Interest-only home loans pave path to riches Jan 30, 2007, 4:00 am PST
If you are adverse to new ways of thinking about your mortgage and building wealth, don't read "Untapped Riches" by Susan and Anthony Cutaia. This new book will challenge your thinking about mortgages.
Instead of making extra mortgage principal payments to own your home and investment properties free and clear as fast as possible, the mortgage broker authors advise never paying off your mortgage and building wealth instead.
Purchase Bob Bruss reports online.
This book is not for typical homeowners who think it's smart to pay off their home loans as fast as possible. Instead, the husband and wife co-authors explain why interest-only, so-called "option mortgages," and even negative-amortization mortgages cut monthly mortgage payments, enabling borrowers to acquire more properties.
Contrary to what most mortgage advisers suggest, the Cutaias are big advocates of using the leverage of borrowing and periodic refinancing to use tax-free cash to acquire more properties. They recommend interest-only adjustable-rate mortgages (ARMs) with maximum payment increase "caps," and making 20 percent cash down payments to obtain 80 percent loan-to-value mortgages.
The book's themes are (1) minimize your mortgage payments, (2) maximize the use of leverage and the use of compound interest, and (3) pay yourself first before you pay the bank.
The authors show how savvy wealth builders pay minimum interest-only mortgage payments and then use the excess cash they would have paid on a fully amortized 30-year mortgage to deposit into their savings account earning at least 5 percent compound interest. They explain how the cash in a savings account earns money for the borrower instead of earning profits for the bank.
Susan and Anthony Cutaia emphasize putting money into other realty investments, rather than paying off a mortgage rapidly, will yield far more profits. They see no future in pouring "dead money" into monthly mortgage payments higher than minimum interest-only payments.
A controversial part of the book extols the advantages of the negative-amortization mortgage. "Neg am" means the monthly payment is less than the interest earned by the lender, and the unpaid interest is added to the mortgage principal instead. Most borrowers don't feel comfortable with this concept, however, especially if property values are not rapidly rising.
Even readers who don't embrace the authors' concept of "keep your money out of the bank's hands, never pay off your mortgage" can still accept the advice to "find a mortgage first, then find the property." This simple, sensible suggestion means borrowers should get pre-approved in writing first by a mortgage lender so they know how much they can then afford to pay for their home or investment property.
Just in case readers don't agree with the authors that ARMs are good, not bad, one of the chapters is titled "The Single Worst Mortgage in Creation: The Fixed-Rate Mortgage." For borrowers who already have fixed-rate mortgages, the authors suggest never making extra mortgage principal payments and instead putting extra cash into a compound interest savings account.
The authors point to the 2005 hurricanes as an example of how little advantage there is in having a paid-off home. When homeowners build up too much equity in their homes, the authors suggest, the mortgage should be periodically refinanced and the tax-free cash taken out should be put into investment accounts, but not with the same lender.
The second half of the book explains the tax advantages of owning real estate investment properties. Most of these explanations are excellent. However, the chapter about using a "cost segregation study" to accelerate depreciation deductions for short-life components of an investment property is nice to know but a bit beyond the tax sophistication of most investors and their tax advisers.
Chapter topics include "Never Pay Off Your Mortgage"; "Don't be House Rich and Cash Poor"; "Create the Ideal Exit Strategy"; "What are New Smart Loans?" "Interest-Only Mortgages: the Increasingly Popular Way to Free Up Usable Cash"; "More on Neg Am Mortgages and Why They Are Gaining More Adherents"; "Gaining a Tax Advantage: Tenant in Common Real Estate Transactions"; "1031 Exchanges to Defer Paying Taxes"; and "Personal Strategies for Real Estate Transactions."
This is far from an average "how to get a mortgage" book. It explains why the authors recommend interest-only ARMs rather than traditional fixed-rate mortgages, and why paying off mortgages early makes no sense. This thinking person's book is sure to be challenged, but the authors do an admirable job of explaining their viewpoints. On my scale of one to 10, this controversial book rates a solid 10.
"Untapped Riches," by Susan and Anthony Cutaia (AMACOM Publishing, New York), 2007, $18.95, 179 pages; available in stock or by special order at local bookstores, public libraries and at the link below.
Yahoo! Finance: Why the Rich Get Richer by Robert Kiyosaki
Tuesday, February 6, 2007
Interest-only home loans pave path to riches Jan 30, 2007, 4:00 am PST
Thursday, January 11, 2007
Now is the time of year that parents realize that they can get back that money spent
on the cildren's dance lessons, baseball uniforms, hockey gear, soccer camp, summer camp...and on and on.
