Cashrunner.net - Save Money. Make Money.

If you don’t have group-based health insurance such as the one typically provided by your employer, you may be shopping for individual or family health insurance. To make an informed decision, you need to understand the different kinds of options available to you.

Part I: Types of Individual/Family Health Insurance Plans

Traditional Health Insurance Plans

Indemnity Plan / Fee-for-Service Plan / Major Medical Health Plan

Health insurance used to be very much like any car insurance today. You paid your premiums and in exchange you were covered for any amount above your deductible. This type of health insurance is known as an indemnity plan. Today it is also known as fee-for-service insurance or major medical health insurance.

Under a traditional plan, you can go to any doctor or hospital you want anytime. Your insurance coverage is the same everywhere. Unfortunately, you will have to pay more for this degree of flexibility. Traditional plans are the most expensive type of health insurance.

As the cost of medical care has risen rapidly over the last few decades, health insurance providers have turned to managed care plans in order to lower their expenses.

Managed Care Health Insurance Plans

These days, the majority of people with private health insurance are covered by a managed care plan. The three most common types of managed care include HMO, PPO, and POS plans. In addition to these long-term plans, there are also short -term health insurance plans.

Health Maintenance Organization (HMO)

A Health Maintenance Organization (HMO) is a network of hospitals, doctors, labs, etc. that have agreed to charge lower fees to HMO members. These lower rates come at a price. As an HMO member you are assigned a primary care physician (PCP), who acts as a gatekeeper. Unless you have an emergency, you have to see your PCP first for all your medical care needs. If they think you need a specialist, they will refer you to a specialist within the HMO network. Note that the HMO will not reimburse you for visits to doctors outside of their network.

Preferred Provider Organization (PPO)

With a Preferred Provider Organization (PPO), you are not required to choose a primary care physician (PCP), and you don’t need a PCP referral when you need to see a specialist. You can see any specialist you choose. However, this added flexibility comes with higher costs. Most PPPs require higher copayments or coinsurance and often require you to pay a deductible before they start paying for any of your expenses. At the same time, the PPO also provides a financial incentive for you to stay within their network. The PPO has contracts with healthcare providers to charge lower fees for their services. When you go out of that network, you typically have to pay more. For example, your co-pay may be $50 instead of $30. In addition, an out-of-network doctor may require you to pay the entire bill up front. You will then have to submit paperwork to the PPO in order to get reimbursed. Consequently, most people who are covered by a PPO stick with in-network doctors.

Point-of-Service (POS)

A Point-of-Service plan is a like a cross between a PPO and an HMO. It is similar to a PPO in that it offers you the flexibility to choose between in-network and out-of-network providers. However, similar to an HMO, you are assigned a primary care physician (PCP). If you want to see a specialist, you will need a referral from your PCP. Your PCP is likely to refer you to an in-network doctor. If you insist on seeing an out-of-network doctor, you will have to complete more paperwork and accept a much smaller reimbursement from your insurance. In line with its relative flexibility, the cost of a POS is usually between that of an HMO and a PPO.

Part II: Long-Term Plans vs. Short-Term Plans

Most people opt for long-term health insurance, which allows you to renew your plan every year as long as you keep paying your premiums. This is to your advantage because your insurance company won’t just be able to cancel your insurance on you just because they feel you are costing them too much. At the same time, this added risk is priced into the premiums that long-term plan members have to pay.

With short-term plans, on the other hand, this risk is significantly reduced. The chance that you could fall sick within a short period is minimal and thus the cost of insurance is lower too. Short-term plans are usually for 6 months. Many of these plans give you the option of renewing your policy for up to 36 months, but each new plan is considered to be a completely new policy. Most short-term plans are either PPOs or indemnity plans. They allow you to see any health care provider you like but come with deductible and coinsurance terms.

The major disadvantage of a short-term plan is the risk that you may not be able to renew it and end up without coverage. This can happen easier than you think. If you are diagnosed with a medical condition, they may consider that to be a preexisting condition and deny you coverage when you try to renew your policy less than six months later.

Nevertheless, if you lost your employer-based healthcare and you can’t afford a long-term plan, then a cheap short-term plan may be your only option. If you have a preexisting condition such as diabetes, you need to make sure that you keep some sort of health insurance until you find another job at which point you can re-enroll in your employer-based group plan. Because of the Health Insurance Portability and Accountability Act (HIPAA), your new employer-based group will usually have to accept you despite your preexisting condition. However, you lose this important protection if you are without health insurance for more than 63 days in the preceding 12 months.

Part III: Important Terminology

Deductible

A deductible is a specific dollar amount that your health insurance requires you to pay each year out of your own pocket before they start paying for any of your medical expenses. As a general rule, most HMOs do not require a deductible while traditional health insurance, PPOs, and POS plans do.

Coinsurance

Co-insurance is a cost-sharing requirement between you and your health insurance. After you have fully paid your annual deductible, you also have to pay a share of the remaining costs of your medical care. Your share is expressed as a percentage. For example, when you’re coinsurance is 20%, you pay 20% and your insurance will pay for 80% of the covered medical expenses. The amount of covered medical expenses you have to pay for yourself is limited only by your out-of-pocket limit for the year.

Out-of-pocket limit

The out-of-pocket limit is the maximum amount you will have to pay each year for covered medical expenses. The out-of-pocket limit takes into account your deductible as well as your coinsurance payments.

Lifetime maximum

A lifetime maximum is the maximum amount your insurance will pay for expenses during your lifetime.

Copayment

Some plans require a copayment, or copay, which means you pay a flat fee for each medical service and your insurance will pay for the rest. For example, a co-pay arrangement may require you to pay $20 for each office visit or $50 for a hospital stay.

Medically necessary treatments or services

Your health insurance will only cover medical expenses for treatments or services that are deemed medically necessary. For example, they may deny payment for treatments that are considered cosmetic.

Reasonable and customary charges

Your health insurance will only pay what it considers reasonable and customer charges.

Preexisting conditions

A health insurance will not pay for health problems that were diagnosed before the effective date of the insurance. If you have job-based coverage, you may be excluded from coverage only for a limited time such as a year. If you’re on an individual or family plan, your options are much more limited. In fact, you may be unable to get health insurance because of your preexisting condition.

Part IV: How to Shop for Health Insurance

1. COBRA. Employer-based group-based coverage is cheaper than individual/family plans. If you lost your employer-based coverage because you lost your job, the Consolidated Omnibus Budget Reconciliation Act (COBRA) allows you to stay enrolled in that plan for up to 18 months. Although you will have to pay the full premium, including the portion previously paid for by your employer, it will still be cheaper than getting similar coverage under an individual policy.

