My federal and state taxes are done and filed, completed weeks earlier than they were last year. I set out to do my taxes early, but I still had to wait on some forms and verify other information before I could complete my work.

Lots of people wait until the final weeks before doing their taxes and that isn’t a bad thing especially if you owe. Why give the government money sooner than you have to?

I did notice some important changes for the 2009 tax year which showed up in my tax preparation software program. Whether you rely on H&R Block’s software, TurboTax, or some other tax program you should be on the look out for certain money saving deductions including the following:

Helping Haiti – Although the earthquake happened during the 2010 tax year, Congress has decided to allow Americans to declare their donations as a 2009 deduction. But your chance to donate and receive a deduction ended on February 28 so any deductions made from here on this year will need to be declared with your 2010 tax filing. (see IRS.gov: Haiti Relief Donations Qualify for Immediate Tax Relief)

Tax Free Unemployment – You pay unemployment insurance yet the federal government still taxes you for taking this benefit. What is the sense in that?! For 2009 and for 2009 only, the first $2400 of that is tax-free. If you and your spouse collected, then you can exclude $4800. (see The Wall Street Journal: Deducting Job Hunting Expenses)

Your New Home – Congress played around with a tax deduction for new home buyers last year, offering an $8000 tax credit for most of the year before amending the law later to include a $6500 tax credit for other buyers who bought a house after November 6, 2009. Confused yet? Wait, there is more! You may still be able to take the deduction on your 2009 returns even if you haven’t signed a contract yet (April 30 is the deadline), giving you until June 30 to close. Yes, you’ll have to file an extension or an amended return to benefit now, but it could save you a bundle of money later on. (see Kiplinger: FAQs on the New Home Buyer Tax Credits)

Home Energy Improvements – Making home improvements has never been so profitable! Well, at least deductible. Under the federal stimulus plan, various incentives were put in place to help homeowners update their abodes. We covered this information in detail last month so check out the link which follows for details. (see SayEducate.com: Enjoy Tax Credits For Energy Conservation)

Your New Car – Eager to stimulate the auto industry—after all the federal government now owns significant chunks of General Motors and Chrysler—you can deduct the state sales tax if your purchase took place on February 16 or later for a car costing as much as $49,500. That trade-in for last summer’s cash for clunkers program can also be deducted. (see Intuit.com: Deduct the Sales Tax Paid on a New Car)

These are only a sampling of what you should look out for when you prepare your 2009 taxes. Certain deductions such as those for investment losses, college tuition, moving, and disaster recovery may also apply. Check the IRS site for more information to confirm what is available to you.

Consumers seeking to save their homes from foreclosure and the resultant long term hit to their credit ratings will sometimes put their homes on the market and accept a price for less than what they owe on their mortgage. If the lender agrees to this deal, then the original homeowner can get out from underneath his mortgage and be free of further obligation.

Well, not so fast.

Theoretically, a short sell (short sale) should be final, a transaction whereby the lender forgives the loan deficiency, choosing to swallow a comparatively small loss up front, rather then a sizable loss that would probably be incurred had the house passed through foreclosure.

According to The Wall Street Journal (A Short Sale May Not Mean You’re Home Free), that theory isn’t always meeting reality. Sometimes lenders will go after the first homeowner in a bid to recoup some or all of the deficiency.

For example, let’s say you are behind on your mortgage and just a month or two away from foreclosure. You owe $295,000 on your home, but it is worth a bit more even though you have owned it for several years. A crummy real estate market is pushed down home values, yet you believe that you could get close to that amount for your home and pay off your mortgage.

Well, the tough market proves two things: buyers are tough too and are looking for bargains. You listed it for $320,000, but the best offer received was just $280,000 which you accepted pending your lender’s approval which you need in order to be released from your obligation. You see, when you seek to sell for less than what you owe in effect you are putting your lender in a position to take it or leave it. If this lender believes that your short sell is the best deal, then they may reluctantly accept the deal.

This is where things can get complicated.

