and that is dangerous. Credit cards were never intended to become your plastic loan shark or an alternative to a payday loan or check cashing storefront, but for many that is exactly what they have become. If so, it’s time to make a change because legislation can do only so much.

Obesity-related illnesses cost us $179 billion annually, with obese Americans spending 42% more per year for medical care than the non-obese to treat everything from type 2 diabetes to heart disease. Breaking that down into individual dollars and cents, it costs $4,879 for women and $2,646 for men every year in various costs associated with being overweight or obese.

It means that obese women pay nine times more and obese men pay six times more in associated costs than do individuals at a healthy wright. Besides the obvious individual health costs associated with this American epidemic, there are also work-related costs that you may not realize.

A study by Duke University concluded that it is costing business $73.1 billion/annually in absenteeism, work productivity and other costs for obese, full-time employees. Lost productivity alone is costing us $12.1 billion/year, which is twice as much as the medical costs. It works out that it is costing business $16,900 per capita for females and $15,500 for men in the 100 pounds overweight category of worker.

Other non-medical costs include wage loss, higher premiums for life insurance, short-term disability and disability pension insurance, sick leave (obese men miss two more days of work than healthy men) and early mortality.

 Much of the statistical data on how many of us are overweight or worse is derived from measuring the Body Mass Index, a cheap and simple formula to determine a rough estimate of body fat. You use your weight and height to compute a score. Those over a certain score are considered overweight and as your score increases so does the obesity factor.

Let’s take me for example, for most of my adult life my weight fluctuated between 185-190 pounds. At six-foot, two, I smoked and worked out like a fiend (love those contradictions). Seven years ago, I quit smoking, stopped exercising, and subsequently ballooned in weight to 255 pounds. My BMI soared from 24 to 33. I avoided standing on the scale and hated getting my yearly physical for obvious reasons. What I didn’t know, won’t kill me (yep, another contradiction).

In the meantime, my brother, who is three years younger than I and about the same height and weight, came down with Type II diabetes because of his weight. It was only a question of time before my added pounds was going to show up as serous health issues.  I started back to the gym but continued to eat what I wanted. I gained even more.  It was at that point, I realized that I had been kidding myself. I wasn’t overweight, I was officially obese.

Almost 55 pounds later (and lighter), the years seem to have have fled and I feel better than I have in a decade. The point to this “true confessions” is that although I knew all the obesity statistics, I never considered myself anything but overweight. I suspect we are all the same until something happens that allows us to take a bite out of reality.

There is good news and bad news about the obesity epidemic in this country. The Centers for Disease Control and Prevention announced that after two decades of steady increases, obesity rates in adults and children in the U.S. have remained unchanged during the last 12 years. Either we have reached the saturation level in the population where everyone that is prone to gaining weight has done so, or that the constant drum beat of public education on the dangers of obesity has made an impact That’s the good news.

The bad news is that a recent study by the New York University School of Medicine indicates that obesity in America might be far worse than we think. The culprit is the same BMI that we all use to determine obesity. Although the BMI is cheap and the starting point for measuring a weight problem is also one of the least accurate medical tests in existence. The study concluded that the number of obese Americans may actually be much higher than we think.

The researchers believe the problem with the BMI is that it estimates rather than measures body fat. The study used two other measures along with BMI —the amount of Leptin, a protein which regulates the body’s metabolism and Dual Energy X-Ray Absorptiometry that tests body fat, muscle mass and bone density. Thirty-nine percent of those patients in the study who were classified as overweight were actually obese.

The bottom line is that we are killing ourselves. Our children are entering adulthood heavier than they’ve ever been at any time in human history. The way our food is processed, American’s addiction to fast food, our increasingly sedentary life style, an aversion to pain or discipline—all have been offered as reasons for this state of the nation.  It doesn’t matter who or what is to blame, in my opinion. Fat is fat and until each of us understands and takes responsibility for his or her own part in this epidemic there is little anyone can do outside of food rationing. My advice is get on the scale. And take it from there.

