Newsletter

To many the holidays are "the most wonderful time of the year" but, to those on a tight budget the holidays can be very stressful. Why not save money this season by following some of these easy tips:

	Holiday Cards: send a holiday postcard rather than a card or letter to reduce postage costs. You can even recycle old cards you have received by cutting the card in half and sending the front of the card as a postcard.
	Wrapping Paper: use your children's artwork, or have them help you decorate a roll of plain paper. Ask your local wallpaper store if they have old samples they would be willing to give you. You will not only save money, but you will make the gift that much more memorable.

Many graduates with student loans are unemployed or underemployed, making it difficult to make their loan payments. In fact, during the 2008-2009 school year, default rates on federal student loans reached 7.2%. The government considers a student loan in default if the recipient of the loan fails to make a payment for 270 days or more, depending on the repayment schedule. The consequences of a defaulted loan are serious. A defaulted loan can lead to damaged credit and the government can garnish wages or withhold your tax refund all without going to court.

If you or someone you know is struggling to make a loan payment, there are several options you can discuss with your lender:

Apply for Deferment: Deferments are available to those still in school, currently unemployed, or experiencing economic hardship. If you meet these requirements, you may be eligible to apply for deferment and stop making payments on your loans, for up to 3 years.

Request a Forbearance: if you are temporarily unable to pay your loan but are ineligible for deferment, you may request a forbearance which allows you temporarily to make smaller payments, stop making payments, or extend your deadline for making a payment. Your loan interest will continue to accrue while you are in forbearance.

Ask About Income Based Repayment Plans: the government has several programs which take your income into account when determining your loan repayment plan.

Loan Forgiveness Programs: the government also has several programs in place to forgive federal student loans for professionals performing public service, such as teachers and civil legal assistant attorneys.

More information on student loan repayment options is available at www.ed.gov, www.ibrinfo.org, and www.studentloanborrowerassistance.org.

What Tax Law Changes will Congress Enact this Month?

As this is written, the lame duck session of Congress is trying to tackle unfinished business prior to seating next year's newly elected legislators.This includes passing funding bills so the government does not shut down. Unfortunately, making decisions will be tough as existing Congressional representatives are limited in what the balance of Congress will accept knowing terms of many colleagues are winding down.So what can you plan on?Here are some fairly certain actions:

Alternative Minimum Tax (AMT) Relief.   Both Democratic and Republican lawmakers have told the IRS that they are working on a bill to provide temporary relief for taxpayers facing the Alternative Minimum Tax (AMT). Without action by Congress, an estimated 20 million taxpayers would be faced with paying the AMT (known to some as the "hidden tax") when filing their 2010 taxes.

While originally designed as a tax on high-income taxpayers, the AMT has threatened middle class taxpayers in recent years because the threshold income for paying the AMT has not been adjusted for inflation. Although there are numerous deadline-sensitive tax issues facing Congress right now, clear bipartisan support makes it likely that the AMT tax issue will be resolved before year's end.

What to do? Try to remain flexible with income AND possible deductions.You may wish to shift income and deductions (like pre-payment of state property taxes) into the tax year that gives you the best tax benefit.

Extenders Bill.   As stated last month, a number of tax breaks that expired in 2009 may be extended into 2010.Those that appear to have the greatest common ground are:

• Teachers $250 expense deduction
• Sales tax deduction alternative as an itemized deduction
• Continuation of the Tuition Credit

2011 Taxes.   While not part of 2010 tax laws, what Congress does with taxes next year will determine what tax planning moves you may want to make this year.So be prepared for the following and be ready to make the necessary moves to reduce your tax burden in late December for:

• Capital Gains tax rates going up an estimated 5% for most taxpayers
• Dividend tax rates going up from 5-15%to 15-39.6%
• Re-introduction of the marriage penalty in lower income brackets
• Re-introduction of the phase-out of deductions and personal exemptions
• Increase in almost all the tax brackets by approximately 5%
• Re-introduction of estate taxes

What does this mean to you? Stay as flexible as possible.There are some things you can safely do this year to reduce taxes.Things like fully investing in your retirement accounts, reviewing your gift giving strategies, and making investment moves all still make sense.But you'll also want to be ready to take advantage of late passing legislation. Just don't hold your breath, this Congress has waited 11 months to address these impending changes.They may just decide to wait one more month and leave the work to newly elected legislators.