2. Decide on a type of plan. Decide what kind of plan you want: HMO, PPP, POS, or short-term health insurance.

3. Compare multiple insurance plans. Find out about the various types of plans offered by at least five different insurance companies. Aetna, Kaiser, Blue Cross, and Blue Shield are among the insurance providers that can be found in almost every state. You can visit their websites to view the plans they offer. In most cases, you can even request to have a brochure mailed to your home. In addition, U.S. News & World Report publishes a list of the best commercial health plans, which you can use to find more reputable health plans. When you compare the policies, you will need to weigh the monthly premiums they charge vs. any deductibles, coinsurance, copayment, and out-of-pocket requirements. Also, ask for how long the premiums are guaranteed. You don’t want to fall for an introductory offer.

4. Beware of fake insurance. In your search for the cheapest policy out there, you may fall victim to a company selling fake health insurance. It’s more common that you think. Be sure to check the website of the National Association of Insurance Commissioners for a list of licensed insurance companies.

Photo Credit: Frenkieb

Habitat for Humanity is a non-profit organization that provides assistance to low-income first-time homebuyers. If you meet their criteria, they will sell you a house at no profit and provide you with an interest-free mortgage. Their generosity is made possible with the help of numerous donors and volunteers who help build the house for you. However, the program does come with certain restrictions.

For one, you have to be on a low-income to qualify for a Habitat home. Note that Habitat for Humanity income guidelines tend to be more stringent than those of governmental first-time homebuyer programs. For example, in most areas, the maximum income for a two-member household is around $30,000 whereas some government programs have thresholds as high as $50,000 in certain areas. However, if you do qualify for a Habitat home, the savings will almost certainly be much greater than under any government program alone. In general, with Habit for Humanity, the cost of both the home and the loan to finance the purchase will be lower. In addition, you may still be able to take advantage of certain government tax credits and rebates on top of that.

As you might expect, the Habitat for Humanity program is extremely popular among first-time homebuyers on low incomes. Given the high demand and the limited supply of Habitat homes, the selection process is quite rigorous in order to ensure that only the most qualified candidates are accepted into the program. The process includes a review of your work history, credit history, family size, and economic need. You also have to show a willingness to become a full partner with Habitat for Humanity. You are expected to put several hundred hours of work, or “sweat equity”, into your own home or the home of another Habitat buyer within a year of signing the partnership agreement.

Habitat for Humanity has local chapters across the country. Each chapter has its own selection criteria and application process. Click here to find a local chapter near you. You can view additional details and download an application from the chapter website.

Photo Credit: First Baptist Church Nashville

Planning for your child’s college education can be a daunting task. The cost of tuition at public and private colleges keeps increasing every year. If you don’t start saving now, you may not be able to afford the college of their choice later on.

There are two types of college savings accounts available to you. Both of them come with certain tax advantages: 529 Plans (also known as Qualified Tuition Programs) and Coverdell Education Savings Accounts (previously known as Education IRAs).

529 Plan

How it Works

529 Plans are named after the section number of the IRS code in which they are described. Each state has its own version of a 529 plan. Depending on the state you reside in, you will have either or both of these options:

1. 529 Prepaid Tuition Plan. You prepay future tuition at today’s rates. This type of 529 plan is guaranteed to increase in value at the same rate as college tuition.

2. 529 College Savings Plan. Contribute to an investment account to save money for future education expenses. You won’t have to pay any taxes on the earnings in your account and qualified withdrawals are tax-free. In addition, qualified education expenses don’t just include tuition but also room and board, books, supplies, and any equipment needed for school.

Note: You can’t deduct prepayments or contributions to a 529 Plan on your tax return.

Contribution Limits

There are no income restrictions on who can participate in 529 plans. However, the amount you can contribute to a plan cannot be more than is necessary to pay for qualified education expenses. The exact contribution limits vary by state.

Coverdell Education Savings Account

How it Works

Coverdell Education Savings Accounts, or Coverdell ESAs, are similar to 529 College Savings Plans. You won’t have to pay taxes on your earnings (i.e. interest, dividends, capital gains, etc.) now or later when you withdraw the money to pay for your child’s qualified education expenses. Qualified education expenses include not only tuition but also room and board, books, supplies, and equipment needed for school.

Note: The contributions to a Coverdell ESA are not tax-deductible.

Contribution Limits

In order to contribute to a Coverdell ESA, your modified adjusted gross income (MAGI) must be less than $110,000 ($220,000 if filing a joint return). For most taxpayers, MAGI is the same as adjusted gross income reported on their federal income tax return.

In addition, total contributions to a Coverdell ESA cannot exceed $2,000 per beneficiary per year (as of 2009). The beneficiary is the child that the ESA was set up for.

Photo Credit: koyochi

Most of us understand that IRAs are accounts that you use to save for retirement. But do you really know the difference between a Traditional IRA and a Roth IRA? Do you know when you should choose one over the other? Read on.

Traditional IRA

Quick Overview

A Traditional IRA is an account that you use to save for your retirement. You can open a Traditional IRA at your bank or at a brokerage. You may use it as a simple savings account or as an investment account for a portfolio of stocks or bonds. It’s entirely up to you. The contributions to a Traditional IRA are tax deductible. So you pay less in taxes each year. In addition, the money in the account grows tax free. That means if you earn interest, dividends, or capital gains, you won’t have to pay taxes on that income, at least not right away. It’s only when you withdraw the money at retirement that your earnings are taxed like ordinary income. The fact that your earnings go untaxed for so long means your investment will grow faster in the meantime. Plus, when you later withdraw your money, you will probably be in a lower tax bracket. As a result, you’ll pay less in taxes at that time.

Eligibility

Any worker under the age of 70 ½ can open a Traditional IRA account. There are no income restrictions to open an account.

Contributions

There’s a limit on how much you can contribute to a Traditional IRA each year. The annual contribution limit for tax year 2008 is $5000 ($6000 if you were age 50 or older by the end of 2008).

Single filers can earn up to $101,000 to qualify for a full contribution. Those earning between $101,000 and $116,000 are eligible for a partial contribution. Single filers earning more than $116,000 a year cannot contribute to a Roth IRA. (2008 Figures)

Joint filers can earn up to $159,000 to qualify for a full contribution. Those earning between $159,000 and $169,000 are eligible for a partial contribution.

You can also never contribute more than your taxable compensation for the year.

Tax Deduction

If you are not covered by an employer plan, IRA contributions are always fully deductible. However, if you are covered by an employer plan, you can deduct the full amount of your contribution only if your modified adjusted gross income is $50,000 or less (single) or $75,000 or less (married). You can only claim a partial deduction if your income is between $50,000 and $60,000 (single), $75,000 and $80,000 (married, both spouses covered), or $150,000 and $160,000 (married, only spouse covered). If you are covered by an employer plan and you earn more than $60,000 (single), $85,000 (married, both covered), or $160,000 (married, only one spouse covered), you cannot deduct your IRA contributions at all(2008 figures).

