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Francis Vayalumkal

Home values are still declining in many areas. Several first-time home buyers and people who want to move into bigger homes or just a different one are taking advantage of the situation. Home purchases have been on the rise in the past few months.

If you are looking to buy a new home, especially if you are a first-time home buyer, you need to prepare for the purchase through several steps.

1. Check the selling prices of comparable homes in your area. Web sites such as and can give you a general idea of what you should expect to pay. You also can do a quick search of actual MLS listings in your area on a number of Web sites, including the National Association of Realtors.

2. Use an online mortgage calculator to get an idea of what your monthly mortgage payments would be if you bought today.

3. Find out what your total monthly housing cost would be, including taxes and homeowners insurance. In some areas, what you'll pay for your taxes and insurance escrow can almost double your mortgage payment. To get an idea of what you'll pay in insurance, pick a property in the area where you want to live and make a call to a local insurance agent for an estimate. You won't be obligated to get the insurance, but you'll have a good idea of what you'll pay if you do buy. For an idea of what you'll pay in taxes, Zillow publishes property-tax information for homes all over the country. Do an online search for your county's property appraiser's Web site and find out the projected taxes for the property you are looking to buy or houses in that area.

4. Find out how much you'll likely pay in closing costs. The upfront cost of settling on your home shouldn't be overlooked. Closing costs include origination fees charged by the lender, title and settlement fees, taxes and prepaid items such as homeowners insurance or homeowners' association fees.

5. Look at your budget and determine how a house fits into it. Fannie Mae recommends that buyers spend no more than 28 percent of their income on housing costs. Go much past 30 percent and you risk becoming house poor.

6. Talk to a reputable Realtor in your area about the real estate climate. Do they believe prices will continue falling or do they think your area has hit bottom or will rise soon?

7. Remember to look at the big picture. While buying a house is a great way to build wealth, maintaining your investment can be labor-intensive and expensive. When unexpected costs for new appliances, roof repairs and plumbing problems crop up, there's no landlord to turn to, and these costs and can quickly drain your bank account.

So consider whether you're ready for the expense and effort of homeownership before pulling the trigger.

If the numbers make sense for you, taking a few steps at the beginning of the home- buying process can save you time, money and aggravation.

1. Examine your credit. Right now, blemished credit or the inability to make substantial down payment can put a stop to your homeownership plans. That's why it pays to look at your creditworthiness early in the home-buying process.

Get your free annual credit report ( and comb through it for errors and unresolved issues. If you find mistakes, contact the credit reporting bureau to make sure they are corrected. It's also a good idea to get your FICO score, which will cost you a small fee.

2. Get your docs in a row. Collect pay stubs, bank account statements, W-2s, tax returns for the last two years, statements from current loans and credit lines, and names and addresses of your landlords for the past two years. Have them ready to show to the lender. This may seem like a lot, but in this age of tight credit, don't be surprised if your lender needs a lot in the way of documentation.

3. Find lenders and get pre-approved. Getting pre-approved for a mortgage helps you bargain from a position of strength when you are house hunting. The institution where you bank and a local credit union are good places to start your search.

4. If you are not able to qualify for a conventional loan, consider getting an FHA loan. The Federal Housing Administration has a program that insures the mortgages of many first-time homebuyers. As a result of this guarantee, lenders who might otherwise feel queasy about your qualifications will be more inclined to lend to you. As a bonus, the FHA only requires a 3.5 percent down payment from first-time home buyers. You can find lenders that work with the FHA in communities across the nation.

5. Finally, don't forget about the first-time home buyer tax credit. Talk to your tax professional and prepare to file Form 5405 to ensure you receive the $8,000 credit as soon as possible.

Francis Vayalumkal is a mortgage banker with Colonial Bank and can be reached at (813) 719-0303

Kamlesh Patel


Now there's an added incentive to generate energy savings at home and at work. Reason: The new economic stimulus law - the American Recovery and Reinvestment Act of 2009 - expands the tax breaks available for qualified improvements made by individual and business taxpayers. Let's review the key changes.

Energy tax breaks at home. For starters, the new law increases the residential energy credit from 10 percent of qualified expenses to 30 percent. As under prior law, the credit covers a wide variety of expenses ranging from central air conditioning to hot water boilers to insulation. Furthermore, the lifetime dollar cap of $500 for the credit is replaced with a cap of $1,500 covering 2009 and 2010.

The new law also removes through 2016 other annual credit caps for solar hot water heaters, geothermal heat pumps, and small wind energy property installed in a home. But a $500 cap remains for qualified fuel cell property.

Energy tax breaks at work. Business taxpayers can now benefit from modified tax incentives.

- A business may claim a 30 percent investment credit for electricity produced from renewable sources.

- The new law enhances the business energy credit by eliminating the cap on small wind property. It also repeals the basis reduction requirement for subsidized energy financing.

- Instead of taking a production credit payable over ten years, business taxpayers can elect to treat certain alternative energy facilities as energy property eligible for the investment credit. This election may be made for qualified property placed in service after 2008 and before 2014 (2013 for wind property).

This is just a summary of several new law changes.


