As it happens each year, there are several new tax provisions in California, and probably in other States as well. Here are some of the new provisions for you to be aware of:

• First-time homebuyer credit – I discussed this in a previous post, but you still have until April 30th to use the credit if you’re a first-time homebuyer.
• Retirement plan distributions – if you are at least 70 1/2 years old, you are normally required to take a mandatory annual distribution from your traditional IRA or 401k (talk to your tax advisor to see if this applies to you). Retirees who ignore the annual distributions usually run a big risk — in the form of a 50% excise tax on the amount they should have withdrawn. However, for 2009, you are not required to take the distribution. Why? So Wall Street will have more money to work with should the market rebound.
• Unemployment compensation – if you are unemployed and collecting from the government – good news. The first $2,400 you received in 2009 is tax-free.
• American Opportunity Tax credit – Under the American Recovery and Reinvestment Act (ARRA), more parents and students will qualify over the next two years for a tax credit, the American Opportunity Credit, to pay for college expenses. The new credit modifies the existing Hope Credit for tax years 2009 and 2010, making the Hope Credit available to a broader range of taxpayers, including many with higher incomes and those who owe no tax. It also adds required course materials to the list of qualifying expenses and allows the credit to be claimed for four post-secondary education years instead of two. Many of those eligible will qualify for the maximum annual credit of $2,500 per student. The full credit is available to individuals whose modified adjusted gross income is $80,000 or less, or $160,000 or less for married couples filing a joint return.
• Making Work Pay credit – This is an easy tax credit so be sure to alert your tax preparer. If you earned income in 2009, you get a $400 credit, and $800 if you are filing jointly. There are some exceptions so I recommend you check this out.

 There are several other new tax provisions for 2009 so be sure to check with your tax preparer to make sure you get the benefit of all that you are eligible for.

So what’s your plan to attack your taxes this year? Are you using TurboTax or H&R Block’s online tax product (if you click the graphic at the top of this post you can save!)? Or do you have boxes filled with receipts that you still need to get to your accountant? Whatever you do, make sure you don’t delay and get your taxes mailed or filed by April 15th!

And don’t forget to have your return (if you’re lucky enough to get one!) directly deposited into your bank or credit union account! If you’re a MCCU call us to find out how!

Questions or comments? E-mail me at blogger@matadorsmoneymatters.com.

Fellow coupon-clippers, I have good news! I just stumbled across this site – Shortcuts.com – where you can choose electronic coupons! Here’s how it works:

• Find out first if they support your local grocery store. They do support many including Ralphs, Vons and Pavillions.
• Register for the site (it’s free but you’ll need your rewards card number)
• Enter your shopping preferences under ‘Profile’

Now they will list available coupons for you. All you do is click on the ones you want and the next time you go shopping and swipe your rewards card, the coupons, and the savings, will be automatically deducted from your bill! It’s really that simple.

It’s important in this economy to save as much as you can, and to take advantage of any money-saving opportunities like this one.

Check it out and let me know how you liked it!

Questions or Comments? E-mail me at blogger@matadorsmoneymatters.com.

 On the DMV MySpace page, teens can connect to the department’s Web site directly and take sample written driving tests, learn about important new safety laws aimed at teens (like the no-cell phone law), set up appointments for written and behind the wheel driving tests, order personalized plates and more. 

The widely-popular “Ask The DMV” Column, located in the blog section of the department’s MySpace page, is widely popular. Here, teens can get their questions answered without having to call the DMV or even take the time to search the Web site for much needed information.  Teens and their parents can use the DMV’s convenient online services 24 hours a day, 7 days a week, for free –either by accessing www.dmv.ca.gov or by obtaining information directly from the MySpace page.

If your teen needs a more visual medium, the DMV YouTube Channel is also a powerful educational resource. The site contains more than 50 instructional video clips, allowing young adults to hone their driving skills right from their desktops.  Not just for teens, these videos bring the California Driver Handbook to life and serve as a refresher course for drivers of all levels. Topics include the Top 10 reasons people fail their behind the wheel test and other common misconceptions about the rules of the road. The DMV YouTube channel can be accessed on the DMV Web site at  or by going directly to YouTube.