Whenever performing any real estate transaction, you want to have a lawyer representing your interests. A real estate attorney will ensure that your short sell is up to snuff and includes one important provision: that the bank will not go after you for the deficiency.

If that provision is not in place, then guess what? Your lender can go after you for the loan deficiency, costing you thousands of dollars. And you thought that it was too expensive to get a lawyer!

Oh, by the way, if you think that short selling your home means you can automatically turn around and buy a new home within the coming months or year, think again. On future credit applications you will be required to state whether you have been involved in a short sale which is sometimes also called a deed in lieu of foreclosure.

Lying about it can cause serious legal problems for you. Telling the truth will keep you from getting a home loan. Regardless, a short sale is a serious matter, one that should be done as a last resort.

In fact, some lenders say that there is no credit advantage in a short sale versus a foreclosure, which means that your credit will likely reflect that information. (see MSN Money: Use a short sale to escape foreclosure)

Tens of millions of consumers today are facing financial difficulties ranging from late payments on their utility bills to foreclosure on their homes. Job loss, illness, overspending, and other problems can weigh in, putting untold pressures on the American family.

Not every financial situation should mean imminent ruin, although taking action sooner rather than later can go far in turning your condition around. Smart budgeting, credit counseling, debt consolidation, and bankruptcy are four do it yourself (DIY) avenues for you to explore; chances are you’ll be taking one or more paths in order to improve your financial condition.

Smart Budgeting

What is smart budgeting? Essentially, it is a budgeting plan that makes sense for you. This means being realistic and developing a plan that works. That doesn’t mean setting pie-in-the-sky goals, near impossible requirements whereby you think you’ll correct many years of financial problems in twelve months or less or pay off your mortgage quicker when you’re still on the brink of foreclosure.

Step by step changes can bring about real results, helping your conquer your problems gradually. This also means negotiating payments with creditors or finding out a way to work with bill collectors. Print out a money tip road map to help you get back on track.

Credit Counseling

Although a “do it yourself” method can work for some people, others may find that professional assistance can go far in helping them conquer the debt monster. Credit counseling organizations can help you develop a repayment plan with your creditors, help you track your bills, an develop a workable budget for you.

A few things to keep in mind: not all credit counselors are on the up and up, some charge very high fees, while others may promise more than what they can deliver. For example, when a creditor says you can pay just pennies on the dollar for your debt, be suspicious. Learn about fees and other costs before agreeing for assistance and check references!

Debt Consolidation

One way to reduce your credit costs is to consolidate your debt, oftentimes by taking out a second mortgage or a home equity line of credit. You’ll be putting your home up as collateral which means that if you stop making payments or make them late you could lose your home.

Certain tax advantages exist when consolidating a loan; check with your financial adviser to learn more.

Personal Bankruptcy

One way to discharge all or some of your debt is to file for personal bankruptcy. Chapter 7 bankruptcy is liquidation of your assets, whereby mostly everything you own is sold off except for exempt assets, which vary from state to state. You’ll be required to take a “means test” to ensure that your income does not exceed a certain amount.

Chapter 13 bankruptcy is less drastic, allowing you to keep a car or your home as long as you keep up payments, while discharging some if not all of your unsecured debt. Changes to the US Bankruptcy Code in 2005 has made personal bankruptcy a less desirable option as some previously forgiven obligations remain in place. Contact an attorney familiar with tax law who can advise you.

Financial Resolution

There is no magic solution to financial problems which means patience and adjusting as you go are important attributes for the person who wants to get back on his feet again. Creating a sensible plan and sticking with it is a good start; seeking professional guidance may be the best choice that you make.

Deutsche Bank, which is also one of the largest and most respected financial institutions in the world, recently made a prediction that by 2011, nearly half of all US homeowners with a mortgage will be “under water” by then. Under water (or underwater) is a financial term which indicates that a home is worth less than what is owed on the loan. Holders of these types of loans are considered “upside down” and would lose money if they were to sell their homes.