Withdrawals / Distributions

You must begin receiving minimum distributions by April 1 of the year following the year you reach age 70 ½. To calculate the minimum required distribution, divide the balance of your IRA account at the end of the previous year by the number of years in your life expectancy. All distributions of earnings are taxed as ordinary income.

In addition to being taxed at ordinary income rates, withdrawals before the age of 59 ½ also trigger a 10% penalty unless the following exceptions apply:

• You withdraw the money you contributed before the due date of your next tax return.
• You have unreimbursed medical expenses that are more than 7.5% of your adjusted gross income.
• The distributions are not more than the cost of your medical insurance.
• You are disabled.
• You are the beneficiary of a deceased IRA owner.
• You are receiving distributions in the form of an annuity.
• The distributions are not more than your qualified higher education expenses.
• You use the distributions to buy, build, or rebuild a first home. ($10,000 maximum)
• The distribution is due to an IRS levy of the qualified plan.
• The distribution is a qualified reservist distribution.

Conversions

You may convert from a Traditional IRA to a Roth IRA if your income is $100,000 or less. The entire amount will be taxed at ordinary income tax rates that year.

When to Choose a Traditional IRA

In general, Traditional IRAs are preferable to Roth IRAs when the following situations apply:

• You are in a high tax bracket. This increases the value of a tax deduction. Multiply your average tax rate by the amount of your contribution to determine how much you will save in taxes for the year.
• You expect to be in a significantly lower tax bracket when you retire. Earnings in a Traditional IRA are tax-deferred. That means you’re going to be taxed on them eventually. The greater the difference between your tax bracket now versus at retirement, the more you will save.
• You are approaching retirement. The older you are, the more conservative you should be with your investments because if the market takes a downturn, your investments may not have enough time to recover. It’s time to shift from stocks to less risky investments. Naturally, the returns on these investments will be lower. This reduces the attractiveness of a Roth IRA (described in the next section) and makes the benefit of a tax deduction relatively more important.

Roth IRA

Quick Overview

A Roth IRA (named after the U.S. Senator who wrote the bill creating it) is another type of retirement account. Like a Traditional IRA, it can be used as a simple savings account or as an investment account. You can open one at a bank or a brokerage. Unlike with a Traditional IRA, contributions to a Roth IRA are not tax deductible. You won’t save on your taxes each year just because you’re making contributions to a Roth IRA. Like a Traditional IRA, the earnings in a Roth IRA account grow tax free. You don’t need to worry about paying taxes on interest, dividends, or capital gains each year. In fact, and here’s the primary advantage of Roth IRAs, you’ll never have to pay taxes on your earnings. This is a crucial difference between Traditional IRAs and Roth IRAs. With a Traditional IRA, you will have to pay ordinary income tax when you withdraw your earnings at retirement. With a Roth IRA, you won’t have to. You’ll get to keep everything.

Eligibility

There are no age restrictions to open a Roth IRA account. However, there are income restrictions.

Contributions

There’s a limit to how much you can contribute to a Roth IRA each year. The annual contribution limit for tax year 2008 is $5000 ($6000 if you were age 50 or older by the end of 2008) but the amount could be less than that depending on your income.

Single filers can earn up to $101,000 to qualify for a full contribution). Those earning between $101,000 and $116,000 are eligible for a partial contribution. Single filers earning more than $116,000 a year cannot contribute to a Roth IRA (2008 Figures).

Joint filers can earn up to $159,000 to qualify for a full contribution. Those earning between $159,000 and $169,000 are eligible for a partial contribution (2008 Figures).

In addition, you can never contribute more than your taxable compensation for the year.

Tax Deduction

Contributions to a Roth IRA account are not tax deductible.

Withdrawals / Distributions

All withdrawals after age 59 ½ are untaxed as long as your IRA has been open for at least five years.

You are not required to begin taking distributions because of your age. You can keep your funds in your Roth IRA account for as long as you like.

If you withdraw earnings from your Roth IRA before retirement age (legally set at 59 ½) or before the 5-year minimum period has passed, you will have to pay a penalty equal to 10% of the amount of the withdrawal unless you meet these exceptions:

• You withdraw the money you contributed before the due date of your next tax return
• You have unreimbursed medical expenses that are more than 7.5% of your adjusted gross income.
• The distributions are not more than the cost of your medical insurance.
• You are disabled.
• You are the beneficiary of a deceased IRA owner.
• You are receiving distributions in the form of an annuity.
• The distributions are not more than your qualified higher education expenses.
• You use the distributions to buy, build, or rebuild a first home. ($10,000 maximum)
• The distribution is due to an IRS levy of the qualified plan.
• The distribution is a qualified reservist distribution.

When to Choose a Roth IRA

In general, Roth IRAs are preferable to Traditional IRAs when the following situations apply:

• You are in a low tax bracket. This reduces the value of a tax deduction you would get with a Traditional IRA.
• You expect to be in a relatively high tax bracket even when you retire. This reduces the value of the tax deferral you would get with a Traditional IRA.
• You are young. The younger you are, the more risk you can take with your investments. You could be invested mostly in stocks, which over a period of many years outperform less risky investment options such as bonds. Even if the stock market experiences a slump for a few years, it will eventually recover and average a higher return on investment. In a Roth IRA, your money will not only grow faster, you actually get to keep all that growth because earnings can be withdrawn tax free at retirement.

Photo Credit: g-hat

The Retirement Savings Contributions Credit, more commonly known as the Saver’s Credit, allows low-income households to claim a tax credit of up to $1000 (single) or $2000 (married). You can reduce the amount of federal income tax you owe by the amount of the tax credit. Here’s how you can get it.

Requirements

You can take this credit if:

• You made contributions to a qualified retirement plan such as an employer-sponsored 401k plan, a Traditional IRA, or a Roth IRA.
• Your adjusted gross income is equal to or less than $26,500 (single), $39,750 (head of household), or $53,000 (married filing jointly). [Figures for 2008.]
• You are 18 or older.
• You were not a full-time student during any part of 5 calendar months.
• You cannot be claimed as a dependent on someone else’s tax return.

Maximum Credit

The amount of the credit you can claim is calculated as a percentage of your adjusted gross income.

For your 2008 tax return, use the following guidelines.

Single or Married Filing Separately

• $0-$16,000 => Credit amount is 50% of contribution.
• $16,001-$17,250 => Credit amount is 20% of contribution.
• $17,251-$26,500 => Credit amount is 10% of contribution.

Married Filing Jointly

• $0-$32,000 => Credit amount is 50% of contribution.
• $32,001-$34,500 => Credit amount is 20% of contribution.
• $34,501-$53,000 => Credit amount is 10% of contribution.

Head of Household

• $0-$24,000 => Credit amount is 50% of contribution.
• $24,001-$25,875 => Credit amount is 20% of contribution.
• $25,876-$39,750 => Credit amount is 10% of contribution.