The words “child labor” evokes visions in our minds of wretched children working in filthy factories or dangerous coal mines with little to eat and even less compensation. The universally accepted definition of child labor is the “employment of children in regular and sustained labor.” Most countries ban that kind of child labor, but what about other forms of labor?

I had my first paper route at 11 years old. By the following year I was also delivering Sunday papers, waking up at 4AM and working until noon. By my 14^th birthday I was working at Duff’s, my neighborhood drug store in Philadelphia, serving soda and making change for the neighborhood after school. During the summers, I worked even harder: cutting lawns, bagging in supermarkets and even hauling hot roofing tar up two stories on occasion. I always had money, was rarely bored, made okay grades in school and received a fabulous education that I could have never obtained in school.

In the U.S., you can legally get a job at 14 as long as you work no more than three hours a day (18 hours a week during the school year or past 7:00 PM). Youths of any age can deliver newspapers, perform in radio, television, movie or theatrical productions; and babysit or perform other minor duties around a private home. In the agricultural sector, kids can work as young as 12 years old during non-school periods. But by the age of 16, America’s youth can work without restrictions or parent’s consent.

In this country there is a long tradition of kids like me, dating back to the last century. The jobs of our youth often teach us skills that are with us our whole lives. Some of the things I learned were simple things like filling out applications and more complicated skills like interviewing, working responsibly and how to get along with co-workers and, of course, the boss. Since my father started his underage work life in the coal mines near Altoona, PA (until he was trapped in a cave-in), my early working career seemed comparatively easy.

My daughter, Jackie, followed in the family footsteps, first as a snowboard instructor at 13 years old (almost 14). She was the snowboard director by the age of 17 managing almost 50 instructors on the weekends at a local ski slope. She credits her early work experience for giving her confidence and independence, a MVP status among her high school peers and a developed sense of responsibility that continues to this day as a new mother and as an executive at a international public relations company.

Like me, her work life kept her on the straight and narrow in school, away from parties, drugs and poor grades.  She also learned the meaning of money and had enough income to pay for her own auto insurance when she learned to drive.

Now, granted, this is all anecdotal evidence. Research indicates that those teenagers who work more than 10 to 15 hours a week do receive lower grades. Many also sacrifice extracurricular activities and friendships they would have otherwise made if they weren’t working as hard.

Some teens, their pockets flush with cash, have the means to experiment with drugs and alcohol, which many obtain from older co-workers. Finally, there are many cases where overworked teens spend a lot less time with their families, eating and exercising less than those kids without onerous work schedules.

Many teens first job are in the retail sector such as fast food outlets, restaurants and grocery stores. Often these entry level jobs are routine, boring and lack positive interaction with adults. It can be tough on a young person, and that’s where you can add value as a parent. Encouragement, a sympathetic ear and a little compassion can go along way to help your child through that first rough year or so.

I also advise you to monitor your child’s progress. Don’t simply take “okay” as an answer for how work is going. And if you don’t like the thought of after school work for your teenager, summer employment is an excellent alternative.

 If for some reason your kid doesn’t need to earn money, there are always non-profit alternatives to choose from, like selling girl scout cookies or fundraising for the Boy Scouts of America or any number of charitable organizations desperate for additional help.

The point is that child labor, American-style, is a major positive in my opinion as long as it is accomplished within the guidelines above.

 I suspect the majority of Americans who are still paying off student loans, or are already paying for a college education (or soon will be) would vote for free tuition. Who can blame them?

My daughter was born in 1980 and graduated college in 2002. During that time period the cost of a college education increased almost 400%. Looking at prices today, I would say I got off fairly cheap. Americans spent almost $100 billion last year to send over 14 million students to public colleges and universities. We all know that tuition and fees continue to skyrocket, climbing 6.6% annually. Yet, most of us believe that going to college is essential and the key to an economic future and the American dream. 

