Rates Fall as Job Creation Slows

The job market wasn't so hot in March, and that cooled mortgage rates in the first week of April.

The benchmark 30-year fixed-rate mortgage fell 11 basis points to 6.02 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.31 discount and origination points. One year ago, the mortgage index was 5.80 percent.

The benchmark 15-year fixed-rate mortgage fell 8 basis points to 5.59 percent. The benchmark 5/1 adjustable-rate mortgage fell 17 basis points to 5.44 percent.

Some of the decline happened April 1, when the Labor Department released the employment report for March. The news wasn't good. It showed that nonfarm payrolls grew by 110,000, well below the level needed to keep up with population growth. Economists had expected net job creation of about 220,000. The previous estimates of January and February payroll gains were revised downward by 27,000.

The slower-than-expected job growth was seen as anti-inflationary. With diminished expectations about inflation, long-term interest rates fell, including rates on mortgages.

"It seems as if it is two steps forward, one step back when it comes to job creation," says Joel Naroff, president of Naroff Economic Advisors. "We thought we had reached a point where job gains in the 200,000 or more range would be posted on a more consistent basis. Wrong again."

Another part of the drop in rates happened the day before the employment report, on March 31, when the Department of Commerce issued the statement on personal income and spending in February. It showed that personal income increased 0.3 percent and spending increased by a greater amount -- it went up 0.5 percent. People spent their increased income and then some.

This environment, with spending growth consistently outpacing income growth, is inflationary. Yet the Federal Reserve's favored measurement of inflation, the core personal consumption expenditures deflator, rose 0.2 percent in February, a slowdown from January's 0.3 percent rate. (The core PCE deflator is part of the personal income and spending report.)

With the Fed's latest short-term interest rate increase still ringing in their ears, bond investors took the slowdown in inflation as good news. Long-term rates, including those for mortgages, fell. That prepared the market for a further fall in rates the next day, when the employment report came out.

Naroff is convinced that inflation is alive and dangerous, rising at a 1.8 percent annual rate in January and February. The Federal Reserve doesn't take inflation as an idle threat, either. When the Fed raised short-term rates March 22, it explained that "pressures on inflation have picked up in recent months and pricing power is more evident."

If the Fed is correct, this drop in mortgage rates is likely to be short-lived.

Mortgage Market Seeping Blood

Ready the tourniquets.

Inflation may finally have opened a main artery in the mortgage market and heel-dragging home buyers, along with procrastinating home owners considering refinancing, could really begin to see red.
"Don't wait ten minutes," to lock in a rate, one mortgage broker told a customer waffling on a refinance this week.
"We've had a long run. I hate to see it end," said a loan officer from a major mortgage bank. "But this is the other side of the market now."
Federal Reserve Chairman Alan Greenspan earlier this year had labeled as a "conundrum" the way 30-year mortgage rates continued falling even as the Fed took a "measured" approach to standing down inflation by raising benchmark short-term rates incrementally -- a quarter point seven times in each of its last seven meetings, including one this week.
Home equity loan rates and other short-term consumer rates tied to the prime, which directly follow the Fed's moves, have been nursing nose bleeds for months since last fall in a thinner atmosphere of higher rates.
Now the "conundrum" of lower long term rates (including those for 30-year mortgages) appears about to lose enigmatic status and give way to very real inflation fears. An ongoing bond market sell-off and the Fed's move this week drove 10-year treasury yields to nine-month peaks this week. Two-year note yields rose to the highest levels since 2001 and five-year notes rose to mid-2002 levels.
Because long-term treasury yields influence the mortgage market, the average 30-year fixed-rate mortgage has been moving higher too, from 5.57 percent in mid-February to nearly six percent last week, according to Freddie Mac's weekly survey.
"The experts are saying there's a chance the rates could come back down a bit, that there was an over reaction, but it's a crap shoot. You just can't count on it" said Earl Peattie, vice president of National Financial News Service in Philadelphia, PA.
It's the kind of risk consumers haven't known for years and how they will react remains uncertain. Decision-making speed, however, is mandatory.
"It depends on the situation. You have to ask yourself 'How soon do I do this? Can I take advantage of rates now or am I better of waiting weeks or months from now?' It's a timing issue. Finding the right property and having all your reserves ready to go forth with a loan," said Peattie.
After mortgage rates remained at record levels for years, a growing consensus, perhaps prematurely, suggested rising long-term mortgage rates was inevitable.
The mortgage market has begun to catch up with those predictions.
The Mortgage Bankers Association said mortgage survey of activity for the week ended March 18 revealed mortgage origination activity was down 9.5 percent from a week ago and 39.3 percent from a year ago. Lending has declined in the five of the past six weeks.
The association said purchases are off by 3.5 percent while refinancing applications dropped 16.5 percent. Refinancing constituted 39.5 percent of all mortgage activity a week ago, down from a 42.9 percent share in the previous week.
Higher fixed rates are creating a run on cheaper adjustable rate mortgages, or ARMs, which accounted for 33.5 percent of all activity last week compared to only 32.4 percent a week earlier.
"I suggest locking in a rate because once the rate is gone, you can't go back. I'm definitely advising locks," said Brandon Knapp with Lawson & Associates Mortgage Planners in Campbell, CA.