When the real estate market has a significant number of underwater homes, default rates rise. With more defaults, lenders lose money and borrower’s find that their creditworthiness has plummeted. All of this bodes poorly for the economy which is very fragile right now and poised to absorb trillions of more debt should Congress pass its national health plan.

The thinking coming from Deutsche Bank regarding home loans two years hence is that quite a few adjustable rate mortgages (ARMs) will be resetting in 2011, which means that homeowners will be faced with higher mortgage payments. That problem began to surface in 2006 and 2007, when ultra low-rate variable mortgages began to reset, forcing the first wave of what is now millions of homeowners to default on their loans. Faced with the twin problems of higher mortgage payments and a loss of income, homeowners have been losing their homes in droves. Deutsche Bank sees that problem surging once again in 2011.

Steps To Strengthen Your Position

But with any national problem, the issue is certainly individual although the collective collapse of the housing industry could lead to the ruin of our nation. Though 2011 isn’t so far away, homeowners who believe that they will be underwater now should keep some things in mind and take action as appropriate including:

Review Your Mortgage Terms – When will your mortgage rate reset? At what rate do you expect it to rise to at reset date? Use a mortgage calculator to compare your current monthly payment with your anticipated monthly payment to see what your price differential will be. Perhaps in your situation the difference won’t be so great, allowing you to absorb the increase.

Keep Tabs On Your Market – The Deutsche Bank survey makes a broad assertion, but as most everyone knows housing conditions are localized. Even in your regional market, a home in one neighborhood could drop in price more significantly than a home in another neighborhood. As always, location is the key as is home condition, neighborhood attractiveness, local job availability, etc. A strong job market can stabilize the housing market.

Work On Your Bottom Line – If you’ve lost your job or have taken a significant salary cut, then you’re immediate priority is to make money. If you are beginning to fall behind on payments to your lenders, communicate to them that you are working to resolve the problem as soon as possible. If you are working right now, then examine your spending habits to see what can be scaled back. Apply for a lower, fixed rate mortgage if your credit is good. In other words, be proactive – not reactive.

The forecast made by Deutsche Bank is, on the surface, a frightening one. But it doesn’t have to be the fate of every homeowner. Though we can’t impact what happens on a national level on a very personal level you may be able bring about the right kind of change to help improve your situation.

Adv. – Are you considering a loan modification? If so, this mortgage medication website could offer just the prescription you need to improve your financial health.

See Also — 48% Underwater? Lawler Challenges Deutsche Bank Report

As the recession lengthens, we’ll be hearing contradictory reports that it has eased, ended even worsened. There are a number of different metrics used to determine when a recession ends with most of these tools not able to do so until months after a recession has ended.

For cash strapped consumers, finding ways to save money during a difficult economy is challenging enough itself. But there are ways you can save money even if your income is down and your finances tight:

You may not be able to save a bundle of money from the start, but if you examine your spending habits, savings can add up over time.

Cut Your Expenses – There are some simple ways for you to trim your overhead. If you have cable, phone service and an internet connection, consider bundling these services to one plan. If you have low deductibles on your car insurance, consider raising these levels to $500 or $1000 in order to lower your premium. Run your air-conditioning on 78 degrees and run your heat on 68 degrees. Cancel unneeded magazine and newspaper subscriptions, buy generic drugs, clip coupons. You get the idea — pay attention to your outgo and you’ll preserve more of your income.

Avoid Credit Cards – Unless you’ve already been paying off your credit cards every month, then using credit cards can do a number on your finances. Even then you may find yourself spending more on something then if you had cash on hand, so why not try making all of your purchases for the next month with cash and/or your debit card?

Deduct Money Automatically – One of the reasons that so many people have a tough time saving is that once the money is in their hands, they’ll spend it. Some of the ways you can build savings is by automatically transferring money from your checking account to a savings account on a periodic basis. On a weekly basis, transfer a set amount of money from your main bank to an online institution where it’ll take an extra step to get your money out. Money will accumulate steadily and before you know it, you’ll have a tidy sum of cash on hand!

