Let’s start with the news of the week:

  1. Unemployment Falls. According to the latest numbers, the economy only lost 11,000 jobs this month. Economists expected a loss of 110,000. Could this be a big fat accounting mess up? Perhaps. It seems unlikely that all employers in the country would completely cease layoffs at the same time. Meanwhile, the unemployment rate dropped from 10.2 percent to 10 percent. The U-6, which is the broadest measure of unemployment, is currently at 17.2 percent. That’s a huge number. Let’s see what happens next month, as we assess where we are with the recession.
  2. This Week’s Bank Failures. Six more banks failed this week, bringing the total number of bank failures in 2009 to 130. The cost of this week’s failures (3 of the banks were in Georgia) was $2.3 billion. Total cost of bank failures in 2009: $100 billion. To bring this into perspective, the FDIC has asked member banks to contribute three years’ worth of insurance premiums at once, which will infuse the FDIC insurance fund with $45 billion. Once again, the cost of this year’s bank failures: $100 billion. If the FDIC is getting three years worth of insurance premiums upfront, that would meant here is no more money going into the fund over the next three years. Banks are going to continue failing. You’ve got to wonder what will be the end result.
  3. Mortgage Interest Rates At Historic Lows.Mortgage interest rates fell again this week. If you haven’t refinanced, now is the time to move. Thirty-year fixed rate mortgages can be had for about 4.71 percent with an average of .6 percent in points (a point is one percent of the loan amount). Fifteen year fixed rate mortgages are at about 4.20 percent, with about the same amount in points. These are historic rates. Shop around for the best deals. Can we get to a 4.5 percent loan on a 30-year fixed rate mortgage? Let’s see. BTW: These great rates will be available to those with the best credit history and score. Everyone else will pay more.
  4. IRS Announced the 2010 Mileage Reimbursement. We put the numbers here.

Tax Tips From The ThinkGlink Tax Team

Merry Brodie, Enrolled Agent and CPA, Bill Nemeth, Enrolled agent, and Chet Burgess, Enrolled Agent and president of the Georgia Association of Enrolled Agents (4gaea.org) joined us on the Ilyce Glink show today.

Here’s what we talked about:

  1. Cancellation of Debt. Be aware that if you negotiate a settlement for any type of debt, whether it is a mortgage, credit card, auto loan or other type of debt, and you pay less than you owe, the company will issue you a 1099 C (for Cancellation of Debt) is the amount that is reduced is greater than $600. The IRS views this as income and you will have to report it on Line 21 of your federal tax return. The amount of debt that was canceled will be added to you income. In a short sale of a personal residence, you will not have to pay tax on the imputed income (or phantom income) listed on the 1099C. But if you did a short sale on a rental property or if you negotiated with your credit card company to pay $10,000 less than you owed on a credit card debt, that would be considered taxable income.
  2. New Tax Credits For Education. The Hope Tax Credit and Lifetime Learning credit have been replaced with the American Opportunities Tax Credit, which is partially refundable. If you spend $2,500 on going back to school, you may be eligible for a tax credit of up to 40 percent of that amount.
  3. Net Operating Loss. Congress passed a new law this year that says if you have a loss, you can go backward for five years to offset any gain that you had with this loss, which will hopefully mean you’ll get a tax refund early in the year.
  4. Home Buyer Tax Credits. I have a lot of information on ThinkGlink.com about these new tax credits. Start with these stories:
  5. Energy Tax Credits. Check out our list of home and business energy tax credits to see if you qualify and reduce your federal income tax owed next year.
  6. Unemployment Tax Credit. Unemployment income would normally be taxable from the first dollar received. This year, the first $2,400 you received is tax free. You may pay tax on the rest of your unemployment income, however. Don’t forget that if you liquidated part of your 401(k), IRA or other qualified retirement vehicle, that distribution will be considered income. And if you’re under 59 1/2, you’ll pay a 10 percent penalty on that as well. In today’s show, we discussed hardship distributions and what you need to do to qualify. But even with a hardship distribution, you’d still owe taxes on the money you took out of the qualified retirement account – you just wouldn’t owe the 10 percent penalty.

If you have other tax questions for Merry, Bill, or Chet, please leave them here or email them directly or talk to your own tax preparer.

Find out more about the American Recovery and Reinvestment Act (ARRA).

And for more information on new tax laws, get the newly-revised and updated Publication 17. Publication 17 has been published annually by the IRS for more than 65 years and has been available on the IRS Web site since 1996. As in prior years, this publication is packed with basic tax-filing information and tips on what income to report and how to report it, figuring capital gains and losses, claiming dependents, choosing the standard deduction versus itemizing deductions, and using IRAs to save for retirement. Go to irs.gov and type “17” into the search box.

New ThinkGlink Ebooks About Investing in Real Estate Are Now Available

We created five new ebooks that together provide you with more than 100 pages of important, money-saving information about investing successful in real estate. here are the five topics:

  1. 1031 Tax-Deferred Exchanges. Everything you need to know about 1031 Exchanges (also known as Starker Trusts) and how to use them to defer capital gains and recapture taxes.
  2. LLCs, Corporations, And Other Ways Of Holding Title To Real Estate. The time to start thinking about you’re going to hold title is BEFORE you buy an investment property. This ebook walks you through the different ownership options and what you need to know.
  3. How to Profit From Foreclosures: 9 Top Tips From Investors. Avoid the most common and most devastating mistakes real estate investors make by reading this ebook.
  4. Finding Great Tenants And Profitably Managing Real Estate Investments. If you don’t have good tenants, you’ll wind up with losing money with your real estate investment – or perhaps destroying your credit. This ebook tells you how to find great tenants, how to price your unit to rent, and how to manage your property effectively and efficiently.
  5. The Successful Real Estate Investors Guide: Top Tax Tips. Investing successfully means you’ve got to keep your expenses low. That means, watch what you pay in taxes. This book walks you through the major tax areas you’ll encounter with real estate investing.

We also have FREE BOOKS and other ebooks in the ThinkGlink.com store.

You can get a FREE copy of my book 50 Simple Steps You Can Take to Disaster Proof Your Finances” or “The REALLY Useful Guide to Working Smarter Not Harder” at the ThinkGlink.com store. You pay the shipping and we’ll send you any number of books for free!

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If you select 3 ebooks from our store and enter the discount code “freeebook” (no quotes), you’ll get one of those ebooks for free. It works with all of our ebooks. Just use the code to get the discount. It will show up when you check out of the ThinkGlink store.