Costs differ because not all colleges charge the same. Forty-four percent of all full-time college students attending a four-year college are paying less than $9,000 per year for tuition and fees. That’s a lot of money for a family pulling in $50,000 annually. At the other end of the spectrum, roughly 28% of full-time students are attending private, non-profit institutions and are paying at least $36,000/annually. Those numbers do not include the cost of living, eating, school supplies and a long list of other school expenses. All but the wealthiest American families are priced out of that market.

To be fair, most students receive some kind of financial aid, usually from the local, state or federal governments. That aid amounted to about $178 billion this year. That means the average student probably received a little over $12,500 in aid and about half of that won’t have to be repaid.

When you account for all student loan programs, grants, tax breaks and such the government is already paying for almost half the tuition, so why not the rest?

Much of the debate comes down to why the government should pay for schooling at all. Critics argue that the public school system is already a disaster. Our students’ learning abilities have already fallen way behind their peers in other countries.  Our high schools are becoming a breeding ground for drugs, crime and dropouts. If we allow colleges to become part of this flawed system, critics say, then we may as well call an end to the educational system in America.

It might be helpful, therefore, to explore why a free educational system evolved in America in the first place.

It was Thomas Jefferson who first suggested creating a public school system. He and others like him argued that common education would create good citizens, unite society and prevent crime and poverty. The debate raged for many years. It took until the end of the 19^th century before free public education at the primary level was available to all American children.

High school was a different story. Although the first publically supported secondary school, the Boston Latin School, was founded in 1635, it was Benjamin Franklin who first saw the need for something more than a primary education. The demand for skilled workers in the middle of the 18^th century led Franklin to establish a new kind of secondary school called the American Academy in Philadelphia in 1751. Once again, public secondary education was no easy sell.

It wasn’t until the 20^th century that high schools took off. when the majority of states extended compulsory education laws to the age of 16. From 1900 to 1996, when government began paying for secondary education, the percentage of teenagers who graduated from high school increased from 6 percent to 85 percent.

Since then the purpose of a free education has widened from Jefferson’s concept of ensuring that citizens could read, write (vote) and remain law-abiding to something more. In order to escape poverty and to provide a skilled labor force for the industrial revolution, Franklin and his peers believed a secondary education was deemed to be in the national interest.

This history lesson has a point. Ask yourself two questions. Are we still in the industrial revolution or have we graduated into something more? And two, does a high school education prepare our youth to enter the work force, escape poverty and become a productive citizen of the economy?

For readers who answered no to the above questions, you will want to read part II of this column. Stay tuned.

Make your gift count this year

American charities took in over $300 billion last year and hope to make this year even better. After all, we Americans are a giving people. Nearly two-thirds of us give something to charity every year with many of those donations occurring between Thanksgiving and New Years.

Why we give is still somewhat of a mystery. The economy is nothing to write home about, unemployment is high and most of us are pinching pennies. Yet, we somehow find that spare dollar or two to drop into the charitable pot or, in some places, the hands of the homeless.

Experts point to the fundamental social urge to help our fellow human beings. There is also the “feel good” factor, since giving makes us feel better about ourselves. There is also the social pressure to give during company fund drives, or marketing calls for example. Yet, each year we discover that things are not quite as they should be in the non-profit world.  Most readers are aware that many large charitable organizations use professional fund raisers at some point or another for phone solicitations, direct mailing, call centers, etc. These fundraisers charge a fee for their efforts, which can be enormous delivering as little as 46 cents on every dollar donated to the charity.

Recently, the Attorney General for the State of New York State released a report that found that, on average, just 37.6 cents of New Yorker donations actually went to the charity of their choice. In some places, such as the Hudson Valley, charities received even less, just 17.4 cents/dollar, which was the lowest percentage in the state. There were actually 61 cases where the charity lost money after paying telemarketers and other fund raisers. New York is no different than Massachusetts, Connecticut, Vermont, New Hampshire or most other states in this regard.