Facebook, currently the most popular social networking Web site, is another great way for teens to find out more information about the DMV. By becoming a fan, teens and their parents will have access to DMV news updates, links to online services, and driving safety videos—you can even interact with the DMV by posting comments on the fan page. To become a fan of the DMV on Facebook, just simply go online to the DMV website or you can go directly to Facebook. 

Teens and their parents can now receive more instant updates by following the DMV on Twitter. Using only 140 characters or less, DMV will “tweet” updates with new information on related DMV services and important driving safety information. If you have questions for the DMV, Twitter is a great way to get your questions answered instantly. You can follow the DMV on Twitter by logging on the DMV website or go directly to Twitter.

Connecting with teenagers in a way that is comfortable for them is vital to the DMV’s goal to prepare young drivers to be responsible and knowledgeable of the rules of the road before they get behind the wheel.  Encourage your teen to log-on! The visual and interactive online content can make learning to drive fun and easy.

The credit union says the rogue Android application “creates a shell of mobile banking apps that tries to gain access to a consumer’s financial information.”

The malware, developed by “Droid09,” has been removed from the market but the safest best for those that have downloaded it is to remove it from your phone and take it to your mobile provider to ensure it’s completely removed.

Questions or comments? E-mail me at blogger@matadorsmoneymatters.com.

Basically, they’re saying that “Too-big-to-fail banks are profiting from bailout dollars and government guarantees, and growing bigger.” And, much like It’s a Wonderful Life, they are urging consumers to move their money from the big banks to smaller community banks. Initially, there was no mention of credit unions. However, after several readers wrote in (myself included) suggesting Huffington steer consumers to credit unions as well, they are now doing just that.

The “Move Your Money” campaign has gained national popularity in such a way that I really wish we could measure how many people actually do move their money to community banks and credit unions.

If you are moved (pun intended) by this campaign, please consider moving your money to MCCU or a local credit union in your area. Remember, credit unions have the same insurance limits as banks, all federally insured by the National Credit Union Administration, or NCUA. Most credit unions, like MCCU, offer everything a bank does, oftentimes with lower fees and better rates/programs. Looking for a loan? Check with your local credit union first.

If you are still with a “big bank” and want to move your money, consider a credit union first.

Questions or Comments? E-Mail me at blogger@matadorsmoneymatters.com.

It is the leading cause of distracted driving collisions in California, increasing one’s risk of a crash by 23 times. It causes an estimated six percent of traffic collisions, resulting in approximately 2,600 deaths and as many as 330,000 injuries a year in the U.S. It’s even more dangerous than drunk driving and driving under the influence of marijuana.

If these facts aren’t enough to get you to put down your phone and drive, maybe the financial repercussions will be. It has been more than a year since the “hands-free” cell phone law was first introduced in California. The law states that adults are required to use hands-free devices when using a cell phone while driving. Though many drivers have chosen to follow the law by using a blue tooth or ear piece, it is evident by the more than 100,000 citations issued statewide in the law’s first 13 months that many are opting to continue to break the law and use their cell phone without a hands-free device.

While the law has been in effect since July of 2008, this does not mean that regulation of the law has declined, in fact it has increased. If cost is an issue, consider this: The cost of a blue tooth device ranges from around $30 to $150 depending on the quality of the device. In contrast, the bail amount for a first offense can be well over $300. In addition to the high fee, drivers should know while the infraction won’t add points to your DMV record, it will still show on your driving record.

Also affected by additional fees are tickets received for breaking the no-text law, which was enacted in January 2009. This law prohibits a person from using an electronic wireless communications device to write, send or read text-based messages while operating a motor vehicle. This law specifically addresses, but is not limited to, instant messages and all forms of e-mail based correspondence. Similar to the hands-free law, drivers are subject to a $20 fee for the first offense and $50 for each subsequent offense, which after penalty fees can end up totaling more than triple or quadruple the base fine. If the risk factors and dangers of using a cellular phone while driving haven’t been enough to motivate you to put down the phone, hopefully knowing the dent it will put in your wallet, will.