Ok so you can't really get THAT money back, however as long as your child fits this profile:
First, each youngster has to be a "qualifying" child. This filing season, the Internal Revenue Service is utilizing a new uniform definition of a child in connection with various tax credits. To qualify for the child tax credit, the youngster must fulfill several requirements.
To qualify, the child must be:
Younger than 17 at the end of the tax year.
Your child or sibling (either full or step) or a descendent of one of these relatives. The child can be yours by birth, adoption, or because he or she was placed in your foster care by a court or authorized agency.
A U.S. citizen or resident.
The child also had to have lived in your home for more than half the year and not have contributed more than half of his or her own support during that year.
If you meet these criteria, then you may be eligible (dependant on your total income) for a $1000 per child tax credit. Furthermore, the IRS is still offering the additional tax credit, which can be used to reduce your tax owed, and if the total credit is more than the amount owed the balance can be taken as a refund.
If this is all too confusing for you, but you are determined to crunch those numbers by yourself, then try TaxBrain,and get your refund in 24 hours. TaxBrain Online Tax Service
Posted by Lee Arthur at Thursday, January 11, 2007
Tuesday, January 2, 2007
Every business deserves to have a 401(k) plan. And now with the ShareBuilder 401(k), every company can. Whether you're a new company just starting out, a business owner looking to lower your current 401(k) plan costs, or just a small business with aspirations of large business benefits, ShareBuilder has a 401(k) Plan to fulfill your needs.
Every company deserves to benefit from having a 401(k).
Affordable - ShareBuilder 401(k) is designed to be the low-cost 401(k) solution for small business owners. It also has the simplest fee structure in the industry, with no hidden fees.
• Simple - ShareBuilder 401(k) is 100% online so you can set up and access your plan at your convenience. Our low maintenance plans have minimal paperwork so you can focus on running your business. Plus, you'll have quick access to our knowledgeable customer service specialists if you require assistance.
• Flexible - You can easily customize the ShareBuilder 401(k) Plan to meet your business's changing needs. Our Plans can be easily integrated with your existing payroll services or software, including QuickBooks.
Posted by Lee Arthur at Tuesday, January 02, 2007
Sunday, December 31, 2006
The last few hours of 2006 are slipping away. Tomorrow starts a New Year, and with it new opportunity. When you are making your resolutions for 2007, here are some points to consider:
1. What are my goals for this year?
2. Did I make as much money as I wanted to in 2006?
a. If not, how do I change #2 in 2007?
b. If yes, how do I do it again?
3. Did I spend as much time with my family in 2006 as I wanted to/should have?
4. Am I taking time to enjoy life or is it just passing by like a train at a crossing?
5. Do I have life goals, if so am I closer to achieving them?
a. If I don't have life goals, or am not moving closer to achieving them, how do I get started?
6. Am I creating wealth, or just making money that goes right back out the door?
If you need help with the answers to these questions, here are a few books that could help you:
Posted by Lee Arthur at Sunday, December 31, 2006
Wednesday, December 27, 2006
PAYJr is a FREE online allowance and chore management system designed to allow you to assign chores and allowances and their associated rewards.
This is a great, interactive way for parents and kids to learn the hard work pays off. Parents assign chores, the kids get their assignments and complete them. Parents can get a prepaid PayJr. Mastercard that they can load money onto as kids complete their chores.
There is also a FREE DOWNLOADABLE Chore Tracking chart and allowance fee table for those not interested in the Prepaid card or for parents of younger children.
This is a highly recommended system to add organization to your family life and teach children the rewards of doing work assigned, all along giving them a tangible way to track their progress.
Are you making your New Years resolutions, planning for the upcoming year, or maybe with the GREAT bargains that are appearing in the real estate market you are looking for purchase a home. Whatever your reason, check out the Suze Orman Credit repair and monitoring kit from Suze Orman FICO Kit
Don't be surprised when you go to meet your lender, know what is on your credit report ahead of time. Be prepared to negotiate for the best interest rates possible, or correct the simple errors on your report.
Or, if you want to monitor your FICO score and find the national average interest rates for your credit score, try the free 30 day monitoring service at Fico Scores/Reports
Tuesday, December 26, 2006
Telephone Tax Refund Questions and Answers
What is the telephone tax refund?
The telephone tax refund is a one-time payment available on your 2006 federal income tax return, designed to refund previously collected federal excise taxes on long-distance or bundled services. It is available to anyone who paid such taxes on landline, wireless, or Voice over Internet Protocol (VoIP) service.
Why is the government refunding these taxes?
Several recent federal court decisions have held that the tax does not apply to long-distance service as it is billed today. The IRS is following these decisions and refunding the portion of the tax charged on long-distance calls. The IRS is also refunding taxes collected on telephone service under plans that do not differentiate between long distance and local calls including bundled service.