Various organizations have given donors tips on the dos and don’ts of giving. Suggestions such as resisting pressure from telemarketers to give on the spot. Others urge you to do background checks on charities before giving or use charity rating organizations that will do that job for you. Experts say that when giving on-line read the fine print and every watch-dog organization advises that we should all educate ourselves about charitable giving. All of the above advice is laudable, but where’s the fun in that?

You see, most studies on philanthropy indicate that charitable giving is an impulse thing. That’s right, we pass through the supermarket doors and toss our spare change into the bucket without thinking, receiving a heart felt “Thank you and Merry Christmas” for our efforts. In fact, numerous studies reveal that the more one thinks about things like which charity is the best choice or how this or that charity uses my money, the less generous one tends to be. So how does one give without spoiling the fun?

Give local just like you buy local. Most of us know the needs of our own communities. There are dozens of charities right outside your door that you can give to directly without worrying about fraud or how much of every dollar they will receive. Food banks, animal shelters, human shelters, its all there and when you give locally there is an added benefit. You improve the quality of life in your neighborhood, which helps everyone.

Take my company, for example. We gave away hundreds of turkeys last year at Thanksgiving.  Individually, this holiday season, some of us are sponsoring needy kids with holiday presents as well as donating money to a local animal shelter. Surely there must be a soup kitchen, children’s home or something that tugs your heart strings some where close. You don’t even need to donate money when you give locally. The donation of your time can be just as valuable. So get out there and give. And God bless us everyone.

“I’m not old enough to worry about a will,” said one of my clients recently.

Looking at him, you might agree, At 25, he is as healthy as the horses he shoes. As a Ferrier with his own business, he works hard and plays hard. Life is his oyster right now but if he dies, I reminded him, the state gets everything.

“No way,” he said, in utter disbelief.

But it is true. As a single man with no relatives and no will, the chances are quite high that the state would take everything. Fortunately, my client found religion and immediately did some estate planning, including creating a will. Unfortunately, most people will find every excuse in the book to avoid creating a will. Many individuals feel uncomfortable with the possibility of their own death or they take the attitude that when you’re dead, you’re dead, so why worry about it.

You may be surprised to know that most states are prepared for that and have effectively written a will for you. They are called statutes and are used to determine your heirs if you die “intestate” (without a valid will). Each state’s statutes are different and can have an enormous impact on your heirs, especially your children.

If you die without a will, for example, and have children under 18, the state will control who will care for them. Sure, siblings or grandparents are usually the go to choices as guardians, but not always. There are also many instances where a sister or brother may not agree with the court’s ruling. In which case, there ensues a long and costly custody battle with most of the emotional hardship born by your children.

It gets worse. Let’s say you have been diligently saving for your kids’ college education. Without a will, there is no guarantee that an appointed guardian will honor your wishes. They may simply use the money for your child’s support dismissing college as a frivolous expense or a luxury they cannot afford.

Probate is the term used for the long, arduous and expensive state court procedure that administers your estate. An uncle of yours dies in Florida and leaves a condo, but no will. As his nearest kin, you will need to hire a lawyer in state, spend the money, time and effort necessary to have the disposition of the condo adjudicated in the court system and hope that in the end the state rules in your favor.

You go through all those hoops only to find out a distant cousin disputes your right to inherit. At the same time you discover the condo’s mortgage is greater than its worth and the condo association doesn’t approve the one buyer who might take it off your hands. I think you get the point. Probate is a nightmare.

Many people have confused a revocable living trust with a will. They are two different legal documents, which serve different purposes. In a living trust, you transfer assets into the trust during your lifetime. When you die, those assets go directly to your beneficiaries and do not go through probate. It is a private document and is more difficult to be challenged.