by Broderick Perkins

Follow the tax rules to guarantee gift deductibility

Good deeds can also mean good tax breaks
By Kay Bell

As the year winds down, thousands of folks are writing checks to or boxing up items for their favorite charitable causes.

One of the side benefits of all this goodwill is that Uncle Sam will reward you at tax-filing time -- if you follow donation tax rules.

First, you have to keep an eye on the calendar. Your charitable gifts must be made in the tax year for which your are filing the return. To be claimed on your 2004 return, due next April 15, your donation has to be in the charity's hands by Dec. 31. Anything you contribute after that will count toward your 2005 tax return. return. You do get a bit of leeway here if you write a check or make a contribution by credit card. The 2004 date on the check or charge counts, even if the statement doesn't arrive or check doesn't clear until next year.

And just how much of a tax break your donations will produce also depends on how you file your taxes. Charitable contributions only help you at tax-filing time if you itemize deductions. That means you keep track of what you give and file the long Form 1040 and Schedule A.
If you opt instead to take the standard deduction when you file your return, the choice made by most taxpayers, your donations will still help the organizations you give to, but they won't help cut your tax bill. You can't add your donation totals to your standard deduction to increase that amount.

So how do you know whether you should itemize or claim the standard deduction? Start by finding out which standard deduction amount applies to you. It depends on your filing status: $4,850 for single or married filing separately taxpayers; $7,150 for heads of households; and $9,700 for married couples who file joint returns. If you have enough deductions -- for example, your donations plus mortgage interest plus real estate taxes -- to exceed the standard amount, it generally makes good tax sense to itemize.

The rules regarding charity tax claims
OK, you've determined that itemizing is the way to go. Now it's time to tally your big-heartedness.

A nice thing about charitable contributions is that, unlike medical or miscellaneous deductions, there is no threshold amount to meet. You can give as little as $5 and still add it to the rest of your itemized deductions.

And you're not limited to monetary donations. You can give merchandise, appreciated assets, count the miles you drive for a worthy cause, even deduct part of the price of a ticket you purchased to attend a charity event.

But there still are a few Internal Revenue Service rules you must follow to make sure your contributions pay off at filing time.

To be deductible, contributions must be made to qualified organizations. Organizations can tell you if they are qualified and if donations to them are deductible. You also can read the charity's literature to ensure that it is fully recognized by the IRS. For complete peace of mind, check out the agency's online list (Publication 78) of exempt organizations or call the IRS at 1-800-829-1040 and ask about the group's tax status

If you get anything in return for your donation -- merchandise (including your old auto), goods, services, admission to a charity ball, banquet, theatrical performance or sporting event -- you can deduct only the amount that exceeds the fair market value of the charity's thank-you token or benefit. For example, if you give your local PBS station $100 and get a $25 videotape of a Masterpiece Theater performance in return, you can only deduct $75.

When you give goods instead of cash, it's up to you -- not the IRS, not the charity -- to assign a value to your donation. Of course, the IRS has rules on how you decide what a donated item is worth: Claim its fair-market value, or what a willing buyer would pay for that item in its current shape, not what it was worth when it was new. Click here for some Bankrate.com worksheets to help you complete this task.