The telephone tax continues to apply to local-only service, and the IRS is not refunding taxes charged on local-only service.
The IRS will refund to you the taxes on long-distance or bundled service billed to you for the period after Feb. 28, 2003 and before Aug. 1, 2006. Taxpayers should request this refund when they file their 2006 tax returns.
Who is eligible to request the telephone tax refund?
In general, any individual, business or nonprofit organization that paid the tax for long distance or bundled service billed after Feb. 28, 2003 and before Aug. 1, 2006 is eligible to request the refund.
What is a refund eligible bundled service?
Bundled service is local and long distance service provided under a single plan that does not state the charge for the local telephone service separately from other services. Bundled service plans include, for example, Voice over Internet Protocol (VoIP) service, and landline and wireless (cellular) service plans that provide both local and long distance service for either a flat monthly fee or a charge that varies only with the elapsed transmission time for which the service is used. Telecommunications companies provide bundled service for both landlines and wireless (cellular) service. If VoIP service provides both local and long distance service and the charges are not separately stated, such service is bundled service.
The method of sending or receiving a call, such as on a landline telephone, wireless (cellular), or some other method, does not affect whether a service is local-only or bundled.
How do I get the telephone tax refund?
In general, anyone who paid the telephone tax on their long-distance or bundled service may be eligible to request the refund on their 2006 federal income tax return. This includes individuals, businesses and nonprofit organizations. The 2006 return is usually filed during 2007.
The IRS is making it easier for individual taxpayers by offering a standard refund amount between $30 and $60, so that these taxpayers don’t need to gather old phone bills. Taxpayers who choose the standard amount will only need to fill out one line on their tax returns. The standard amount is based on actual telephone usage data and the amount applicable to a family or other household reflects the taxes paid on long-distance or bundled phone service by similarly sized families or households. Using this amount may be the easiest way for taxpayers to get their refunds and avoid gathering 41 months of old phone records.
What is the standard amount?
Individual taxpayers can take a standard amount from $30 to $60 based on the number of exemptions claimed on their tax return. For those claiming:
one exemption, the standard refund amount is $30
two exemptions, the standard refund amount is $40
three exemptions, the standard refund amount is $50
four exemptions or more, the standard refund amount is $60
The instructions to the 2006 1040 tax forms will provide more information on how to determine the correct number of exemptions. (Because the term “exemptions” does not appear on Form 1040EZ, people who fill out this form should follow the instructions carefully.)
The standard amount is based on actual telephone usage data, and the amount applicable to a family or other household reflects taxes paid on long-distance or bundled service by similarly sized families or households. Using this amount may be the easiest way for taxpayers to get their refund and avoid gathering 41 months of old phone records.
How did the government come up with the standard amounts?
Telephone industry and IRS data were used to determine the refundable standard amounts. Telephone industry data showed that spending on long distance correlated directly with the number of persons in a household; therefore, a scaled refund structure was selected based on the number of exemptions claimed on the tax return.
What forms do I file to request the refund?
For many individual taxpayers who want to take the standard amount, there are no additional forms to file, and you only need to fill out one additional line on your regular income-tax return.
Individuals choosing the standard amount can simply fill in the amount on Form 1040, 1040A, 1040NR or 1040EZ. People who don’t need to file a return can use a new, simple form (Form 1040EZ-T) to choose the standard amount.
Taking the standard amount is optional. It is also the easiest way to get a refund. A married couple filing a joint return with two dependant children, for example, will be eligible for the maximum standard amount of $60.
Individuals who decide not to use the standard amount must figure their refund using the actual amount of tax they paid. To choose this option, taxpayers can fill out Form 8913 and attach it to their regular income-tax returns.
The standard amount is not available to businesses and nonprofits. Accordingly, businesses and nonprofits must fill out Form 8913 and base their refund requests on the actual amount of tax they paid. Businesses should attach this form to the income-tax returns they normally file — Form 1120, 1120S, 1065 or 1041. Nonprofits, including churches, charities and other tax-exempt organizations, should attach it to Form 990-T.
Alternatively, businesses and tax-exempts can review their bills for 2 months and use a special formula to figure the refund. For more information, see Telephone Tax Refunds: Questions and Answers for Businesses and Tax-Exempt Organizations.
Can I e-file to get this refund?
Yes. Virtually anyone who files an individual return qualifies for electronic filing, and the telephone tax refund is one of many tax benefits that can be reported on an e-filed return. Whether you file electronically or on paper, you can get your refund even faster by having it deposited directly into your checking or savings account.
I don’t have to file an income-tax return. How do I get the telephone tax refund?
For those people who do not otherwise have to file a tax return, there is a new simple form (1040EZ-T) that can be used to get this refund. Beginning in mid-January, this form can also be filed electronically for free via the Free File link this Web site.