In contrast, a will is a public document. It can be useful in combination with a living trust to ensure that any property that is not already listed in your living trust (such as furniture or antiques, or heirlooms) before death will be transferred to the trust at death. A will can also address the needs of your children by naming a guardian and spelling out the financial provisions for their care and education. A will can also accommodate your wishes and intentions clearly and at greater length than a trust.

Creating a will and/or a living trust is best done through an attorney. It may cost a couple hundred dollars but it is the best way overall to cover yourself and your family in the event of your death. I suggest if you haven’t done one yet, it’s about time you did.

Start saving now!

Back in the day, before the advent of government-sponsored savings plans, defined benefit pension plans and the odd annuity were the only investment vehicles available to me. As a young stud on Wall Street, it didn’t matter. Retirement saving was for others. I would live forever, make millions in the market and retire when I was thirty. Fortunately, I woke up to the realities of the real world and started saving early in my career. You should too.

In fact, the earlier you recognize that saving for retirement regularly is a no brainer, the easier it will be to retire. So let’s say you recognize that and want to start saving. The choices today can seem overwhelming. Start with the obvious: tax deferred plans where the U.S. government gives you a tax break. There are traditional IRAs, Roth IRAs, employee 401(k) s, 403(B)s, 457 plans, deferred annuities and many more. In my opinion, if you have earned income and your employer offers some kind of tax-deferred plan, that is where you should concentrate.

Any financial planner will tell you to try and take maximum advantage of the amount you can save in your tax-deferred plan. That would be $16,600/year in a 401(k), 403(B) and 457 plan and $5,000 in a traditional IRA or Roth IRA. For those over 50 years old, an additional “catch-up” amount of $1,000/year in your IRA is allowed and $5,500 in your 401 (K) 403 (B) and 457. 

Yet, few of us make enough to contribute the maximum. Instead, the best place to start is your employer plan, especially if it offers a matching contribution to your own. As an example, let’s say you make $50,000/year and your employer will match 3% of your salary ($1,500). It doesn’t take rocket science to figure out that you should put your first $1,500 of savings into your tax deferred employee program since your company is matching that amount as a free employee benefit.

But let’s say you want (and can afford) to save even more, possibly an additional $5,000. Should you just put it into your company’s 403(B) or 401(k) plan or open a traditional, tax-deferred IRA? In my opinion, you should open an IRA. Here’s why.

Both contributions are treated equally (i.e. tax deductible) by the Federal government. However, your company’s retirement plan will offer a limited number of investment choices. In addition, the fees you pay for investing in your company’s plan are quite high compared to opening your own IRA. Although you can’t contribute as much in your IRA, you have much more control over what to invest in and at a lower cost.

There is one caveat however if you are contributing to both your traditional IRA and your company plan, at a certain salary level (above $56,000-$66,000) the amount you can contribute as a single tax payer to a traditional IRA is reduced. For those married couples who file jointly the phase-out range for deductibility of your salary is higher ($90,000-$110,000). If your spouse does not participate in a qualified employer plan but you do, than the cutoff level for your spouse becomes $169,000 to $179,000 if filing jointly.  

You can also put your IRA contribution into a Roth IRA but remember, a Roth is not a tax deductible IRA, However, qualified withdrawals are tax-free while in traditional IRAs withdrawals are taxed as ordinary income. And like traditional IRAs, the Roth contribution is $5,000 yearly and phase-out salary limits also apply.

I suspect most of you will already be tapped out if you contribute the full Monty to both your employer plan as well as a traditional IRA, but in some cases a Roth might work better for you. If you still have money to save then I suggest you give me a call and we can discuss how best to deploy it.

The first thing to remember is there is no such thing as “can’t” when selling your home. It is just what price you are willing to take for it. Some homeowners have no choice. Underwater owners that are running out of money to pay their mortgage must sell or face foreclosure. Their woes have been well documented. But what about those of us who would like to sell, either a primary residence or a second home, but have the money to wait for a bottom in the real estate market?