Even though you generally don't have to include substantiation of your gift-giving with your return, it's a good idea to keep a record of your donated goods as well as cash gifts. So when Goodwill asks, "Do you want a receipt?" say "Yes." If they don't offer, ask for one.

Extravagant giving
Acknowledgment of your largesse is necessary when your gifts are large. For a contribution of $250 or more, you must get a written receipt of your donation from the qualified organization before you can claim the deduction.

When you donate more than $500 worth of goods to charity, you must include with your tax return Form 8283, Noncash Charitable Contributions, detailing your generosity. Take this deduction amount and forget the form, and the IRS could disallow your claim.

In an even bigger giving mood? If you claim a deduction of more than $5,000 for an item, the IRS wants more than just your word. You must have a qualified appraiser provide the value and then attach an appraisal summary (Section B of Form 8283) to your tax return.


And while Uncle Sam basically views charitable gifts as a good thing, he has his limits.

In some cases, the IRS won't let you claim all your contributions in one tax year. Generally, your donations cannot be more than 50 percent of your adjusted gross income, although in some instances the limit is 20 percent or 30 percent depending on the type of property you donate and the type of organization to which you give it.

You can carry over your excess contributions for up to five more tax years, but your carryover amounts will still be subject to the original adjusted gross income limitation rules. For most donors, these limits don't pose a problem. However, the total of all your Schedule A itemized deductions could be reduced if you make a lot of money ($139,500 for 2003 returns).

More details on charitable contribution tax deductions and possible limitations are found in IRS Publication 526, Charitable Contributions, and Publication 561, Determining the Value of Donated Property.

http://www.geocities.com/q41

A tidier house could mean a smaller tax bill

Your old stuff can save you big tax dollars
By Andrea B. Abramowitz

Feeling a need to simplify your life? Getting rid of some of that old stuff cluttering up the house could be just the answer.

And the nice thing about emptying a crammed closet is that you get two perks for the price of one: More space plus potentially hundreds of dollars in tax savings!

You're probably aware that when you give clothes and household goods to charity, you can claim a tax deduction. It can be a valuable part of your deduction considerations if you itemize in your returns. But many people sell themselves way short by undervaluing their deduction claims.

Whether it's sweaters or sewing machines, trousers or typewriters, blouses or bicycles, the system is the same.

"Most people take a bunch of old clothes, throw it into a bag and toss it into a dumpster outside a Goodwill or Salvation Army building," says Tony Anchukaitis, a CPA, CFP and PFS with Canby, Maloney & Co. Inc., in Framingham, Mass.

Your papers, please
But these people are missing a key ingredient according to Anchukaitis, "Documentation is key to how much you want to claim for donations. If you want a big number deduction, keep track of the items and their receipts -- the more documentation you have, the higher a deduction you can claim."

Documentation is the best way to arm yourself against money-grabbing government agents. But documenting is no easy task.

According to the Internal Revenue Service, a taxpayer can deduct the fair market value of clothing and household goods. Fair market value is defined as "the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts."

But the IRS doesn't have an exact formula or method for you to establish fair market values, so what you write down is completely subjective. The IRS does, however, offer vague guidelines.

With regards to fair market value, Ken Hubenak of the IRS Media Relations office says, "It's something YOU have to determine. All the main rules are laid out in Publication 561, Determining the Value of Donated Property and Publication 526, Charitable Contributions."

A former IRS agent who can speak more freely, but asked to remain anonymous, adds, "a sweater is a sweater. It doesn't matter if it was a $2,000 sweater from Nieman Marcus or a $20 sweater from Kmart." He adds that most donated clothing goes to homeless people, so they don't care where the sweater came from.

By following these guidelines, you'll be able to receive maximum tax benefits when donating used clothing and household goods.

1. Give your items to a qualified organization -- an organization that has a tax-exempt status with the IRS. To find out if the organization is qualified:

• Ask the charity if the IRS has qualified it.
  
• Read the charity's literature to ensure that it is fully recognized by the IRS.
  
• Check IRS Publication 78, Cumulative List of Organizations, which lists most qualified organizations.
  

2. Assign a fair market value to the items that you're donating.

• You can't claim a fair market value that is more than the original cost of that item.
  
