Francis Vayalumkal

With so much of talk out there about who can get help with their mortgage and what they need to do, people are often confused or overwhelmed.

The Make Home Affordable program, a treasury initiative to try to help many people stay in their homes, divides homeowners into three categories - those in need of a refinance, those in need of a mortgage modification and those beyond government help.

You should pursue a government-backed refinance at today's low rates if:

1. Your home's value is within a few percentage points of the amount of your loan. If you live in an area hard hit by price declines, and the value of your home has declined substantially from its purchase price, you may not be eligible for this type of refinance.

2. You are current on your loan payments.

If it's clear that you won't qualify for a refinance, you should pursue a mortgage modification if: 1. You're having trouble making your mortgage payments.

2. You've experienced some kind of verifiable hardship -- such as a job loss, rising mortgage payment or an increased expense such as emergency medical care -- that has prevented you from staying current on your payments.

3. Your home is worth less than the amount of your loan, leaving you unable to refinance.

Here are the items you need to gather before you go in for any of these options.

" Your most recent income tax return;

" Information about your savings and other assets;

" Information about your first mortgage, such as your monthly mortgage statement;

" Information about any second mortgage or home equity line of credit on the house;

" Information about the monthly gross (before tax) income of your household, including recent pay stubs if you receive them or documentation of income you receive from other sources;

" Account balances and monthly payments on all your other debts such as student loans and car loans;

" Account balances and minimum monthly payments due on all of your credit cards;

" A letter describing any circumstances that caused your income to be reduced or expenses to be increased (job loss, divorce, illness, etc.) if applicable.

Check http://makinghomeaffordable.gov for information that could help you.

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

	Kamlesh Patel

By KAMLESH H. PATEL, CPA

If you're thinking about buying a new car, there's a powerful tax incentive to make the purchase: a new tax deduction authorized by the economic recovery law signed earlier this year. But this new deduction isn't available to all taxpayers and, surprisingly, may be passed over by others.

Here are the basic rules: You can claim an above-the-line deduction for state and local sales tax and excise tax attributable to the first $49,500 of the price of a new vehicle purchased after Feb. 16, 2009, and before Jan. 1, 2010. For this purpose, qualified vehicles include cars, SUVs, and light trucks, as long as the vehicle doesn't weigh more than 8,500 gross pounds. Also, motorcycles and motor homes may qualify.

For example, say that you buy a new car for $30,000 and receive $10,000 on a trade-in for your old car. If the applicable sales tax is 5 percent, you can deduct $1,000 (5 percent of $20,000 price).

However, the new deduction is phased out for taxpayers with an adjusted gross income (AGI) exceeding $125,000 for single filers and $250,000 for joint filers. The phase-out is complete at an AGI of $135,000 and $260,000, respectively.

The IRS has not explained all the rules for this tax break yet, but this much is clear: You can't deduct the sales tax under the new law provision if you elect to deduct state and local sales tax (instead of state income tax) under prior law. It's one or the other. Depending on your circumstances, you might come out ahead by forsaking the new deduction.

THERE'S A NEW LOOK TO THE HOMEBUYER CREDIT

It didn't take long for Congress to tinker with the "first-time homebuyer tax credit." This tax break, created by the housing law enacted last year, has been enhanced by the new economic recovery law. But major limitations still exist.

2008 home purchase: The housing law authorizes a refundable credit for first-time homebuyers equal to the lesser of $7,500 or 10 percent of the price of a principal residence purchased after April 8, 2008, and before Jan. 1, 2009. A "first-time homebuyer" is defined as someone who has not owned a principal residence for three years prior to the purchase.

But the housing law requires taxpayers to repay the 2008 credit to the IRS over a 15-year period beginning with the 2010 tax year. Thus, it resembles an interest-free loan more than a typical tax credit. If you stop using the home as your principal residence, you must repay the full amount.