Expand Your Income – Trying to get a raise in this economy is difficult to do, but not impossible. If you have been working hard and producing measurable results, your boss may be willing to share some of that profit with you. Naturally, if your company is reporting record losses and threatening lay offs, then waiting until after things settle down is wise. But, even during tough times companies find ways to retain their best help which means that you may have some leverage the next time you seek a pay raise.

Finally, if you’re the type of person who is new to an austere way of living, then not buying anything can seem dull and unrewarding. So that you wont’ flag in your zeal when it comes to your finances, why not reward yourself on a periodic basis especially as you reach one or more of your clearly defined goals? Dinner out, taking in a concert, a quick getaway to the beach or some other splurge type event can help you stay right on course.

Adv. — Everyone wants to save money, but we’re often hesitant to ask for a lower price from merchants. You may be paying too much for your mortgage even with rates at historically low levels. Why not seek to refinance your loan or pay off your mortgage sooner, if possible? Please visit SayRecession.com for timely tips on how to stay ahead of the game during trying economic times.

Cybersquatting is a foreign term to most people unless you are someone who has an online presence and a trademark that you want to protect. Also known as domain squatting, these terms call attention to a practice whereby “domainers” register a web address containing the name of a company, brand, person, etc. without their authorization.

Making Money Off Of Domains

People will often register these names in a bid to make money off of them through advertising, sometimes holding them in reserve until they receive compensation from the company in exchange for selling the domain to them. ICANN, which is the Internet Corporation for Assigned Names and Numbers, oversees the market and handles disputes. But it isn’t always a simple thing for people to retrieve domains that they think belong to them.

But now there could be reason for you to be concerned about this problem, especially if your name or your child’s name is taken by someone else. In a recent ruling from ICANN, the organization is planning to expand the number of suffixes (*gov, *com and * org, just to name a few) to include other suffixes including those which may be valued by certain brands.

New Suffixes Are On The Way

Specifically, if the .apple suffix is used, this move could upset Apple Computers, which has tried (sometimes in vain) to secure a number of different variations of its name. Unfortunately for Apple, the company’s name is also a popular fruit, thus ICANN hasn’t been too interested in protecting what the company considers to be its internet property rights.

So what should you do? You can’t buy every variation of your child’s name, right? Most certainly you can’t or at least you can’t keep up with this change. But, what you can do is this:

Register Your Domains

Visit a popular domain registrar such as GoDaddy to see if your child’s name is still available. For example, enter fredericksmith.com to see if that name is available and, if so, register it. If you want, register other versions of the name including .net an .org. However, keep in mind that you’ll pay an annual fee for each domain registered, an amount that can quickly add up.

Why would you want to secure your child’s name? That’s easy — at some point he or she may want open his or her business and use their own name. If you buy it now, prices should be low. However, if their name is taken and they want it later on, it could cost hundreds even tens of thousands of dollars to retrieve their domain.

For its part ICANN is a non-profit organization with minimal government oversight. Based in California, the organization does work with other organizations to combat illegal instances of domain squatting, but with new suffixes regularly rolling out, its ability to handle each case becomes more strained as time marches on.

Adv. — Are you looking to purchase a new computer? If so, prices have never been lower! Please visit the nBuy Shopping Plaza to review our selection of computer choices including top brands such as Gateway, Lenovo and Toshiba.

Friends of ours mentioned something about the economy in passing, a topic that is almost always too good to pass up. Or too hot to handle!

Paying Their Mortgage Down Quickly

Turns out that they have lived in their home for seven years and have been making extra payments on their mortgage for most of that time even as kids came along and an invalid cousin came to live with them. “Steve” has done very well in business while “Janet” takes care of the home.

We soon learned that the wife had received an inheritance, money they weren’t sure should be used for anything but paying off the mortgage. Neither one is particularly fond of debt and could care less about the tax advantages to owning a home — they just want to own their house free and clear!