• CFP Ken Pikor of Westerville, Ohio, who is also an "enrolled agent" (someone who can represent taxpayers before all administrative levels of the IRS) says, "If you happen to be like my wife who saves all her clothing receipts and files them, a good rule to follow when valuating used clothing/items, is to use 25 percent of the original purchase price as a guide when determining the donated value."
  

3. Keep a detailed record of your donated items, including:

• The number of items and the condition they're in.
  
• The dates you received or bought the items -- if you don't know exact dates, use approximate dates.
  
• The original purchase prices.
  
• A quick snapshot or video of the items you're donating -- this will substantiate your contribution if questions ever arise. Keep the visual record with your tax records.
  
• Signed and dated receipts from the organization receiving your donations -- when Goodwill asks you, "Do you want a receipt?" say "yes."
  

4. Report your charitable deductions on Schedule A of Form 1040.

5. The value of your charitable deductions can't be more than 50 percent of your adjusted gross income in any single year. Donations exceeding the 50 percent limit can be carried forward to future years.

6. When you donate more than $500 worth of goods to charity, you must include Form 8283, Noncash Charitable Contributions, with your tax return.

7. If your claimed deduction is more than $5,000, you must get an appraisal from a qualified appraiser and attach an appraisal summary (Section B of Form 8283) to your tax return. A qualified appraiser is someone authorized to complete Part III, Declaration of Appraiser, of Section B.

Dealing with large donations

You may be thinking that a donation of more than $5,000 is out of your league. But consider this, if a relative dies or moves into a nursing home, donating their sheets and towels, furniture and kitchen utensils, may be the most practical way of cleaning up. The total fair market value of a large donation like that could easily top $5,000.

The best way to deal with an extraordinarily large donation, says Peter Jason Riley, a CPA in Newburyport, Mass., "is to put a note on your return, claiming that it's a donation from a deceased person or an estate situation."

A note explaining the circumstance may just help you avoid facing that dreaded IRS audit.

http://www.geocities.com/q41

Uncommon charitable donations that can cut your tax bill

Atypical charitable donations that can cut your tax bill
By Kay Bell

If you think your tax deduction for charitable contributions ends when you drop that box of clothing off at the Salvation Army, think again. You may be cheating yourself.
The Internal Revenue Service allows several different ways to take tax advantage of your goodwill.

Driving home deductions

Volunteer work itself does not produce a tax deduction. However, your travel expenses getting to and from the volunteer location are deductible. If you use your car to help out once you get there (for example, delivering food to the needy for your church), that counts, too.

You can take a standard deduction of 14 cents per mile on your tax return. Or, if it's more advantageous and you kept track, you can deduct the actual cost of your gas for your philanthropic driving. With either choice, you also can include any parking fees or tolls paid.

Out-of-pocket expenses

Similarly, if you pay for some of a qualified organization's expenses and aren't reimbursed, these costs can count as charitable deductions. This might be buying stamps for a group's mailings or purchasing office supplies for the organization's administrative operations.

And if your volunteer work requires you wear a uniform -- say, as a Red Cross hospital aide -- the cost of the clothing and of keeping it clean are deductible.

Student lodging can mean a tax break

Did a student live with you last year? You may be able to deduct some expenses associated with that boarder, either a foreign or American student, if he or she:

1. Is not your dependent or relative,
2. Is a full-time student in the 12th or lower grade at a U.S. school, and
3. Lives in your home under a formal agreement with a qualified organization to provide educational opportunities for the student.
   

You can deduct up to $50 a month for each full calendar month the student lives with you. The IRS even eases the definition of a month in these cases. When a student meets the three conditions above for 15 or more days, that counts as a full month.

Gifts of appreciated property

You also can give appreciated assets, enabling you to avoid paying capital gains taxes while simultaneously getting a tax deduction. This tax move is most beneficial if you donate stock you've owned for more than a year and its value has increased substantially.
If you sell the appreciated stock, you'll have to pay taxes at the 15-percent long-term capital gains rate on your profit. Even if you give the cash you make from the sale to a charity, you'll still have to pay the taxes. But if you give the stock directly to the qualified organization, you can claim a deduction for the full asset price at the time you donated it and escape the capital gains bill.