For more information regarding cell phone laws and safe driving practices, check out the California Department of Motor Vehicles’ Web site. Save time. Go online!

Do not text them or call them back! This is  a scam. Think about it, does your Visa Credit Card Carrier have your cell phone number? Are you signed up to get text alerts? If you answered no, don’t call. 

Please let everyone you can know about this. They will ask you for your credit card number, and probably your social security number. This is a complete phishing scam.

Who is eligible to claim the $6,500 tax credit?
Qualified move-up or repeat home buyers purchasing any kind of home are eligible to claim this credit.

What is the definition of a move-up or repeat home buyer?
The law defines a tax credit qualified move-up home buyer (long-time resident) as a home owner who has owned and resided in a home for at least five consecutive years of the eight years prior to the purchase date. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse. Repeat home buyers do not have to purchase a home that is more expensive than their previous home to qualify for the tax credit.

How is the amount of the tax credit determined?
The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $6,500. Purchases of homes priced above $800,000 are not eligible for the tax credit.

Are there any income limits for claiming the tax credit?
Yes. The income limit for single taxpayers is $125,000; the limit is $225,000 for married taxpayers filing a joint return. The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) above those limits. The phaseout range for the tax credit program is equal to $20,000. That is, the tax credit amount is reduced to zero for taxpayers with MAGI of more than $145,000 (single) or $245,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.

What is modified adjusted gross income?
Modified adjusted gross income or MAGI is defined by the IRS. To find it, a taxpayer must first determine “adjusted gross income” or AGI. AGI is total income for a year minus certain deductions (known as “adjustments” or “above-the-line deductions”), but before itemized deductions from Schedule A or personal exemptions are subtracted. On Forms 1040 and 1040A, AGI is the last number on page 1 and the first number on page 2 of the form. For Form 1040-EZ, AGI appears on line 4 (as of 2007). Note that AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains.

To determine modified adjusted gross income (MAGI), add to AGI certain amounts of foreign-earned income. See IRS Form 5405 for more details.

If my modified adjusted gross income (MAGI) is above the limit, do I qualify for any tax credit?

Possibly. It depends on your income. Partial credits of less than $6,500 are available for some taxpayers whose MAGI exceeds the phaseout limits.

Can you give me an example of how the partial tax credit is determined?
Just as an example, assume that a married couple has a modified adjusted gross income of $235,000. The applicable phaseout to qualify for the tax credit is $225,000, and the couple is $10,000 over this amount. Dividing $10,000 by the phaseout range of $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time home buyer tax credit that is available to this couple, multiply $6,500 by 0.5. The result is $3,250.

Here’s another example: assume that an individual home buyer has a modified adjusted gross income of $138,000. The buyer’s income exceeds $125,000 by $13,000. Dividing $13,000 by the phaseout range of $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $6,500 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,275.

Please remember that these examples are intended to provide a general idea of how the tax credit might be applied in different circumstances. You should always consult your tax advisor for information relating to your specific circumstances.

How is this home buyer tax credit different from the tax credit that Congress enacted in July of 2008? How is this different than the rules established in early 2009?
The previous tax credits applied only to first-time home buyers and were for different amounts of money.

How do I claim the tax credit? Do I need to complete a form or application? Are there documentation requirements?

You claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on line 67 of the 1040 income tax form for 2009 returns (line 69 of the 1040 income tax form for 2008 returns).

No other applications are required, and no pre-approval is necessary. However, you will want to be sure that you qualify for the credit under the income limits and repeat home buyer tests. Note that you cannot claim the credit on Form 5405 for an intended purchase for some future date; it must be a completed purchase. Home buyers must attach a copy of their HUD-1 settlement form (closing statement) to Form 5405 as proof of the completed home purchase.

What types of homes will qualify for the tax credit?
Any home that will be used as a principal residence will qualify for the credit, provided the home is purchased for a price less than or equal to $800,000. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats. The definition of principal residence is identical to the one used to determine whether you may qualify for the $250,000 / $500,000 capital gain tax exclusion for principal residences.