I can appreciate the way that Steve and Janet think because I agree that home ownership is one burden that should be overcome as soon as possible. Instead of dragging out a loan for thirty years, why not pay it off sooner? Besides, the quicker it is paid off the less money owed to the bank.

The Political Landscape Is Murky

With the way things are going in Washington, DC a lot of homeowners are worried about their home values, mortgages, debt, you name it. Housing values in some areas of the country have dropped like a rock over the past year with the national average down to around $170,000.  Many Californians who have faithfully been making mortgage payments are under water — owing more on their mortgages than what their homes are worth.

Each market is different and every family has their own requirements and priorities.  But, if you could lower your housing costs would you? Among the ways that you can go about doing that is by paying off your mortgage early; refinancing to a lower, fixed rate; selling your larger home and settling in a home that meets your current needs; and even seeking a property tax cut or trimming your homeowners insurance.

Decisions, Decisions: Yours For The Making

Of course, if you aren’t certain which direction to turn, consult your financial adviser. Most will tell you to hang on to your mortgage, but that’s one decision you’ll have to make and live with, not them.

Photo Credit: Svilen Mushkatov

Watching the news, reading the newspaper or surfing the internet can certainly leave you feeling hopeless, anxious and depressed. Mostly everyone is focusing in on the bad news to the point where when good things do happen that news is brushed aside in favor of more gloom and doom.

As with any economic condition, that old Charles Dickens maxim “It was the best of times. It was the worst of times” holds true. And, if you are planning to make any sort of major purchase or take a trip over the next few months, you could find some of the best bargains in recent years including:

Travel Discounts — Skyrocketing airfare increases have eased and, thanks to fare specials offered by Southwest Airlines, is causing airlines to slash fares in a bid to sell seats. Also, fuel surcharges have been dropped by most air carriers as jet fuel prices drop to more reasonable levels. Hotels, resorts, rental car companies and other businesses catering to travelers have also slashed their prices.

New/Used Cars — Discounts on new cars are among the best seen in years. Plus, some automakers are offering discounts and cut rate financing in a bid to move iron. If you have good or excellent credit, then you have a very good chance to come away with a new ride. Used car prices are also down as cars languish on dealer lots.

Energy Prices — Last summer’s dire warnings of high energy prices never materialized thanks to the big drop in oil prices that kicked in late summer. Electricity prices in some areas of the country have dropped or increased at much lower than anticipated rates. Oil and natural gas prices are also down.

Mall Deals — Whether shopping at your local mall, downtown or most any other retail shop, prices are being slashed in a bid to attract shoppers.  My local mall of 140 businesses has 12 empty stores and almost that many unoccupied kiosks. Almost every store is constantly running sales with discounts of 20-75% on most items common. Even online merchants are slashing prices in a bid to get their share of an increasingly shrinking pie.

Mostly everything with a sticker price on it can be negotiated, a tactic many consumers do not practice, but should consider when shopping. Grocery prices are generally what they are but soft goods, most hard goods and certainly many services can be negotiated.

The consumer friendly market will continue to last as long as the economy is in the doldrums. Take advantage of the bargains out there now because when the recovery kicks in, many of those bargains will be quickly kicked out.

Adv. — Everyone wants to save money, but we’re often hesitant to ask for a lower price from merchants. You may be paying too much for your mortgage even with rates at historically low levels. Why not seek to refinance your loan or pay off your mortgage sooner, if possible? Please visit SayRecession.com for timely tips on how to stay ahead of the game during trying economic times.

If you are in the market for a home loan, you may find it more difficult to obtain a loan through some of the smaller mortgage banks. Thanks to government support of Bank of America, J.P. Morgan Chase & Co, Wells Fargo, Citigroup and other big banks — recipients of billions of dollars in taxpayer monies — a number of smaller lenders are finding that they are being starved of credit, limiting their ability to offer loans to consumers.

In yesterday’s issue of The Wall Street Journal the newspaper interviewed Jay Brinkmann, chief economist of the Mortgage Bankers Association who noted that smaller lenders have fewer loans to offer and aren’t able to match the rates of the big banks.