For example, if you bought a 100 shares of stock several years ago for $5 a share and it was selling for $10 a share when you donated it to a charity, you can claim the full appreciated value of $1,000 as a charitable deduction. Remember, this valuation applies to long-term holdings. If you had owned the stock for a year or less, you could only deduct what you originally paid for the asset, $500 in this case.

A growing number of charitable groups have established programs to accept gifts of appreciated property. Check with your favorite charity to see if it can help you through this donation process.

Easing your tax bill and helping your country

And if you're feeling particularly patriotic, you can help keep reduce the country's public debt along with your tax bill.

The Treasury regularly borrows money by selling Treasury securities such as T-bills, notes, bonds and savings bonds to the public. This public debt helps raise cash to keep the U.S. government operating. Any contribution you make to reduce the national debt burden is deductible as a charitable contribution on your tax return for the year in which you make it.

You should make the payment as a separate check payable to Bureau of the Public Debt and send it to: Bureau of the Public Debt, Department G, P.O. Box 2188, Parkersburg, WV 26106-2188. Of, if you prefer, you can save a stamp and stick the check in your tax return envelope.

Same donation rules apply

Although some of these charitable donations are not commonly taken, the usual tax rules still apply.

To be deductible, contributions must be made to qualified organizations. Ask the group if it meets IRS guidelines. Most will be able to tell you. Or you can check IRS Publication 78 online for the latest list. You also can call the IRS at 1-800-829-1040, TTY/TDD connection at 1-800-829-4059, to find out if an organization meets IRS charitable standards.
And if your gift is worth $250 or more, you've got to get a receipt from the organization before you can claim the deduction.

Don't get greedy

While Uncle Sam is pretty flexible about letting you write off your good works, don't go overboard. There are some things the IRS says it won't allow, including:

• Contributions to a specific individual, regardless of the person's neediness,
  
• Contributions to a group created to lobby for law changes,
  
• The value of your time or services, such as the income you forfeited to work as an unpaid volunteer,
  
• Your personal expenses, for example, the cost of meals while you're volunteering,
  Appraisal fees to determine the value of donated property, or
  
• Contributions to homeowner associations, social or sport clubs, civic leagues or chambers of commerce.
  

And be sure to meet the most important guideline, or at least the most timely one right now: Make your uncommon contributions by Dec. 31. If you miss that deadline and make the donation in the new year, you can't claim your largesse until you file your 2005 return.
More details about tax deductions for charitable contributions are found in IRS Publication 526, Charitable Contributions, and Publication 561, Determining the Value of Donated Property.


http://www.geocities.com/q41
courtesy of bankrate.com

Beware of scammers looking to divert donations

Don't be fooled by charity scammers
By Julie G. Bandy

Americans have always been altruistic, quick to respond to victims' needs and ready to lend a helping hand or much-needed cash. Unfortunately, scam artists know this charitable trait well and often are waiting with a con to cheat both givers and recipients.

The schemes come through the mail, via telephone and e-mail and by knocks at the door. While many legitimate organizations, such as the Red Cross and the Salvation Army, collect for well-deserved and Internal Revenue Service-approved causes, you need to be alert to scam artists. "

Here's how to make sure your heartfelt donations go to the right cause:
Don't be rushed. Do not feel pressured to make an immediate commitment -- "deadlines" are a characteristic of a scam. Ask the caller or e-mail sender to provide written information on the charity's programs and finances before you make a contribution decision.
Ask questions. Who does this contribution assist? Does your organization intend to meet immediate or long-term needs of those victimized by this tragedy, or both? How much goes to victims? How much goes to administration? Even newly established charities should have written material available describing their programs, anticipated expenditures and how they will carry out activities.
Get it in writing. Always ask for and wait until you receive written material about any offer or charity. Remember, telephone con artists are skilled at sounding believable -- even when they're lying. There's no need to rush to a decision.

Verify. Always make an independent verification of the solicitor's identity before sending a contribution. Call or write the organization's headquarters. Contact your local charity registration office (usually an arm of your state's attorney general's office) or the Better Business Bureau's Wise Giving Alliance to confirm.