It is important to note that you cannot purchase a home from, among other family members, your ancestors (parents, grandparents, etc.), your lineal descendants (children, grandchildren, etc.) or your spouse or your spouse’s family members. Please consult with your tax advisor for more information. Also see IRS Form 5405.

I read that the tax credit is refundable. What does that mean?
The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit.

For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that the taxpayer qualified for the $6,500 home buyer tax credit. As a result, the taxpayer would receive a check for $5,500 ($6,500 minus the $1,000 owed).

Instead of buying a new home from a home builder, I hired a contractor to construct a home on a lot that I already own. Do I still qualify for the tax credit?
Yes. For the purposes of the home buyer tax credit, a principal residence that is constructed by the home owner is treated by the tax code as having been purchased on the date the owner first occupies the house. In this situation, the date of first occupancy must be after November 6, 2009 and on or before April 30, 2010 (or by June 30, 2010, provided a binding sales contract was in force by April 30, 2010).

In contrast, for newly-constructed homes bought from a home builder, eligibility for the tax credit is determined by the settlement date. Be sure to check with a tax advisor in cases where a HUD-1 form is not used at settlement to be sure you have sufficient documentation to attach to IRS Form 5405.

Can I claim the tax credit if I finance the purchase of my home under a mortgage revenue bond (MRB) program?
Yes. The tax credit can be combined with an MRB home buyer program.

I am not a U.S. citizen. Can I claim the tax credit?
Perhaps. Anyone who is not a nonresident alien (as defined by the IRS) and who has owned and resided in a principal residence in the United States for at least five consecutive years of the eight years prior to the purchase date can claim the tax credit if they meet the income limits. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse. The IRS provides a definition of nonresident alien in IRS Publication 519.

Is a tax credit the same as a tax deduction?
No. A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $6,500 in income taxes and who receives an $6,500 tax credit would owe nothing to the IRS.

A tax deduction is subtracted from the amount of income that is taxed. Using the same example, assume the taxpayer is in the 15 percent tax bracket and owes $6,500 in income taxes. If the taxpayer receives a $6,500 deduction, the taxpayer’s tax liability would be reduced by $975 (15 percent of $6,500), or lowered from $6,500 to $5,525.

Is there a way for a home buyer to access the money allocable to the credit sooner than waiting to file their 2009 or 2010 tax return?
Yes. Prospective home buyers who believe they qualify for the tax credit are permitted to reduce their income tax withholding. Reducing tax withholding (up to the amount of the credit) will enable the buyer to accumulate cash by raising his/her take home pay. This money can then be applied to the downpayment.

Buyers should adjust the withholding amount on their W-4 via their employer or through their quarterly estimated tax payment. IRS Publication 919 contains rules and guidelines for income tax withholding. Prospective home buyers should note that if income tax withholding is reduced and the tax credit qualified purchase does not occur, then the individual would be liable for repayment to the IRS of income tax and possible interest charges and penalties.

In addition, rule changes made as part of the economic stimulus legislation allow home buyers to claim the tax credit and participate in a program financed by tax-exempt bonds. As a result, some state housing finance agencies have introduced programs that provide short-term second mortgage loans that may be used to fund a downpayment. Prospective home buyers should check with their state housing finance agency to see if such a program is available in their community. To date, 18 state agencies have announced tax credit assistance programs, and more are expected to follow suit. The National Council of State Housing Agencies (NCSHA) has compiled a list of such programs, which can be found here.

HUD allows monetization of the tax credit. What does that mean?
It means that HUD will allow buyers using FHA-insured mortgages to apply their anticipated tax credit toward their home purchase immediately rather than waiting until they file their 2009 or 2010 income taxes to receive a refund. These funds may be used for certain downpayment and closing cost expenses.

Under the guidelines announced by HUD, non-profits and FHA-approved lenders are allowed to give home buyers short-term loans. The guidelines also allow government agencies, such as state housing finance agencies, to facilitate home sales by providing longer term loans secured by second mortgages.

Housing finance agencies and other government entities may also issue tax credit loans, which home buyers may use to satisfy the FHA 3.5 percent downpayment requirement.