Choice of IRA

You may choose between a Traditional IRA and Roth IRA. (If you cannot contribute to an employer-sponsored retirement plan, these may be your only choices.) For many low-income households, contributing to a Roth IRA is going to be more valuable than a traditional IRA. That’s because a large part of the savings from a Traditional IRA are due to the tax deduction you can take each year on the amount of your annual contribution. However, if your taxable income is not that much and you are in a low tax bracket, the tax savings from those deductions are going to be relatively little. A Roth IRA would make more sense. Although it does not give you annual tax deductions, it allows you to keep the earnings from your investments from ever being taxed, which a Traditional IRA doesn’t. For a low-income household, tax-free withdrawals of your earnings in the future will be more important. Note that you have until the day your taxes are due (April 15) to contribute to an IRA to claim the Saver’s Credit for the previous year.

Photo Credit: Komunews

Regardless of whether you are already in school or you are planning to go to school, it’s important that you are aware of the various tax deductions and credits that are available to lower your cost of attendance.

1. WHY EDUCATION TAX DEDUCTIONS AND CREDITS MATTER

It always surprises me that so many people go to college or graduate school without really considering education tax deductions and credits. Sure, you can have a tax specialist or software take care of it for you when you file your tax return the next year, but there are good reasons to know about the tax implications of your enrollment in advance.

When it comes to deciding what school to go to or whether to go to school at all, the cost of education usually plays an important role. Two different types of costs come into play.

The most immediate cost you need to consider is the fact that you actually lose money by not working full-time. That could be tens of thousands dollar a year. In finance jargon, it’s called an opportunity cost. More often than not, however, your education will pay for itself as it will allow you to earn more money in the future, especially if you’re just getting a bachelor’s degree.

Assuming you have decided you want to go to school, your next decision rests on which school you should attend. Many of us try to factor in the cost of attendance as much as the quality of education the school can offer. You need to decide which school is the best value. The single greatest direct expense of a college education is tuition and fees. In addition, if you don’t have the funds to pay for it out-of-pocket, you also need to consider how much it’s going to cost you to take out loans to finance your education. The cost of a loan is the interest you pay on it. That is why it’s important to take into account tax deductions and credits which in effect reduce the cost of tuition and fees as well as loans. The after-tax cost of an education is different from its before-tax cost. When you don’t take taxes into consideration, you may jump to wrong conclusions about the relative costs of different schools as well as the cost of education itself. Unfortunately, many people don’t know enough about tax deductions and credits and therefore don’t even bother taking them into account. Don’t make the same mistake. It’s important that you learn about these things in order to make an informed decision.

2. EDUCATION TAX CREDITS vs. EDUCATION TAX DEDUCTIONS

There are both tax credits and tax deductions available to reduce the cost of education for you. In some instances, you will have to choose or the other because you can’t get different tax credits and deductions for the same educational expenses. You should choose the tax credit or deduction that gives you the most money back.

A tax credit will reduce your tax debt dollar for dollar. For example, a $1000 tax credit means you can pay $1000 less in taxes. To find the value of a tax deduction, on the other hand, you need to multiply it by your marginal tax rate. If your marginal tax rate is 30%, then a $1000 tax deduction means you will pay $300 less in taxes. (Note: Strictly speaking, these calculations work only for refundable tax credits and above-the-line tax deductions, but all education tax credits and deductions fall under these categories. If you want to learn about the difference between tax deductions and tax credits in greater detail, you may want to read our Basic Guide to Income Tax).

Another thing you need to be aware of is that you can get tax credits and deductions for qualified educational expenses only. The definition of ‘qualified educational expenses’ varies a little bit depending on the type of credit or deduction. Generally, though, tuition and books are qualified educational expenses while transportation, room and board, health insurance are not.

All four education tax credits and deductions have income restrictions based on your modified adjusted gross income (MAGI). MAGI is the same as adjusted gross income unless you also claimed the foreign earned income exclusion, the foreign housing exclusion, the foreign housing deduction, the income exclusion for residents of American Samoa, or the income exclusion for residents of Puerto Rico on your tax return, all of which would then have to be added back.

3. EDUCATION TAX CREDITS

Two different education tax credits are available: the Hope Credit and the Lifetime Learning Credit. You can only claim one of the two credits. You will have to determine which one saves you more money. Both credits are non-refundable, meaning they will help you reduce the amount of tax you owe but can’t be used to increase your tax refund.

Hope Credit

Here are some facts about the Hope Credit for tax year 2008:

• Amount. The amount of the Hope credit (per eligible student) is the sum of: 100% of the first $1,200 ($2,400 if a student in a Midwestern disaster area) of qualified education expenses you paid for the eligible student, and 50% of the next $1,200 ($2,400 if a student in a Midwestern disaster area) of qualified education expenses you paid for that student.
• Maximum benefit. The maximum credit you can claim is $1,800 ($3,600 if a student in a Midwestern disaster area) per eligible student
• Time limit. Available ONLY until the first 2 years of post-secondary education are completed and available ONLY for 2 years per eligible student.
• Student qualifications. Student must be pursuing an undergraduate degree or other recognized education credential and must be enrolled at least half time for at least one academic period beginning during the year. In addition, there must be no felony drug conviction on student’s record.
• Phaseout. The amount of your Hope credit for 2008 is gradually reduced (phased out) if your modified adjusted gross income (MAGI) is between $48,000 and $58,000 ($96,000 and $116,000 if you file a joint return). You cannot claim a credit if your MAGI is $58,000 or more ($116,000 or more if you file a joint return).

You cannot claim the Hope Credit if you claim either the Lifetime Learning Credit or the Tuition and Fees Deduction.

Lifetime Learning Credit

Here are some facts about the Lifetime Learning Credit for tax year 2008:

• Amount. The amount of the lifetime learning credit is 20% of the first $10,000 of qualified education expenses you paid for all eligible students.
• Maximum benefit. The maximum amount you can claim for the year is $2,000 ($4,000 if a student in a Midwestern disaster area) per return
• Time limit. Available for all years of postsecondary education and for courses to acquire or improve job skills. Available for an unlimited number of years
• Student qualifications. Student does not need to be pursuing a degree or other recognized education credential. Available for one or more courses. Felony drug conviction rule does not apply
• Phaseout. The amount of your lifetime learning credit for 2008 is gradually reduced (phased out) if your modified adjusted gross income (MAGI) is between $48,000 and $58,000 ($96,000 and $116,000 if you file a joint return). You cannot claim a credit if your MAGI is $58,000 or more ($116,000 or more if you file a joint return).

You cannot claim the Lifetime Learning Credit if you claim either the Hope Credit or the Tuition and Fees Deduction.