The American Recovery and Reinvestment Act of 2009 restored faster depreciation deductions for those business owners buying qualified business equipment in 2009. Additional depreciation deductions equate to a lower tax bill in 2009 - saving cash that would otherwise be lost to taxes.

The purchase of new equipment in 2009 will allow for an additional depreciation deduction of 50 percent of the cost of qualified property. That allows the business owner to rapidly claim the depreciation deduction on half of the cost of the equipment, while deducting the balance of the cost over the remaining depreciable life.

But if you want really fast depreciation, make sure to consider the higher expensing limits reinstated by the 2009 law. Companies can expense up to $250,000 in one year as long as total equipment purchases don't exceed $800,000. Any excess over the $800,000 limitation drops the amount of the eligible expensing on a dollar for dollar basis.

Essentially, if the business buys more than $1,050,000 in equipment, the expensing option is completely phased out.

However, the 50 percent bonus depreciation remains in play for qualifying equipment. And not only that, you can combine the expensing election and the 50 percent bonus depreciation on assets that qualify. While the 50 percent bonus depreciation is good only for new property, the expensing election is available for both new and used equipment.

Remember that these larger depreciation amounts are temporary in nature. For now, they generally apply to equipment purchased and placed into service in 2009 only, and will drop back to significantly lower levels in 2010.

Could this tax relief be extended again? It's possible, but you may want to take advantage of the combined tax breaks while you definitely can. This just might be your final opportunity.

Kamlesh H. Patel, CPA, can be reached at (813) 949-8889 or e-mail or

Seema Ramroop

As you approach retirement, you will quite likely be assessing your financial situation to determine if you have saved and invested enough to afford a comfortable future. Generally, financial professionals advise that to maintain your current lifestyle you will need approximately 70 percent to 80 percent of your current annual income each year in retirement, although your own situation may differ based on your personal goals and finances.

Taking an in-depth look at your finances and an inventory of your retirement funds about five to seven years before retiring will give you time to make adjustments to help you meet your goals when retirement time comes around.

Will I Have Enough Retirement Income?

Generally, retirees turn to these sources of income: Social Security benefits; earnings (including part-time jobs); personal savings and investments, including IRA accounts or additional employee savings plans; and company retirement plans.

According to the Social Security Administration, Social Security may account for only about 40 percent of your income in retirement ("Income of the Elderly Population Age 65 and Over 2006," EBRI Notes, Vol. 28. No. 12, December 2007). Personal investments and savings, company retirement plans and other sources will have to make up the remaining portion of your income - about 60 percent.

After calculating your projected retirement income, you also need to examine your current expenses and determine which items will increase or decrease, which will be eliminated and which will be added after you retire. By reviewing this information early on, you can develop a sense of whether you'll have the necessary income to cover your expenses once you retire.

Compare your expense calculations with your projected sources of income and determine whether you will have a surplus or a deficiency. At the same time, determine at what point in retirement you will need to begin drawing on your retirement plan assets. If, after comparing your expenses with income, you have a surplus, you are on the right track to enjoying a comfortable retirement. However, if you note a deficiency, you can make decisions now to help ensure that you will have a relatively comfortable retirement later on.

Should I Adjust My Asset Allocation Strategy?

Having a good understanding of investing becomes more important as you approach retirement. Examine all the investments available through your retirement plan and determine into which category - stocks, bonds or cash equivalents - each of them falls. Next, assess your level of risk. As people prepare to retire, they generally want less risk in their investments than in the past. Since your income from employment will have stopped or decreased considerably and your assets may be invested over a shorter period, it may be more difficult to recover from loss. Therefore, you may want a lower-risk investment strategy than before. Whether you intend to use your money over a relatively short period or spread it out through your retirement is another important factor.

Important Points to Consider

There is no set asset allocation strategy that works for everyone. Before determining which strategy best fits your personal situation, keep in mind that different people have different financial resources and expectations regarding how long they will be in retirement. Therefore, individuals have different risk tolerances and investment horizons. And remember, no matter what asset allocation strategy you choose, there is always some level of risk and no guarantee that you will not experience a loss.

Also, keep in mind that you need to look at your holdings as a whole. Consider your personal accounts, retirement accounts and any additional sources of retirement income that you may have. By planning the entire picture, you will be better able to develop a portfolio that reflects your immediate and long-term goals. Your financial adviser can help you determine if your strategies are on the right track toward a secure retirement and help you find ways to maintain your position or work toward your goals.

1. Source: "Income of the Elderly Population Age 65 and Over 2006", EBRI Notes, Vol. 28. No. 12, December 2007

Seema Ramroop, financial advisor at Morgan Stanley in Palm Harbor, can be reached at (727) 773-4629 or e-mail

Ramesh Parekh

What is "Long-Term Care?"

As we grow older, there are greater possibilities that we may not be able to perform our routine tasks such as bathing, dressing, eating, etc. Such needs generally arise because of a prolonged physical illness, a disability or a cognitive impairment (such as Alzheimer's disease). Long Term Care (LTC) is different from traditional medical care. LTC includes help with activities of daily living, home health care, nursing home care or care in an assisted living facility. The type of care can be either skilled or custodial care.