Hang on to your cash. Do not pay with cash. Use a check and make it out to the organization, not the individual collecting the donation.
Be stingy with personal information. Do not give your credit card account information over the telephone or online. Always check out the organization before giving any personal information. This could be a ruse to obtain the card number for illegitimate purposes.
Call the authorities. If you cannot verify an organization or you are suspicious of the solicitation, contact the police or the FBI.

http://www.geocities.com/q41
courtesy of bankrate.com

Getting the most tax mileage from that old car

Don't dump that old car, donate it
By Kay Bell

Are you planning to donate your old jalopy to a charity instead of trying to sell or trade it? Then you better give it away by Dec. 31. Next year, the tax rules on auto donations get tougher.

Sure, you'll still be able to donate an old car when the new year rolls around. And you'll still get a tax deduction. But the write-off might not be as large. That's because some people took advantage of the donation system, prompting lawmakers to tighten the vehicle giving guidelines beginning in 2005.

Right now, however, taxpayers still have time to help out a good cause by giving away a car (or boat or other vehicle) and get in under the existing, and more accommodating, Internal Revenue Service rules. If that's your case, here are some things to consider.

First, the timing of your auto donation is critical. All charitable gifts must be made in the tax year for which you are filing the return. To claim a donated auto on your 2004 tax return (due next April 15), you must give it to a charity by this coming Dec. 31.

Next, to write off your auto gift, you must itemize instead of claiming the standard deduction. That means you have to keep track of what you give and file the long Form 1040 and Schedule A. If your old car is the only deduction you can claim on Schedule A, giving it to a charity may not be worth it from a tax standpoint.

To determine whether to itemize or claim the standard deduction, find out your standard deduction amount. It depends on your filing status:

• $4,850 for single or married taxpayers filing separately,
  
• $7,150 for heads of households, and
  
• $9,700 for married couples who file joint returns.
  

If your itemized expenses are close to your standard amount, adding the value of a donated car could be just what you need to make itemizing the right tax choice this year.

Also keep in mind that as a deduction, the value of your car does not directly cut your tax bill. Deductions are used to reduce your taxable income, which usually does mean you'll owe less taxes. But a deduction's actual worth depends on your tax bracket. That means a donation of a $300 auto translates to a tax cut of only $75 for a filer in the 25-percent tax range.

So if you would rather have the cash instead of a comparatively small tax break, sell your old auto. If, on the other hand, you're feeling generous -- or don't want to spend what it would take to get the clunker in sellable shape -- giving it to a charity might be the better route

Check out your charity

Once you've decided to donate your vehicle, the biggest choice is which philanthropic group gets it. More than 4,000 charities accept gifts of vehicles. The important thing is to make sure that the one you select is a reputable and tax-qualified organization. Unfortunately, some con artists take advantage of people's good intentions and accept cars that never go to philanthropic causes.

Other groups may well do valuable community work but are not approved charitable organizations under IRS rules. Ask for copies of the group's federal tax-exempt status documents. You also can check out the IRS Web site's directory to see if the charity is on the approved list or peruse GuideStar's registry, which provides information on more than 850,000 U.S. nonprofit organizations. Or call the IRS at 1-800-829-1040 and ask about the group's tax status.

Don't worry if your car's engine conks out completely before you pull into the charity's parking lot. In most cases, the auto doesn't even have to run. Many groups offer free towing. In fact, it doesn't even have to be a car. Vans, trucks, recreational vehicles, boats and heavy equipment are accepted by many groups.

You must have a clear title to the vehicle, and it must be lien-free. Groups won't accept cars that are still being paid for or that are leased.

Proving your generosity
After handing over the vehicle, get a receipt. For contributions of $250 or more, you must get a written acknowledgment of your gift from the organization before you can claim the deduction. The group getting the car, however, won't include on the receipt the value of your gift.

When it comes to deciding just how much your car was worth, the IRS relies on you to accurately claim the fair market value -- what a willing buyer would pay a willing seller for the product. To get an idea of this, check out auto valuation services such as the National Automobile Dealers Association, the Kelley Blue Book or Edmunds. You may be surprised by how much your donation is worth.

Some taxpayers, however, have gotten greedy when it comes to claiming vehicle donations.
Government inspectors say they found wide discrepancies between the value that some auto donors claim on their tax returns and the actual worth of the cars they give. A November 2003 General Accounting Office report notes that excessive tax valuations of donated vehicles cost the U.S. Treasury $654 million in tax revenue in 2000.