4. EDUCATION TAX DEDUCTIONS

Tuition and Fees Deduction

Here are some facts about the Tuition and Fees Deduction for tax year 2008:

• Type of deduction. The Student Loan Interest Deduction is an adjustment.
• Amount. You can deduct tuition and fees up to the maximum allowed and subject to the phaseout restrictions (see below).
• Maximum benefit. You can reduce your income subject to tax by up to $4,000.
• Qualified expenses. Tuition and fees required for enrollment or attendance at an eligible postsecondary educational institution, but not including personal, living, or family expenses, such as room and board.
• Student qualifications. The expenses must be paid for a student enrolled in an eligible educational institution who is either you, your spouse, or your dependent for whom you claim an exemption.
• Phaseout. If your modified adjusted gross income (MAGI) is not more than $65,000 ($130,000 if you are married filing jointly), your maximum tuition and fees deduction is $4,000. If your MAGI is larger than $65,000 ($130,000), but is not more than $80,000 ($160,000 if you are married filing jointly), your maximum deduction is $2,000. No tuition and fees deduction is allowed if your MAGI is larger than $80,000 ($160,000).

You cannot claim the Tuition and Fees Deduction if you claim either the Hope Credit or the Lifetime Learning Credit.

Student Loan Interest Deduction

Here are some facts about the Student Loan Interest Deduction for tax year 2008:

• Type of deduction. The Student Loan Interest Deduction is an adjustment.
• Amount. Your student loan interest deduction for 2008 is generally the smaller of: $2,500 or the interest you paid.
• Maximum benefit. You can reduce your income subject to tax by up to $2,500.
• Loan qualifications. Your student loan must have been taken out solely to pay qualified education expenses, and cannot be from a related person or made under a qualified employer plan.
• Student qualifications. The student must be you, your spouse, or your dependent, and enrolled at least half-time in a degree program.
• Time limit on deduction. You can deduct interest paid during the remaining period of your student loan.
• Phaseout. The amount of your deduction depends on your income level. If you are married and file a joint return, the amount of your student loan interest deduction for 2008 is gradually reduced (phased out) if your modified adjusted gross income (MAGI) is between $115,000 and $145,000. You cannot take a deduction if your MAGI is $145,000 or more.

Note that you can still claim the Student Loan Interest Deduction even if you also claim the Tuition and Fees Deduction, the Hope Credit or the Lifetime Learning Credit because the Student Loan Interest Deduction is claimed for an expense not covered by the other three.

Photo Credit: VirtualSugar

Most of us are satisfied with having our taxes done for us. However, if you want to be more successful at planning your financial future, you should have at least a basic understanding of how a federal tax return actually works. In this basic tax guide, you’ll find out about the five simple steps involved in preparing your tax return. You’ll also learn about tax deductions and credits and how they are different from each other.

Part 1: Overview - How Income Tax Is Calculated

Step 1: Figure out your taxable income.

You first add up all your sources of income (e.g. salary, wages, interest, dividends, business income etc.). This is your total income. But the government does not tax you on your total income. You are allowed to subtract various types of expenses, which end up reducing your taxable income. These expenses are called deductions and come in four flavors: adjustments, standard deduction, itemized deductions, and exemptions - more about that later. The less taxable income you have, the less income tax you will have to pay.

Total Income

- Adjustments
- Standard Deduction or Itemized Deductions (whichever is larger)
- Exemptions
________________________________________________________

= Taxable Income

If the amount is zero or negative, then your taxable income is zero.

Step 2: Calculate tax.

Look up your tax rate for your level of income and multiply it by your taxable income to calculate your tax. You can find your tax rate in a tax table that is included with your tax forms.

Taxable Income x Tax Rate = Tax

Step 3: Subtract Non-Refundable Credits

If you qualify for non-refundable tax credits, subtract them from the amount of tax you calculated earlier.

Tax - Tax Credits = Tax Less Non-Refundable Credits

If the amount is zero or negative, then your income tax is zero.

Step 4: Add Other Taxes to Calculate Total Tax

Under certain circumstances, you may owe other types of taxes in addition to income taxes. These can include self-employment taxes or unreported social security taxes. Add them to your income tax calculate your total tax.

Tax Less Non-Refundable Credits + Other Taxes = Total Tax

Step 5: Subtract Refundable Tax Credits and Payments to Calculate Amount You Owe / Refund Due

The government doesn’t want to wait for its taxes until you file your return. They make you prepay your taxes by withholding an amount from each paycheck. Of course, it’s only when you file your tax return the following year that you actually know how much tax you really owed the government. The withholding amounts are just estimates. In addition, you may qualify for refundable tax credits, which you get to subtract at this point as well.

Total Tax

- Payments
- Refundable Tax Credits
_________________________

= Tax Refund / Tax You Owe

Sometimes you will find the government took too much from you, so they will have to pay you back. That’s a refund. On the other hand, if it turns out you paid too little in tax, the government will ask you to pay up the remainder of what you owe. You may even have to pay penalties for failing to withhold more.

Part 2 - Deductions vs. Credits

Deductions and credits are two very basic concepts. Surprisingly, very few people seem to understand the difference between the two.

Tax Deductions

There are several types of deductions: adjustments, standard deduction, itemized deductions, and exemptions. When you subtract adjustments from your gross income, you arrive at an amount called adjusted gross income. Then you get to subtract either a standard deduction, which is an amount set by the government, or itemized deductions, whichever is larger. You would only want to itemize deductions if their total was greater than the standard deduction amount.

Consequently, adjustments are usually worth more than itemized deductions. The government decides which deductions can be used as adjustments and which deductions can be itemized. Adjustments are sometimes also known as above-the-line deductions while itemized deductions are also known as below-the-line deductions. Common adjustments include IRA contributions, educator expenses, health savings account contributions, student loan interest, and tuition and fees. Itemized deductions include, for example, mortgage interest, medical expenses, charitable contributions, and investment expenses.

After you have reduced your adjusted gross income by applying either your standard deduction or itemized deductions, you get to reduce it again by another type of deduction called an exemption. The amount of the exemption is set by the government. Everybody gets at least one exemption for themselves, more if they have dependents.

The value of an above-the-line tax deduction is easy to calculate. After you have subtracted all deductions, you arrive at your taxable income. At this point, you apply the tax rate for your income level to calculate your tax. The value of an above-the line tax deduction is just the marginal tax rate multiplied by the amount of the deduction. For example, if your marginal tax rate is 30%, then a $1000 above-the line tax deduction is worth $300. Basically, the deduction reduces your taxable income by $1000, which means you have to pay $300 less in income tax.

The value of an itemized tax deduction is a little harder to calculate. If you add up all itemized deductions and it turns out that they are less than the standard deduction, then the value of the itemized deductions is zero because you wouldn’t even use them. On the other hand, if the total amount of itemized deductions is greater than the standard deduction, they would be worth something but only insofar as they increase your tax savings above the amount you would save with the standard deduction. So you would subtract the amount of the standard deduction from the total amount of itemized deductions and then apply your marginal tax rate to calculate the tax savings.

