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Francis Vayalumkal

It would take several pages of Khaasbaat to explain the $75 billion homeowner relief program introduced by President Obama on Feb. 18.

I will try to briefly address some most common questions about it that the readers may have.

Two sets of homeowners will be eligible to get help under the Obama administration's foreclosure-prevention plan:

1. People who got plain-vanilla conforming mortgages and who have never fallen seriously behind on the monthly payments might qualify to refinance at lower interest rates - even if they owe as much as the house is worth.

2. People who have subprime mortgages, or exotic loans such as pay-option ARMs, might qualify to keep their current loans, but have them modified to make the payments more affordable.

While announcing the Homeowner Affordability and Stability Plan (HASP), President Obama said "The plan I'm announcing focuses on rescuing families who played by the rules and acted responsibly." He explained this would be done by "refinancing loans for millions of families in traditional mortgages who are underwater or close to it, by modifying loans for families stuck in subprime mortgages they can't afford as a result of skyrocketing interest rates or personal misfortune, and by taking broader steps to keep mortgage rates low so that families can secure loans with affordable monthly payments."

The Obama administration estimates that HASP will help 7 million to 9 million families avoid hardship or foreclosure. But many won't be eligible to get help because of the limitations and exceptions in the plan. Probably, the biggest hole in HASP is that it won't help many people where house prices have fallen most: California, South Florida, Las Vegas and Phoenix. A lot of these people won't be eligible for refinancing because they owe much more than their houses are worth.

Another gap in the plan: It provides a path to refinancing for people whose loans were securitized by Fannie Mae or Freddie Mac. Millions of homeowners have mortgages that were securitized, but not by Fannie Mae or Freddie Mac. They might find it difficult to refinance, whereas their neighbors who got similar loans securitized by Fannie or Freddie might have an easier time qualifying for refinancing. Most borrowers won't know if they have a Fannie or Freddie loan until they ask the servicer.

The administration has set itself a March 4 deadline for getting the refinancing and modification programs rolling. On top of that, the administration wants to impose "clear and consistent guidelines for mortgage modifications" - a task that has been occupying the mortgage industry's sharpest minds for months.


The plan has two main pieces: refinances for conforming loans, and modifications for subprime and exotic loans. The refinance piece is designed to help 4 million to 5 million "responsible homeowners."

Who are these responsible homeowners? They:

" Haven't fallen behind on their monthly payments.

" Owe more than 80 percent of their homes' currently appraised value.

" Owe no more than 105 percent of the currently appraised value.

" Have mortgages that are owned or guaranteed by Fannie or Freddie.

That last requirement effectively imposes a limit on loan amounts. Few mortgages for more than $417,000 will qualify for refinances because that is the conforming limit.

Also, a mortgage that's deeply underwater wouldn't be eligible for refinance. An example of a hypothetical loan illustrates why:

Let's say someone in Florida borrowed $310,000 to buy a $350,000 house a few years ago. Now, the house has lost one-quarter of its value and is worth $262,000. The owner still owes $300,000, or about 115 percent of the appraised value. That's far more than the 105 percent limit. The owner wouldn't be able to refinance without coming up with about $25,000 cash to bring the loan balance down to 105 percent of the home's value. I won't get into talking about how the plan affects those with subprime and exotic loans. The complications of that would take several pages to explain.

The plan will still help millions of people that need the help at this time and let's hope there will be changes to it to accommodate the need of millions more that are in a desperate need.

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

Kamlesh Patel


To paraphrase Mark Twain, reports of the demise of the estate tax are probably exaggerated. Recent news indicates changes are coming - including a likely reversal of the federal law that would have let the tax expire in 2010. States may implement changes as well, leading to additional uncertainty.

One thing is clear: While legislators work out the details, planning can put you in a favorable position for protecting your assets and saving tax dollars, no matter the outcome.

Here are two strategies to consider.

- Gifting. Use the annual gift tax exclusion of $13,000 to make tax-free transfers that reduce the size of your estate. If your spouse agrees to "split" the gifts, meaning each of you is considered to have paid one-half, you can transfer up to $26,000 to any number of recipients during the year.

In addition, you can generally make unlimited transfers to your spouse. This estate planning technique gives you the opportunity to re-title certain assets in order to take full advantage of the $3,500,000 sheltered from estate tax in 2009. (The 2009 federal annual exclusion is $133,000 if your spouse is not a U.S. citizen.)

- Irrevocable life insurance trusts. Generally, if you own a life insurance policy, the proceeds are taxable as part of your estate. Establishing an irrevocable trust to hold life insurance policies can shelter the proceeds from estate tax, because the trust becomes the owner of the policy, removing it from your estate.

Another benefit: Life insurance proceeds provide the liquidity your heirs may need to settle tax liabilities. This is especially useful if your assets include property such as a business, farm, or other real estate.


Strange as it may seem, the IRS doesn't want everybody to file an income tax return. The reason is simple: Processing tax returns takes time and money. The IRS doesn't want to use its resources handling returns that weren't necessary in the first place.

Who should file a return? The rules for filing 2008 tax returns are straightforward for most people.

- Single taxpayers (including those who are divorced or legally separated): If you're under 65 and had gross income of at least $8,950 in 2008, you must file. If you're 65 or older, the cutoff is $10,300.

- "Head of household" taxpayers (generally, unmarried people who provide a home to a child or other dependent): If you're under 65 and had income of at least $11,500, you'll need to file. If you're 65 or older, the cutoff is $12,850.