Furthermore, the credit begins to phase out if your modified adjusted gross income (MAGI) exceeds $75,000 for single filers and $150,000 for joint filers. It disappears when MAGI reaches $95,000 for single filers and $170,000 for joint filers. The 2008 credit can be claimed only on a 2008 tax return.

2009 home purchase: For home purchases in 2009 before December 1, the new recovery law increases the maximum credit to $8,000. It also eliminates the requirement to repay the credit if you live in the home for at least three years following the purchase. However, you must recapture the entire credit if you stop using the home as your principal residence during this period. Finally, you still have to contend with the income phase-out rules. The 2009 credit can be claimed on either your 2008 or your 2009 tax return.

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

	Seema Ramroop

Introduction to Asset Allocation

Your investment goals are unique to you. An important step toward achieving your goals is to include the appropriate mix of assets in your portfolio. This mix, known as 'asset allocation1,' is the balance of equities (stock), bonds (fixed income) and cash (or cash alternatives) within your portfolio.

A core objective of asset allocation is to potentially increase the overall return for a given degree of risk, or to reduce the overall risk of a portfolio for a targeted level of return. Before deciding on your allocation you should consider your investment goals and your level of risk tolerance.

Investment Goals, Time Horizon and Risk Tolerance

Are you looking to generate a predictable stream of income to meet living expenses? Or do you want to generate capital growth? Are you investing for retirement? If so, what is your retirement timeframe (five years, 10 years, or more)? You should clearly define your investment goals and horizon.

A key to setting investment goals is to balance return expectations with your willingness to accept risk. It is important that you are comfortable with the amount of risk in your portfolio so that you will be able to stick with your investment strategy even through turbulent times.

You should strive to establish realistic expectations and carefully determine the appropriate investment time-frame for an investment plan. You may have multiple goals impacting your investment strategy, and accordingly may have multiple time horizons. Typical goals include payment of college tuition for your children, purchase of a home and retirement, among many others.

Revisit and Rebalance Your Allocation Regularly

Your investment goals, time horizon and risk tolerance will evolve over time - your asset allocation should change with them. At the beginning of your career, you may be willing to take on more risk, as you have time on your side to recoup losses. You and your financial advisor may determine that it is appropriate to include a relatively high allocation to equities at this stage, as well fixed income instruments which focus on capturing high yields.

As you accumulate wealth, your needs may expand to include the purchase of property, the cost of education and impending retirement. You and your financial advisor may determine that you should reduce your exposure to riskier investments and increase your allocation to more highly rated investments, such as investment grade corporate bonds, mortgage backed securities and, if appropriate, tax-exempt municipal bonds2

Near the end of your career, you may have a much lower tolerance for risk as you look toward retirement and spending some of the wealth you have accumulated. Your focus may shift to income generation and principal protection at this stage, and you and your financial advisor may transition your allocation toward high quality fixed income instruments and away from more volatile securities.

Equally important is regular rebalancing of your portfolio to maintain your target allocation3. As markets change and different assets appreciate and depreciate differently, the relative weightings of each sector, geographic region and asset class in your portfolio will change. In order to keep your asset allocation in line with your long-term strategy, it is important to revisit and rebalance your portfolio regularly.

Investment Strategy

The key to building a diversified portfolio is to make sure that your investment decisions are consistent with your financial objectives and long-term plans. By taking the time to understand your investment objectives and style, as well as the investment choices available, you can develop an asset allocation strategy that is right for you.

1 Asset allocation and/or diversification does not assure a profit or protect against loss in declining financial markets.

2 Municipal bonds are generally exempt from federal tax. Typically, state tax-exemption applies if securities are issued within one's state of residence and, local tax-exemption typically applies if securities are issued within one's city of residence. Some bonds may be subject to the alternative minimum tax (AMT).

3There may be tax implications with a rebalancing strategy. Please consult your tax advisor before implementing such a strategy.

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

	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 [email protected]