Tax Credits

Unlike tax deductions, tax credits reduce the tax you owe dollar for dollar. They are applied after all deductions have been subtracted and after you have applied the tax rate to your taxable income. For example, if you qualify for a $1000 tax credit, then you will have to pay $1000 less in income tax for the year. Consequently, a tax credit is worth more than a tax deduction for the same amount.

There are actually two types of credits: refundable tax credits and non-refundable tax credits. In some situations, a refundable tax credit can be worth more than a non-refundable tax credit. If it turns out that you don’t owe any taxes (i.e. taxable income is zero), then a non-refundable tax credit won’t do you any good. It won’t increase your refund. Similarly, if you have some taxable income but your tax is less than the refundable tax credit, your tax will be reduced to zero but the difference won’t be added to your refund. A refundable tax credit, on the other hand, doesn’t just decrease your tax debt, but it can also be used to increase your refund. Most working taxpayers, however, won’t be faced with this problem because their taxes won’t be low enough to make a difference.

Some of the most common non-refundable tax credits include the foreign tax credit, the education tax credit, and the child tax credit. Refundable tax credits include, for example, the earned income credit, the first-time homebuyer credit, and the recovery rebate credit (for tax year 2009).

There’s no reason to pay your bank an arm and a leg just to get new checks.

Many people are surprised to learn that you don’t have to order checks through your bank. There are a number of private companies that will print your checks and mail them to you for a lot less than your bank is charging you.

Of course, you have to be extremely careful. You don’t want your personal information to fall in the wrong hands. That’s why it’s important to work with reputable companies.

Three such companies include Costco, Walmart, and Sam’s Club. The savings can be 50% off or more of what you’d usually have to pay at a bank. Conveniently, they all allow you to order your checks online.

Car salesmen have a bad reputation - and deservedly so. Learn about the tricks they use to make you pay more than you have to, so you won’t fall victim to them.

1. Pretending they’re your friend. A salesperson will try to gain your trust by pretending they’re your friend. They know the more you can relate to them and think of them as a friend, the more difficult it will be for you to say no.

2. Pretending they’re on your side. A salesperson will often pretend they’re trying to get you the lowest possible price. They will tell you their sales manager has to approve everything but they will do their best to get you the best possible deal. Only the first part of that statement is true. In fact, the salesperson wants you to pay as much as possible because the more you pay, the more commission they will get. Contrary to what you may be led to believe, the salesperson is not risking their job for you at all when they talk to their manager. What’s more, the salesperson will try to coax you into a commitment by using a line like this: “If I could, would you buy this car today?” Just tell him you will buy the car today if you like the deal you’re getting.

3. Making you feel guilty. Another reason not to get too close to a salesperson. If they think you’re a nice guy, they may try playing the guilt car. They can’t afford to lose the sale because if they do they can’t get commission or might even get fired. Of course, that’s too bad because they have children in college, are getting married soon, or have a pregnant wife at home. Don’t ever feel like you need to buy a car out of pity for the salesperson. You’re not a charity. You’re there to buy a car for yourself. Plus, chances are the salesperson is lying to you anyway.

4. Limited time offer. Sometimes the salesperson will pressure you to buy the car the same day because of a special promotion. They will tell you that prices will go up again once the promotion ends. Don’t believe a word they say. Lucky for you, there is always a special sale going on at car dealerships. You can tell just by watching car commercials.

5. Affordable monthly payment. Instead of focusing on the price of the car, most dealers will try to talk about the monthly payment instead. They make it seem like that’s the most important thing you should care about. But is it monthly payments for 3 years, 4 years, 5 years, or longer? Needless to say, the more monthly payments you need to make, the greater the cost of the car will be. By getting you to focus on the monthly payment, the salesperson is trying to distract from more important things - like the price of the car.

6. Misplaced items. Be careful about leaving anything in the care of the dealership. It will take you a long time to get it back. By pretending they misplaced your item, the salesperson gets more time to continue pressuring you to buy the car. Sometimes you may not even have a choice. For example, the salesman may ask for your driver license to look up your record or your car keys so they can check out your trade-in. When you tell them you want to leave, don’t be surprised if they can’t find it right away. They will do everything they can to keep you there as long as possible.

7. Keeping you waiting. You would think a salesperson wants try to close the deal as quickly as possible. However, to get the best deal, they will also try to wear you out. The more tired and impatient you are, the more likely you are to give in to their terms to get it all over with. Typically, the salesperson will leave more than once to talk to their sales manager and take several minutes before they return.

8. Allowing you to take the car home for the night. This may seem like the dealer is doing you a favor. Actually, they just want you to get attached to the car.

9. Bait and switch. Car dealerships will do anything to get you to come to their dealership. They advertise amazing bargains but when you get there they’re already sold out because only one car was available at that price in the first place or the car turns out to have defects that were left out in the original advertisement. Similarly, you may be told they have a great deal waiting for you when you’re on the phone with them. Once you’re at the dealership, they get you to take a look at other cars.

10. Lowballing. If the salesperson knows you’ll be shopping around, they may quote you an incredibly low price to get you to come back again. They’ll know you won’t make a decision until after you have visited all the dealerships on your list. Of course, when you do return, that deal will no longer be available for whatever reason. You, on the other hand, are tired and worn out. That’s the kind of customer they want to be negotiating with.

11. Making up numbers. Car salesmen rarely use even numbers. Instead, they rely on odd numbers to make you think there was a scientific way they arrived at the dollar amount they’re quoting you, e.g. the monthly payment turns out to be $513 instead of $500.

12. Upselling. A salesperson will want to sell you the most expensive car you can possibly get because that gives them the most commission. When they ask you how much you want to pay for a car or how much you want your monthly payment to be, they’re usually just setting you up for the next question: “Up to?” Your answer to this question will let them know how much you’re really able to afford. That’s what they’ll be going by.

13. Four squares. Most sales negotiations will center on the “four squares”. The salesperson will use a sheet divided into four boxes: trade-in value, purchase price of car, down payment, and monthly payment. They will haggle with you over all four boxes. When they find out your “hot button” (e.g. you insist on a certain price for your trade-in), they might just give it to you to make you feel but then rip you off somewhere else.

14. Last minute changes. Sometimes the salesperson will give you the impression that you have reached a deal. Everything seems fine. You’re ready to sign the papers. Then, suddenly, there’s a change. You’re told that for some reason you will get less for your trade-in; or you have to pay slightly more for your monthly payment, etc. Even a seemingly minor change can cost you a lot more than you think. For example, a $20 increase in your monthly payment means you’ll end up paying $1200 more over a five-year term. They’re hoping you’re tired enough at this point not to give it too much thought.