  The rental market is booming across America.  Over 3 million Americans have entered the rental market over the last three years and as foreclosures mount, that number will only increase. It appears that demand for rental properties is outpacing supply.

Obviously, renting your home only makes sense if you have another place to live. If you are relocating because of employment, on sabbatical for a year or two, if you have a second home, or will be moving in with someone else (because of a marriage, death of a relative, etc.) then the economics of renting may be appealing.

On the plus side, renting allows the owner to keep the property until prices bottom out and hopefully begin to appreciate. In the meantime, rental income can cover mortgages, taxes and insurance payments if the rental price is right. Better yet, certain expenses such as mortgage payments, property taxes, repairs, maintenance, advertising, broker’s fees, transportation and insurance can be deducted from rental income.

There’s also a phantom tax deduction called depreciation (the wear and tear on your property) that you can deduct each year from your rental income. All you do is divide the fair market of your home (excluding cost of land) by its recovery period, which is 27.5 years for residential property. For example, assume your home is worth $ 350,000 divided by 27.5 years equals an annual deduction of $12,727.27 from rental income.

But there are some negatives as well. Landlords have plenty of headaches ranging from renters who fail to pay their rent, to vandalism of their properties. Housing maintenance issues don’t go away simply because you no longer live in your home. Depending upon its age, everything from leaky faucets, non-flushable toilets to really big emergencies like roof leaks, and lack of electricity and heat must be addressed immediately or you may be hauled into court and sued.

Renters too have rights and in some cases, even obvious reasons for evictions, such as failing to pay the rent, may involve the courts and we all know how lengthy court cases can be.

As it now stands, the U.S. government provides a generous tax break for homeowners who have lived in their house for at least two of the last five years. Married couples who file jointly can keep up to $500,000 in capital gains from the sale of their home, tax-free. Singles can enjoy up to $250,000 in wind-fall profits. By renting your home that tax break disappears under certain circumstances.

If you are renting for just a year or two, there is no problem. Simply move back within the qualifying time period, sell, and enjoy your gains.  However, if you want to rent over the long-term (five years or more), you need to understand the tax consequences. Of course, you can always have your cake and eat it too. If you are willing to rent for a period of years, then move back into the house for two years and then sell it, you will qualify for the tax break.

Before you decide, find out your rights as a landlord by consulting with an eviction attorney. You should interview property managers. They will charge a percentage of the rental income for handling all of your landlord duties; but it could be worth it. Finally, create a budget that encompasses all the expenses, taxes and other items you might incur as a landlord.

All of this may take more time and effort then you are prepared for, but let’s face it, renting is a business just like any other and requires preparation, planning and work.

New versus used cars?

My wife, Barbara, and I have been shopping for either a used or new car. We own matching 2004 Subaru’s that we purchased used back in 2005-2006. We would much prefer a vehicle with even better gas mileage, but we live in the Northeast where snow and ice demand a four, or all-wheel drive vehicle and that limits our choice of fuel efficient transportation.

The good news for us is that although all used cars are priced higher these days, smaller, fuel efficient models and hybrids are commanding especially good prices. As a rule of thumb, every $1 increase in the price per gallon of gas, the value of used compact cars rises 8% to 12%. So if the trade-in value of your car was worth $10,000 last year, it could bring $11,000 this year.

However, this shortfall in supply won’t last long. Dealers estimate by late fall or winter the pipeline will begin to fill once again.

Much of this used car price windfall is a by-product of the 2008 recession. The consumer was hit by the double blow– less income and, thanks to the financial crisis, increased difficulty in qualifying for either a lease or auto loan.  As a result, today, three years later, there are a lot less used autos for sale. The average car on the highway today is 10.6 years old, according to Polk, the auto research firm.  That’s up from 9.8 years in 2007.