Tougher law for 2005
To help reduce overvalued auto donations (and bring more tax dollars to federal coffers), the IRS has issued a new guide for auto donations. In addition, legislation signed into law by President Bush on Oct. 22 makes substantial changes to used-car charitable deductions next year.

Beginning Jan. 1, 2005, when a taxpayer donates a vehicle for which the claimed value is $500 or more, the precise deduction he can claim will depend on how the charity plans to use the vehicle. If the auto is sold by the nonprofit, then the taxpayer will be able to deduct only the amount of gross proceeds the organization got from the sale. And the donor will have to depend on the charity to let him know the donation amount by the individual tax-filing deadline.

If, however, the group plans to use the car for what the law deems as "significant" tax-approved charitable work, the donor would be able to claim the fair market value of the donated vehicle. The new law also provides penalties for fraudulent acknowledgments provided to taxpayers.

Sen. Charles Grassley (R-Iowa), primary sponsor of the measure, calls it "common-sense reforms [that] will go a long way toward ending the abuses in car donations" documented by government accountants.

Charities acknowledge that there are problems with the current system, but many are skeptical about changes that put the burden of policing tax breaks on the recipient groups. The organizations also worry that the new rules will dampen these types of contributions.

In a letter sent to the Treasury Secretary during consideration of the changes, representatives of two dozen charitable groups argued that, "Under such a proposal, a taxpayer's actual deduction amount would be uncertain at the time of a contribution, and potential donors would not be able to compare the relative benefits obtained by donating their vehicles, trading them in to a car dealer, or selling the vehicles themselves. ... We believe this approach would greatly discourage and reduce future vehicle donations to charities and increase the cost of administering such programs, and we would respectfully ask that the Treasury join us in opposing any such proposal."

Lawmakers, however, believe that the amount of tax cheating on vehicle donations is sufficient to warrant the changes and that the new law will not prove that onerous. "Without any hassle, the taxpayer can still donate his 1985 Pacer that goes only in reverse, and the charity will get the same amount of money it always gets," Grassley said. "The only difference is the taxpayer can’t claim $5,000 for the car that will sell at auction for $50."

Details on the implementation and enforcement of the new law will be developed by the U.S. Treasury in the coming months, and lawmakers and charities will be watching closely. Until then, if you want to give your car to your favorite cause, be warned: Even without the new law, auditors and lawmakers will be watching. Claiming a $5,000 tax break for a 1992 Ford Escort will definitely raise IRS eyebrows.

http://www.geocities.com/q41
cortesy of bankrate.com

Surprises in the New Year

We get the final revision to the third-quarter GDP report on Wednesday. Gross domestic product is the measure of the nation's total economic output. The first estimate of GDP from July through September showed growth of 3.7 percent. Then came the first revision, based on updated data, and growth was bumped up to 3.9 percent. Wednesday brings the final revision. Economists surveyed by Briefing.com forecast that the number will stand at 3.9 percent.
If they are wrong, and the final estimate of GDP growth is revised upward again, to above 4 percent, you can expect a modest bump in long-term rates. If GDP is revised downward, which I doubt will happen, mortgage rates probably won't drop much, if at all.

All in all, economists don't expect economic reports to spring any surprises on us, and that's a recipe for steady interest rates. Of course, if you reread that last sentence, you will want to reach through your computer monitor and slap me and remind me that no one expects surprises. That's why they're surprises.

Another report of note comes Thursday, when the Census releases its estimate of new home sales in November. The economists surveyed at Briefing.com expect a 3 percent drop from the previous month. If they're right, there's no reason to panic -- October's new home sales were the third-strongest in history, so a modest decrease is to be expected.

http://www.geocities.com/q41
courtesy of bankrate.om

Inaugural Address

Welcome to my Mortgage Blog. I look forward to providing you with useful mortgage and financial information.

For those of you that don't know, a Blog is short for Web Log. A Web Log is an interactive website/open forum, where guests can contribute to the website.

On occasion I'll post my thoughts, articles and links to resources on industry related and financial issues. Feel free to ask questions, or inspire discussion on topics you may be interested in.

As always, if you or anyone you know is looking to buy, sale, refinance, or has any questions regarding real estate issue please refer them to me. If I can't personally help you I'm sure I have a professional referral partner that specializes in your area of concern.

http://www.geocities.com/q41