15. Not telling you everything. Used car salesmen are especially good at this. Instead of lying to you, they’ll just conceal anything that might make you walk away from the deal. As long as you don’t ask, there’s no need for them to be upfront. If it comes out eventually, you might be so tired by that time that you just don’t know what to do about it and accept it.

16. Inspection. The fact that their mechanics inspected the car inside and out should be of no value to you. Those mechanics don’t work for you. They work for the dealership and if the dealership wants some sort of certification so that the car that can be sold more easily, they’ll get one.

Part 1 - Car Sales: Tricks of the Trade

Part 2 - How to Buy A New Car

Part 3 - How to Buy A Used Car

Photo Credit: Vagawi

No matter what kind of kind you are buying - used or new, it pays to be prepared. In this series of articles I will show you how.

Part 1 - Car Sales: Tricks of the Trade

Part 2 - How to Buy A New Car

Part 3 - How to Buy A Used Car

Photo Credit: Viernest

Everyone knows you’re not supposed to pay sticker price for a new car. The final sales price ultimately depends on your negotiating skills. You’ll be facing off against an experienced salesman. Don’t go unprepared.

1. Beware of common sales tricks. Read Car Sales: Trick of the Trade.

2. Get preapproved. Unless you’re going to pay cash, make sure you get financing from your bank or credit union before you even step into the dealership. Often the salesman will give you a break on the sales price of the car but then rip you off on the cost of the loan. If the salesman can offer you a better loan package after you have negotiated a low price, then by all means go for it. Otherwise, stick to what you have.

3. Know what you want. Do as much research as you can. Read the consumer reports. Know which make and model you want to buy. Don’t let the dealership make this decision for you. Also find out the invoice price of the car, which is what the dealer paid for the car. You should never have to pay more than a few hundred dollars over the invoice price. In fact, sometimes you may be able to get a car for less than invoice. That’s when dealers get paid additional rebates from the manufacturer whenever they sell a car. You can find out the invoice price of your car by doing a simple Google search online. You will find many car-related websites also list invoice prices. Beware of their car reviews though. In what seems to be a conflict of interest, many of them have business relationships with car dealers and get paid for referrals. Some of them even sell cars themselves.

4. Don’t trade in your used car. You can always get more money selling your car yourself than trading it in.

5. Visit a dealership for a test drive. Go to a dealership to check the car out yourself. The reviews are one thing but if you don’t like the car, you shouldn’t have to buy it. Take the car for a test drive. Be upfront. Let the salesman know that’s all you there for. You might want to leave your checkbook and credit card at home. The salesman may still try to get you to buy a car that same day. Don’t give in.

6. Contact several dealerships and ask for their final quotes. Understand that a lot of dealers are reluctant to give you a quote without first negotiating with you in person, but when car sales are slow and the economy is in a recession, they may have no other choice. They’ll jump at any chance to get another car off their lot. Since you are only interested in one particular make and model, it will be easy for you to compare quotes. The person you will want to contact is the fleet sales or internet sales manager. Don’t get one of the regular sales people involved. That just means one more commission. Be as firm as possible. Tell them you’re not interested in negotiating. You don’t want to play any games. You just want the final price. If they ask you to come in, politely turn down their request. Give them your number in case they change their mind and then hang up.

7. Don’t be afraid to walk away. When you go to the dealership and the salesperson tries to pull a fast one on you and the deal suddenly changes, get up and tell him to his face that he can’t be trusted. Make sure you say this loud enough so the other customers can hear it. Then leave. This may sound harsh but the salesperson lied to you and needs to learn that there is a cost involved. If you don’t do it, they will continue to treat other customers that way.

8. Take your time. Don’t let them rush you. Take as much time as you need to clear up anything you don’t understand or would like to know more about.

9. Read the contract carefully. Clear up any abbreviations. Ask about any charges you don’t understand. Make sure everything you agreed on verbally is also stated in the contract.

Part 1 - Car Sales: Tricks of the Trade

Part 2 - How to Buy A New Car

Part 3 - How to Buy A Used Car

Photo Credit: Chicago Eye

Many people are reluctant to buy a used car because they are afraid of getting burned. However, if you know what you’re doing, you can get an amazing deal on a great car. Here are some useful tips to help you get the best deal.

1. Know what you want. Settle on one or two models you really want to buy. Do your research. Consider factors that are important to you. Find the average sales price of the car from multiple sources to get an idea of what a good deal would be. Don’t just compare listed prices. Find out what the cars are actually selling for. For example, you can use eBay’s “Completed Listings” feature to check completed auctions to get an idea of the current market value of the car you want. Also, read reviews about the car from ConsumerGuide.com and CarandDriver.com. You may change your mind about a car after reading a review. There’s much more to a car than meets the eye.

2. Get a car under warranty. If you can afford it, you should get a used car that still comes with the original manufacturer’s bumper-to-bumper warranty. The fact that the car is still under factory warranty gives you some assurance that the car won’t have major mechanical problems. And if it does, you’ll be able to take it to a dealership and have it fixed for free. Used cars like that will be usually less than three years old. While still relatively new, the car will have already lost a lot of its value. That’s because new cars depreciate in value as soon they are sold, and the loss in value is the steepest in the first two years. When you buy a car that’s about two years old, you let someone else take that big depreciation hit. This strategy works especially well with American cars, which depreciate more rapidly than Japanese ones.

3. Sign up for CARFAX. Check the vehicle history report of any car you’re interested in.

4. Find out everything about each car. Find out about the number of previous owners, any accidents, mechanical problems, and maintenance history of the car. If possible, get the seller to put this in writing. If the seller won’t do it, be prepared to walk away.

5. Don’t buy a car that has had a major accident. Even if the car has undergone repairs, there can still be hidden damage.

6. Have the car examined by a mechanic. When you’re ready to buy a car, have it examined by a mechanic. This is called a pre-purchase inspection. You will have to pay for this, but if you buy the car without one and it ends up there’s something wrong with it, you only got yourself to blame. If the seller won’t let you do a pre-purchase inspection, be prepared to walk away. There’s no need for them to say no, unless they have something to hide.

7. Keep a clear head. Don’t fall in love with a car. It is okay to like the car you want to buy but don’t overdo it. You’ll end up paying more.

Buying from a Dealer:

8. Beware of common sales tricks. Read Car Sales: Trick of the Trade.

9. Get preapproved. If you need financing, get your financing at your local bank or credit union. If you can pay off the loan within a year and you have an adequate credit line and low APR offer, consider using your credit card to pay for the car. (Visa and MasterCard require dealerships to accept credit card payments of any amount. American Express does not.)

10. Don’t sign any As Is conditions. The dealer might try to slip these in without you noticing. You should have at least 30 days to check everything out. The whole point of buying from a dealership is that you’re getting at least a limited warranty.