Cost of LTC

LTC costs can be high. The costs vary depending upon the parts of the country and the type of care needed. According to Genworth 2009 Cost of Care Survey, a sample of Median LTC costs in Tampa-St. Petersburg Area:

Nursing home private room - Annual ----- $82,125

Assisted living facility private one bedroom - Annual ----- $24,000

Home Health Aid Service - hourly rate ----- $17-$32

Who bears the burden of long-term care?

There are basically three sources of funds available for LTC:

1. Self-insurance - own or family and friends funds

2. Public program - Medicaid if qualified for the poverty level prescribed by the state.

3. Long-term care insurance

Reasons people buy LTC insurance:

1. Financial protection for retirement

2. Protecting families

3. Wealth and estate protection

4. Financial independence

5. Peace of mind

Recognizing the seriousness of the long-term care costs on an aging society like ours, Congress provided specific tax benefit for long-term care policy premiums. Many states, including Florida, have instituted state LTC Partnership Programs to encourage the public to get LTC coverage.

Long-term care insurance is a part of an individual's financial planning and risk management. You should consult a financial adviser for your specific needs and financial suitability.

Florida Resources for more information:

Florida Department of Elder Affairs - Tallahassee (850) 414-2000

National Association of Insurance Commissioners, Kansas City, Mont.; (816) 842-3600;

Ramesh Parekh, CPA, can be reached at (727) 461-9770 or e-mail or

Shan Shikarpuri

While the media has extensively covered the financial crisis in the banking, insurance and auto industries and other larger retail companies, etc., little or no attention has been paid to the smaller businesses (such as retail, service, etc.) who are struggling to survive during these uncertain and turbulent economic times. As businesses gauge the economic recovery plan from the Obama administration, we can be certain of new tax legislation that will contain many additional deductions and credits for individuals with adjusted gross income of $250,000 or less, as well as bonus depreciation for businesses and allowing loss carry-back for five years (currently two years) in an effort to create new jobs and jump start the economy in 2009.

The recent $787 billion economic stimulus package signed by the president contains significant tax-saving opportunities. However, this subject will be discussed in a separate column.

The purpose of this article is to make you aware of the changes that were made in 2007 and 2008 so you can take advantage of these opportunities of additional deductions and credits for both businesses and individuals for 2008 filing. Please keep in mind that a complete and comprehensive discussion of the recent tax legislations is beyond the scope of this brief article and have merely outlined the tax matters that affect businesses and individuals in our surrounding area.

The recently passed legislations are: (1) The Mortgage Forgiveness and Debt Release, enacted in December of 2007, (2) The Economic Stimulus Act of 2008 passed Feb. 13, 2008; (3) Heartland, Habitat, Harvest and Horticulture Act of 2008 enacted May 22, 2008; (4) Heroes Earning Assistance Act of 2008 passed June 17, 2008, (5) Housing and Economic Recovery Act of 2008 (July 30, 2008, and (6) Emergency Economic Stabilization Act of 2008 enacted October 3, 2008.

Some of the changes affecting individuals include:

1. Exclusion of mortgage debt relief. Up to $2 million of qualified mortgage indebtedness on principal residences is extended to the year 2012.

2. First time home buyer credit is ten percent of the purchase price up to $7,500.

3. Additional standard deduction for real estate taxes is $500 for single ($1,000 for joint filers).

4. Deductions extended through the year 2009 include: sales tax deduction, tuition and fees deduction, out of pocket educator deductions, and IRA distributions to charity.

5. Mortgage insurance premium deduction.

6. Surviving spouse sale of home (full exclusion until two years from the date of death).

Some of the changes affecting businesses:

1. Enhanced code section 179 deductions (immediate write-off of qualified equipment expense). For the year 2008, the expense limit went to $250,000 from $128,000; and asset limits went to $800,000 from $510,000.

2. The first year bonus depreciation: 50 percent of property with 20 years or less life.

3. New luxury auto first year limit is $8,000. Business mileage rate is 58.5 cents as of July 1, 2008. 4. Extension of research credit to the year 2009.

5. Extension of 15 years amortization of leasehold improvements and restaurant properties to the year 2009. 6. Extension of expensing environmental remediation costs.

7. Extension of energy conservation credits and energy efficient property credits (qualified wind turbines and qualified geothermal heat pumps) and energy efficient appliances credits.

8. Extension of deductions for energy efficient commercial buildings.

9. Bonus depreciation for re-used and re-cycled property.

Please note that the above represents a brief outline of only some of the provisions of the legislations passed in the past fourteen months. There are numerous other changes that I have not outlined, such as farmers & agricultural energy credits, tax breaks for military reservists, disaster relief provisions, and issues affecting international businesses and tax preparers, etc. If any of these affect you or your business, we encourage you to consult with your tax advisor.

Shan Shikarpuri, C.P.A., of Shan Shikarpuri & Associates, P.A. is a certified public accountants/business consultant in Palm Harbor, and can be reached at (727) 786-1800 or e-mail

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