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The Simple Dollar

Income tax quandary: I make $320,000. Can I cut my taxes?

Income tax weighs on the mind of this high-earner. For a solution to a high income tax, see question No. 3 in the reader mailbag.

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My husband and I are very responsible with our money, but our income is around 1/3 of my parents’. At no point do I intend to bail them out. Their choices are theirs, and they need to be accountable for them, not to mention that we simply cannot afford to help them while pursuing our own goals of retirement savings, paying off my student loans, 529 contributions for our two children, etc. At the same time, I know that the day will come when they will not be able to borrow from my grandparents anymore and will seek us out as lenders. (My siblings are in even less of a position to help them than I am.) This, coupled with worries about what would happen if they encountered a genuine emergency or had a devastating illness haunts me. Efforts to have honest conversations about these issues with them are usually cut off before anything meaningful can be said. I love them, and I know I will have a hard time watching them struggle, which they eventually will be doing unless they themselves make changes. Do you have any thoughts about how to make this situation easier? As an aside, I owe them a lot in that they provided an extremely loving home and all my necessities growing up, but they did not help me pay for college or with a down payment, so I don’t think I will feel guilt about owing them anything when it comes to that.
- Katie

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As I’ve said before in such situations, it comes down to the relationship between parent and child and the long-term expectations of that relationship. There is no cut-and-dried answer to how a child should handle the December of their parents’ years.

If this is how you feel, you need to be prepared to simply say to them that you do not have the money to give to them when they come calling. Make that statement and stick to it.

The only reason guilt comes into the picture here is because you’ve not adequately resolved the situation in your own mind. You’re still unsure, and no answer I can give can make you sure. Keep searching and figure out what you consider to be the best route.

Q7: Credit report issues
When I was in college, my mother issued me a credit card on one of her accounts to use in case of emergency. I rarely needed the card, and put no debt on it that I did not immediately repay to my mother. However, a few years later, my parents hit a very bumpy financial road. My mother lost her job, and my father had to downgrade to a lower salary. Their credit cards were mostly closed, including this account. However, there is now a very high balance on the card (around $15,000), as well as several months of non-payment, with non-payment still continuing today. Despite many calls to the credit card company, this card, debt, and problem continues to show up on one of my three credit reports (the other two agencies removed it after my mother made the request). I am now 25, married, with children, and the stain on my credit report continues to be a problem. Almost all our finances have to go in my husband’s name, without even me as a co-applicant, because our interest rates increase with my bad credit report. My parents are very close to filing bankruptcy, so I know that they cannot afford to pay off this debt right now. I’m worried that this will continue to have a negative impact on my financial future, and am trying to decide what to do about this. My husband and I are financially capable of paying off the card ourselves, but I worry that we will never see that money back, and I’m not sure that it’s worth $14,000 to clean up my credit report (or that my husband would be very happy about it). What do you think I should do?
- Mary

You need to continually harass that final reporting agency until the situation gets resolved. There’s really no other route that you have to follow at this point if the account is closed.

You can request that the holder of the closed account remove your name, but they have absolutely no reason to do so and it would make their own position worse to do so, so they’re very unlikely to make such a change.

Another option would be attempting to settle the debt by contacting them and discussing a smaller lump sum payment to make the debt go away.

If you cannot get your name removed and no one can afford to pay off the debt all at once (or settle it), the best thing that could happen with regards to your credit is that your parents never pay off this debt. Any payment to that account makes the debt current again, which means that the seven year “clock” that measures how long the debt will sit on your credit report restarts. From your perspective, your parents making a small payment on the account doesn’t help at all.