11. Don’t buy an extended warranty from the dealer. If the dealership tries to sell you an extended warranty, turn it down. Even if you do need it, you can get it cheaper elsewhere.

12. Only haggle over price. If you’re buying your used car from a dealership, the down payment and monthly payment should be irrelevant. Ideally, you will already be preapproved for financing. And if you’re going to sell your old car yourself, there’s no need to discuss a trade-in. What you need to focus on is the final price of the car you’re buying.

Buying from a Private Party:

13. Find out how to transfer title. Each state has its own requirements. Read your DMV handbook to learn about the requirements for transferring ownership of a car. Don’t rely on the seller to know this.

14. Use Craigslist to search for cars. Since the listings are free, you will find a greater selection of used cars for sale.

15. Email offers. If you’ve done your research properly, you will know how much similar cars have sold for recently. Don’t just base your decision on the BlueBook value, which many people consider to be inflated. Imagine the lowest price you could possibly get on the car and ask the seller “Will you accept … for this car?” When you meet the seller and find out about additional problems with the vehicle, you should try to get an even lower price.

16. Meet them where they live. Set up a meeting by phone. Make sure you meet at the seller’s residence. There’s no reason for the car to be parked somewhere else. If they insist on meeting somewhere else, they may be hiding something from you.

17. Bring a friend. You never know who you’re going to meet. For your own safety, never go alone.

18. Be careful who you buy from. Find out as much as you can about the seller. When you go to see the car, you will find out where they live, but that’s not enough. Try to find out what they are doing for a living? And why are they selling the car? You don’t want to buy a car from some low-life. The best people to buy used cars from are professionals and international students. You can be sure they have had the money to maintain their car reasonably well and are under no financial pressure to defraud you. In addition, you should prefer female sellers over male sellers because men, especially young men, tend to have terrible driving habits, which of course affects the condition of their car.

Part 1 - Car Sales: Tricks of the Trade

Part 2 - How to Buy A New Car

Part 3 - How to Buy A Used Car

Photo Credit: brian-m

If you are planning to give someone a gift card or have just received one yourself, you should read this.

1. Don’t pay full price for gift cards. If you’re a member of a warehouse club like Costco, you can often buy gift cards at a discount. Also, check your local Craigslist or eBay for people selling their unwanted gift cards. If the store isn’t hugely popular, you may be able to get the gift card at a steep discount. If you’re going to buy on eBay, make sure you buy only from sellers with an established reputation. When you’re buying through Craigslist, make sure the person you’re buying from is not a criminal. If they are selling many gift cards, they usually are. You don’t want to buy stolen gift cards. College students are usually a safe bet.

2. Buy gift cards that are likely to be used. Gift cards are a profit center for most merchants that issue them. For one, until someone actually uses a gift card, the merchant is basically getting an interest-free loan. Moreover, a lot of people never get around using their gift cards at all.

3. Buy gift cards that mean something. Unless the person you’re getting the gift card for is in deep financial trouble, you should avoid buying Visa or American Express gift cards or grocery store gift cards. They are equivalent to giving cash. Since the gift card is likely to be spent on everyday items, the recipient will soon forget you ever gave it to them. A better idea would be to give them a gift card for something that will remain memorable. Gift cards for a theme park, a spa, or a classy restaurant are more meaningful.

4. Sell gift cards you don’t need. If you are the recipient of a gift card you don’t need, feel free to sell it. If it’s for a popular store or restaurant, you may be able to get 80% to 90% of its value back. Just post an ad in your local Craigslist. Avoid eBay because you will have to pay all kinds of fees and it’s too easy to get conned by unscrupulous buyers.

5. Redeem your unwanted gift card for cash. Some states such as California have passed laws requiring merchants to refund the remaining value on a gift card when the balance is low, typically less than $10.

6. Beware of account maintenance fees or inactivity fees. When you receive a gift card, you should use it up as soon as possible. That’s because account maintenance fees or inactivity fees may reduce the value of the card the longer you keep it.

7. Beware of gift cards from stores about to file bankruptcy. Another reason to redeem your gift card as soon as possible is the possibility that a store might go bankrupt and refuse to accept your gift card. Gift cards basically represent unsecured loan obligations. When a store files for bankruptcy, it longer has to accept any outstanding gift cards. You may go to court to ask for your money back. However, as a creditor with an unsecured loan, you are at the bottom of the pack. The secured creditors get first dibs and you will be lucky to you get anything back at all.

If you have a monthly prescription from your doctor, then this deal is for you. Did you know that most drug stores such as CVS, Rite Aid, Longs Drugs, Walgreens, and Walmart will pay you for transferring your prescription to them? The bonus is usually a store gift card valued at $20 to $30.

Sometimes you have to bring a coupon to get the offer. The coupon is usually available on the drug store website. You can also try calling the store first to check if they offer an incentive for transferring your prescription. If they tell you that you need the coupon and you can’t find it on their website, you can also do a Google search for it. Chances are some website will have a link to it.

If you cannot find a coupon for a particular drugstore, try using a coupon from another store. Most drugstores will accept competitors’ coupons.

More often than not, though, the drug store will have an ongoing promotion and you won’t even need a coupon. You might even notice big promotion banners outside the store inviting customers to transfer their prescriptions for a gift card.

Finally, there’s nothing preventing you from transferring your prescription more than once. While a store may allow only one prescription transfer bonus every six months, there are enough drug stores around that this won’t be a problem. If you have six or more drug stores to choose from, you can go through all of them in six months and then start over.

Photo Credit: bartificial

Here’s an easy way to earn some extra cash when you’re looking for a new apartment. Get paid by the broker.

I’m sure you already know how to search apartment listings online on sites like Yahoo or Craigslist. However, there’s another site you should keep in mind, and that’s Rent.com. This site will give you a $100 visa gift card if you tell the landlord that they referred you. In order to get the gift card from Rent.com, the apartment has to be listed on their site. Since Rent.com has numerous listings in every city across the country, there’s a good chance that it is.

I’m not telling you to limit your search to apartments that are listed on Rent.com. If you can find better deals, by all means, go for it. The $100 gift card is a one-time thing and you will lose more if you have to pay inflated rent just to get it. On the other hand, if you happen to find a great apartment and you are satisfied with its location, rent, deposit, etc., then the $100 gift card is a great bonus on top of everything else.

Another way of getting paid is to check whether the apartment offers a referral bonus to its tenants. For example, I used to live in an Archstone apartment complex that offered a $500 bonus for referring new tenants. Since Archstone apartments can be found nationwide, I imagine this kind of deal is available elsewhere as well. At this point, you might be asking yourself how you can get the bonus if it’s the existing tenant who’s getting paid. Well, if you don’t think it’s too awkward, you can just approach a tenant and offer to be referred. In exchange, you will simply split the bonus. This is more common than you might think. I have seen Archstone tenants posting ads on Craigslist offering to do this.