If you choose the standard amount, all you need to do is fill out this simple form using the number of exemptions you are eligible to claim. For example, a married couple with two dependent children (for a total of four exemptions) will be eligible for the maximum standard amount of $60.
If you decide not to use the standard amount, you must figure your refund using the actual amount of tax paid. To choose this option, you must fill out an additional form (Form 8913) and attach it to Form 1040EZ-T.
Do Internet long-distance plans qualify for the refund?
Yes. If you paid the federal excise tax on your long-distance Internet plan, you can request the telephone tax refund. Internet long distance plans include broadband VoIP long-distance plans.
Why do I only get a refund for the past few years?
Under the applicable statute of limitations in the Internal Revenue Code, the IRS is generally not permitted to refund taxes that were paid more than three years before the date on which the refund program was announced. Accordingly, the telephone tax refund is available for long-distance taxes billed after Feb. 28, 2003, and before Aug. 1, 2006.
How do I determine how much federal excise tax I have paid on my long-distance service?
Taxpayers who choose to base their refund requests on the actual amount of tax paid should review their phone bills since Feb. 28, 2003. Taxes paid on local-only service are not eligible for the refund. In general, federal excise taxes paid on other types of service qualify. Federal access charges and state or local taxes and charges are not eligible for the refund.
The standard amount is based on actual telephone usage data, and the amount applicable to a family or other household reflects the phone tax on long-distance or bundled service paid by similarly sized families or households. Using this amount may be the easiest way for taxpayers to get their refund and avoid gathering 41 months of old phone records.
What if I don’t know whether I paid this tax?
Your phone service providers were required to include the federal excise tax on your monthly telephone bills. So if you had long distance or bundled service and received a monthly bill from your phone service provider, and you paid the bill including the tax amounts, then you should be eligible to request the refund.
Where do I go for more information?
Instructions for requesting this refund will be included with your tax forms and on this Web site. Therefore, most people will not need to call the IRS. If you decide to figure the actual amount of the refund rather than the standard refund, you will need copies of your phone bills. Telephone companies have already provided their customers with copies of their bills during the original billing periods and may charge for replacement copies of past bills, if they are available. Before contacting your telephone company, should you need to obtain replacement copies of past bills, you may want to check the company’s Web site.
What do I have to do now?
In most cases, nothing. Taxpayers will request this refund on their 2006 return. Accordingly, the IRS will begin accepting refund requests in January 2007.
The only decision you have to make is whether to use the standard amount or to request the amount of tax you actually paid. To take the standard amount, you don’t need to do anything now. You can figure it when you fill out your 2006 return.
If you are considering using the actual expense method, you may want to start gathering your phone bills since Feb. 28, 2003. As with any other line item on your return, starting early and keeping good records always makes the tax-preparation process easier.
Will the IRS pay interest on the refunded telephone tax?
Yes. The standard amount includes interest For those basing their request on the actual amount of tax paid, the instructions for Form 8913 explain how to figure the interest amount.
How do I decide if it’s better for me to use the actual or take the standard amount?
You can use whichever method gives you the larger refund. The standard amount is based on actual telephone usage data and the amount applicable to a family or other household reflects the tax on long-distance or bundled service paid by similarly sized families or households. Using this amount may be the easiest way for taxpayers to get their refund and avoid gathering 41 months of old phone records.
Example A: If a couple filing jointly had $20 in local service and $15 in long distance service each month over the 41 month period, their telephone tax refund based on their actual billing would be $15/month X 0.03 X 41 months = $18.45 (not including interest) in comparison to the standard refund amount of $40. The telephone tax paid on the local portion of their service is not eligible for the refund.
Example B: If a sole proprietor had $20 in local service, $50 in long distance per month and $150 in cellular phone charges for each month over the 41 month period, the telephone tax refund based on actual billing would be $200/month (50 +150) X 0.03 X 41 months = $246.00, in comparison to the standard refund amount of $30 (which would cover both personal and business expenses). The telephone tax paid on the local portion of their service is not eligible for the refund. The sole proprietor determines that they would benefit from requesting the actual amount of tax paid versus using the standard refund amount of $30. The taxpayer must maintain supporting documentation for their tax records.
Do I have to itemize to request this refund?
No. Because this is a refund of taxes previously paid, it does not matter whether you itemize or take the standard deduction.
Will I get a separate check?
No. The telephone tax refund will be treated as a one-time payment on your 2006 return. Accordingly, it will reduce the amount you owe on your return or increase the amount of your refund.
What is the total amount the government expects to refund?
Economists at the U.S. Department of the Treasury estimate the amount refunded to individuals will be about $10 billion.