 Another large source of used cars for dealerships has traditionally been the leased cars market. Companies sell leased cars as used when leases expire. But a lot less leases were written during the financial crisis, leaving a large hole in supply at the wholesale level.

“Wholesale prices are quite high,” says Mike Coggins, General Manager of Haddad Dealerships in Berkshire County, MA. “We haven’t passed those prices on to the consumer so our margins are smaller.”

Still, Coggins isn’t complaining since his used car sales are up 25% this year, leading all of his other divisions.

The effect of Japan’s earthquake has also contributed to an overall shortage of new autos this year. The disaster in Japan disrupted the world’s supply chain of auto parts as well as the export of many Japanese made vehicles to the United States. This is a far cry from three years ago when all three U.S. automakers were on the ropes and dealerships around the country were closing every day.

It may actually make more sense for us to look at replacing our autos with a new car this time around. I am going to do my research, something you should do as well, if you are planning to buy a car.  Figure out the price differences between a used model and a brand new vehicle before making a decision. I tend to drive my auto for many years (as opposed to trading it in every three years) so the new car avenue may make economic sense for me.  Find out a ballpark asking price for your vehicles from “Kelly Blue Book” on the internet and find out what similar cars are selling for in your area.

I know that we would probably get a higher price for our vehicles by selling them to a private party. Something I suggest you try if you really want to get the best price for your car. We will probably take a 10% haircut on the price by trading it in to a dealer.

Yet, neither of us is willing to put the effort into listing it on the internet and haggling with potential buyers. I would much rather devote that time to writing columns for you, my readers.

April 15th is around the corner

Let’s start with property taxes; something most of us have learned to despise. Until last year, if you owned a home you were able to deduct a portion of your state property taxes in the form of an enhancement or an addition to your standard deduction. The deduction was worth between $500-$1,000 depending on whether you were married or single. This provision was not extended, but you can still claim the deduction providing you itemize your deductions. The problem with this new wrinkle is that many Americans do not have a sufficient amount of deductions to make itemizing worth doing.

Given the vast number of workers who lost their job during this last recession, if you were unemployed in 2009, the government granted an exemption in unemployment income up to $2,400 per person. That meant you only had to pay taxes on earned income above that amount. That exclusion has been eliminated as well.
So if you were unemployed at any time last year and collected unemployment compensation you owe taxes on 100% of that income. The problem here is that few of these jobless taxpayers withhold taxes from this income, so now they will need to come up with the cash they owe the IRS.

The first-time home buyer credit and the follow-on homebuyer tax credit on primary residences provided a tax credit ($8,000 for first time buyers and $6,000 for other buyers) but require that you keep your new residence for at least 36 months. That means if you bought and sold that new home you must repay that tax credit to the government this year.

The American Opportunity tax credit was a bit of new legislation that replaced the Hope credit that allows taxpayers earning $80,000 ($160,000) for joint filers) to claim $2,500 tax credit for tuition, fees, books, supplies and equipment required for educational studies paid in 2010. There is some confusion about this tax credit because the government already allows a deduction of up to $4,000 for the same items. You can’t claim both the deduction and the credit.

People become confused between a credit and a deduction. Simply put, a deduction reduces your income while a tax credit reduces your tax bill. If you earned $60,000, for example, and took the $4,000 education deduction that would reduce your adjusted gross income to $54,000. If you were in the 20% tax bracket, then the tax savings for you would be ($4,000 X 20%) or $800. However if you selected the tax credit, your tax bill would be reduced by $2,500, a dollar for dollar tax savings.

Because Congress acted so late in the year, the IRS said that it would need until mid-February to reprogram its systems. As a result, they have advised that those who plan to itemize their deductions wait until after March 1 to file their taxes. Since most of us wait until the very last second (or longer) to file, this delay should not have a major impact on us taxpayers. In any case, the coast is clear for filing your taxes. I bet you just can’t wait.