In addition, approved FHA lenders can purchase a home buyer’s anticipated tax credit to pay closing costs and downpayment costs above the 3.5 percent downpayment that is required for FHA-insured homes.

More information about the guidelines is available on the NAHB web site. Read the HUD mortgagee letter (pdf) and an explanation of the FHA Mortgagee Letter on Tax Credit Monetization (pdf). An FAQ about monetization (pdf) is available at the NAHB web site.

If I’m qualified for the tax credit and buy a home in 2009 (or 2010), can I apply the tax credit against my 2008 (or 2009) tax return?
Yes. The law allows taxpayers to choose (elect) to treat qualified home purchases in 2009 (or 2010) as if the purchase occurred on December 31, 2008 (or if in 2010, December 31, 2009). This means that the previous year’s income limit (MAGI) applies and the election accelerates when the credit can be claimed. A benefit of this election is that a home buyer in 2009 or 2010 will know their prior year MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount.

Taxpayers buying a home who wish to claim it on their prior year tax return, but who have already submitted their tax return to the IRS, may file an amended return claiming the tax credit using Form 1040X. You should consult with a tax professional to determine how to arrange this.

For a home purchase in 2009 or 2010, can I choose whether to treat the purchase as occurring in the prior or present year, depending on in which year my credit amount is the largest?
Yes. If the applicable income phaseout would reduce your home buyer tax credit amount in the present year and a larger credit would be available using the prior year MAGI amounts, then you can choose the year that yields the largest credit amount.

Questions or comments? E-mail me at blogger@matadorsmoneymatter.com

Daily reports of doom and gloom surrounding this housing market seem endless with numerous foreclosures and increased government regulations, making a home purchase seem even more difficult and your dream of home ownership just that, a dream. However, there are ways to improve your chances of purchasing a home utilizing the criteria of lenders to your benefit.

While it is true that financial institutions are imposing stricter lending standards, there are alternatives for first time homebuyers including programs with flexible guidelines requiring little down payment, balanced with job stability and good credit. In addition, there are public servant programs for teachers, police officers and other public employees, which are government-backed programs that are available with as low as 3.5% for a down-payment.

There is more good news. As interest rates are still relatively low, this is a great time for people to get into their first home. Inventories are high and with the continued influx of foreclosures, homeowners are eager to sell, creating a “buyer’s market”, and will often absorb closing costs when negotiating. Wise buyers have a real opportunity of obtaining their dream home at the right price.

 There are still several things to consider before purchasing a new home. First, be familiar with your credit score and credit history prior to pre-qualifying because the better your credit score, the better chance you have of obtaining a loan and at a more desirable rate. Also, start saving for a down-payment and pay off your debt. A 20% down-payment may be difficult to accumulate, but a 3.5% down-payment is within reach. Lastly, you should get pre-qualified so you know how much house you can afford, and you will be taken more seriously by the sellers.

Home ownership is within reach! For those of you looking to purchase, keep searching for your dream home while the housing market is down. These economic times will sooner or later be turning around as history has proven, and you wouldn’t want this opportunity to pass you by! Find out more about MCCU’s mortgages or call our Loan Department today for more information or to get pre-qualified or apply – 818.993.6328.

Questions or comments? E-mail me at blogger@matadorsmoneymatters.com.

In the past year or so, we’ve all seen several banks and credit unions failing and either closing their doors completely, or being swept up by a larger financial institution.

A good way to check on your financial institution’s well-being, besides looking at annual reports, is to check their rating on Bauer Financial. Bauer has been analyzing and reporting on the financial condition of the nation’s banking industry since 1983. They analyze bank and credit union’s quarterly financial data, and base their ratings (ZERO is the lowest and 5 is the highest) on factors such as liquidity, delinquencies, and net worth.

Before you open a new account with a bank or credit union, it’s always a good idea to check with Bauer first to see what their rating is. If they have a low rating, it’s probably a good idea to look at another financial institution for your money.

And – this is extremely important – always make sure that your funds are 100% insured.

MCCU is proud to continue to receive a 5-star rating from Bauer each month. For more information go to Bauer’s website.

Questions or Comments? E-mail me at blogger@matadorsmoneymatters.com.