Some analysts say that the rate differential is one-quarter to one-half of a percent higher for small lenders, which can add thousands of dollars to consumer mortgage costs over the life of the loan — a clear disadvantage for these types of lenders.

Moreover, most small lenders are family-owned businesses who generally borrow money for the short term from what are known as warehouse lenders. Warehouse lenders get their funding from Wall Street investment banks, but these particular institutions have cut back on warehouse loans or exited the arena altogether.

For small lenders, the drop in warehouse lenders has been precipitous, a decrease of nearly 90% since 2006. During that year $25 billion in funds came from warehouse loans.

Several large commercial banks still make warehouse loans including Bank of America through its Countrywide unit and Wells Fargo. The Mortgage Bankers Association (MBA), noting that hundreds of small lenders have gone out of business in the past few years, is asking Congress to help maintain existing sources of warehouse credit and also to create new ones.

The MBA is suggesting that Congress could provide a federal guarantee of warehouse loans, which would reduce the risk for lenders. In addition, the MBA would like to the Congress give Fannie Mae and Freddie Mac temporary authority to help provide funding for warehouse lines of credit.

What does this mean for you, the home loan shopper? Not too much other than a reduced number of lenders to select from when applying for a home loan. Big banks are still lending and, as mentioned, may be lending at a lower rate than small home lenders. But, if your credit isn’t excellent, will a large financial institution take a chance on you as might a small home loan lender?

That remains to be seen!

Further Reading

How to Establish Good Credit (SayLending)

MBA’s Courson Testifies on Promoting Bank Liquidity (MBA)

Mortgage Banks Push For Federal Support (The Wall Street Journal)

Smart Financial Center (nBuy)

If you are in the market for a new car, then I have some great news for you: prices are being slashed and financing deals are among the best we’ve seen in some time. In fact, you may be able to save thousands on your new car while getting low interest rate financing.

Though most shoppers will pay for their new car purchase by taking out a loan or paying cash, there is a segment of the car buying populace who have figured out a way to buy a new car by using the equity found in their home to pay for it. Instead of dishing out cash or taking out an auto loan, these consumers negotiate the best price for their car and finance the deal for themselves.

Certainly, anytime you borrow money against the value of your home, you are responsible to pay those funds back, just like any other loan. But, in this case, you can deduct the interest from your fixed rate equity loan on your income taxes. Try doing that with your auto loan — you cannot!

Yes, there are certain things you need to keep in mind to make this type of loan smart for you. Otherwise, you risk making the same foolish mistakes that some homeowners have made with credit over the past few years, putting themselves in financial jeopardy.

Among the things to keep in mind are:

Borrow what you need, nothing more. If you have your eyes on a car that will cost you $25,000, then borrow that amount and not a penny more. Avoid the temptation to add in other costs, otherwise your loan will be bigger than what you want it to be.

Keep it short. Certainly you can borrow for ten or fifteen years, but not too many people keep their cars that long. Besides, do you really want to pay interest on a vehicle for that long? Instead, consider a five year loan the length of loan many new car buyers select.

Choose a fixed rate. Avoid any type of loan that can fluctuate. In these challenging times, you don’t want government policy or financial conditions to determine what you have to pay each month. Pay the same amount in month sixty as you’ll pay in the first month and every month in between.

Calculate LTV. What is the value of your home today? LTV is the loan to value of your home, the higher the percentage the better loan rate you’ll be offered. Even if you are allowed to borrow more than what you need for a new car, only do so if you’ll use those monies to fund other projects.

No Restrictions. When choosing a home equity loan, make sure that there are no restrictive clauses for how you can use your money. In addition, you don’t want pre-payment penalties. Why should you be punished for paying off your loan early? You shouldn’t be!

One of the best reasons for allowing your home to finance your new car purchase is that you can claim a tax deduction as per federal and state tax guidelines. Most taxing authorities don’t care what you use your home equity loan money for, that is your business. Consult your financial adviser or tax accountant if you have questions about how this works.