- Married taxpayers filing jointly: Filing is required if both spouses are under 65 and income is at least $17,900. If one spouse is 65 or older, the cutoff is $18,950. If both spouses are 65 or older, gross income must be at least $20,000 to require filing. If you were married but not living with your spouse at the end of 2008, filing is required if you have income of $3,500 or more, regardless of your age.

- Married taxpayers filing separately: If you made at least $3,500, you must file, regardless of your age. Different IRS rules govern filing for certain widows and widowers, dependents, those who owe special taxes (e.g., self-employment tax), children under age 19, and aliens.

It's worth looking into your filing requirements. This year you may not have to file at all. If you have a refund coming, you will want to file regardless of your income level.


Time is short, but it's not too late to trim your 2008 tax bill. Here are some last-minute moves to consider and deductions you shouldn't overlook.

- Maximize your 2008 IRA contribution. You have until April 15 to make deductible 2008 contributions. The maximum contribution is $5,000 for 2008 ($6,000 if you were 50 or older last year).

- If you changed jobs in 2008, make sure you didn't have excess Social Security taxes withheld. Claim credit for the excess on your Form 1040 if you paid more than $6,324.

- Look into itemizing deductions if you usually take the standard deduction. Search for allowable deductions that you might have overlooked, such as the reinstated deduction for state and local sales taxes in lieu of deducting state and local income taxes.

- Medical deductions are allowable to the extent they exceed 7.5 percent of adjusted gross income (AGI). Don't forget items such as eyeglasses and hearing aids. You can deduct mileage for medical appointments, plus parking and tolls.

- Don't overlook tax preparation fees, safe deposit costs and certain investment advice. They all qualify as miscellaneous deductions, subject to a 2 percent of AGI limit.

- Up to $2,500 of student loan interest is deductible whether you itemize or not.

- The deduction of up to $4,000 for qualified tuition and school expenses is available for 2008. Qualifying amounts for you, your spouse, and dependents may be deductible. Income limits apply.

- If you're a teacher or teacher's aide, you can deduct up to $250 for classroom supplies that you purchased with your own money.

- If you purchased a hybrid gas-electric car in 2008, you may be entitled to a tax credit.

- Even if you don't itemize deductions, you can take a deduction of up to $1,000 ($500 for singles) for real estate taxes paid in 2008.

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

Seema Ramroop

The old-fashioned common sense of our grandparents still stands as a reliable guide to money. Whether you are digging out of debt or managing substantial assets, the principles are similar.

Don't keep up with the Joneses

Comparing and competing with others can lead to financial overextension in which all our income disappears every month to support too much house, multiple vehicles and premium coffee. Many things that you see others enjoying are not paid for - they may be up to their ears in debt.

The advertising-driven consumerism of American society has lured millions of us into confusing our needs with our wants. Consider that most new purchases trade potentially income-producing assets (money you can invest) for income-draining liabilities (new car, vacation home).

Resist the temptation of false necessities and cultivate the freedom of contentment. Enough is enough. Possessions do not bring peace or financial independence. Pare down and clarify what you really value. If your spending expands as your income expands, you can miss a great opportunity to build wealth.

Get out of and stay out of debt

Ben Franklin said that "he who has four but spends five has no need of a purse." No matter how much money you make, if you are spending more, you are living in debt rather than building wealth.

Imagine pouring water into a bucket with so many holes that it runs our faster than you can put it in. Plug the holes. Analyze your spending - are the culprit's new clothes or dinners out? Do whatever it takes to control them - stay out of stores, eat at home, etc. Shred the credit card offers, choose one card to use carefully, cut up the others, and pay them off, the one with smallest balance first, until you are debt-free. Then pay your credit card bill in full every month.

Live below your means

Spend less than you make: Live not just within the edge of your means, but well below your means. Otherwise, you will not have surplus to save and invest wisely.

Everyone has enough to save. If your income were cut by 10 percent, you would find a way to adjust. So, pay yourself 10-to-20 percent every month, preferably by direct deposit into an investment account, so that it is automatic and doesn't require making a choice or remembering. The investment vehicle could be your company's 401(k) or an account with a brokerage firm, for example; you could split your automatic investments between two accounts.

Don't put all your eggs in one basket

Diversification is the key to preserving your invested assets. A table with four legs will stand, but a table with fewer may not. Picking one or two stocks or funds is risky.

Diversification does not mean parking money in multiple accounts at multiple firms. That leads to an uncoordinated strategy and a lack of oversight. If your investments are the players on a team and you are the owner, you still need a coach. Find a good financial advisor - most do not charge to consult with you.

Take care of yourself

Your goal is your own eventual financial independence. This means not being dependent on a job, a spouse, an inheritance, a company retirement plan or your children for financial sustenance. Financial independence occurs when your investment income meets or exceeds your monthly expenses. Achieving this takes time, but leads to psychological freedom. It's a slow, gradual process built on the cumulative effects of your determined long-term choices. Disciplined patience and a fine-tuned will are the tools of wealth-building.

Be a good steward

With wealth, comes great responsibility. It must be managed well and that requires education, attention, time and effort. Even a fortune can be lost with poor management and foolish lack of attention. And with wealth, comes great opportunity. It is a delightful experience to have sufficient surplus to give charitably, to provide for others - whether family members or the poor.

Money is a powerful tool that can be frittered away, wasted on temporary satisfactions, or used wisely for a long-lasting legacy. Cultivate uncommon common sense in matters of finance to set your course on the ultimately more satisfying path.

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

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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