PF QUESTIONS. A selection of responses to readers' financial questions
Q:I am planning to buy a car that will be be mainly used for my business. Does the new tax law have any effect on the type of car I buy? A:It sure does, and it may make a difference as to whether you buy a car for business at all. First, the write-off period for business cars was extented to six years from three, which will mean a smaller tax deduction.
In the second place, this write-off only applies to vehicles that are not considered ``luxury'' cars. The government's definition of a luxury car is anything that costs more than $12,800, which probably isn't much if you're looking for a vehicle with some long-distance driving comfort and room for customers.
Also, the law dramatically reduced the amount you can depreciate a business car each year. This, plus the other changes, may make you reconsider buying a car for business. If you use a personal car, however, you can still get some deductions for mileage, but check with a tax specialist to find the best route for you.
Q:Many banks and other lenders are pushing home equity lines of credit. Isn't this just the old second mortgage, under a new name?
A:Not quite, although both loans are secured by the equity in your home, which could mean loan payments in addition to any mortgage payments. Interest rates on home equity lines of credit usually float with the prime rate. As the prime goes up, the lender raises your rate, which boosts your monthly payments.
Also, these loans are not for a specific amount; you can take out as much as you like, up to a preset limit, without additional fees. This privilege must be used carefully by anyone who tends to overspend.
With the prime going up in recent months, interest in second mortgages has been rekindled. This one does have a new name - ``home equity loan'' and it carries a fixed rate and terms, usually 15 years. It is generally made for a specific purpose, like home remodeling, and is less flexible than a line of credit. But if the rate is competitive, it can be a good way to fix your interest costs while avoiding the temptation to go too far into debt.
Q:We are making estimated income tax payments because my wife is in sales for a company that only pays commissions, no salary. Do we have to file the form each quarter, even if she has no income during one three-month period?
A:Yes you do. Once you start filing quarterly tax payments, you have to do it thoroughout the year. If there is no income in one quarter, you don't have to pay any taxes, but the form still has to be sent in.
Q:Our monthly credit card statements almost always come with some kind of an offer to sign up for a credit card registration service. The offers make this sound like a type of ``insurance.'' I thought they did nothing more than give me another place to call if my cards were stolen. Do these services really provide extra protection?
A:Not really. These services do not change your obligation, which is limited by a law that says you can't be held responsible for more than $50 of unauthorized charges per card. Many credit card issuers don't even hold customers liable for $50.
The only thing these services do is save you from making some phone calls. If you have several credit cards and your wallet is lost or stolen, for instance, you can call the service and they will notify the firms that issued your cards. Besides being convenient, this could prove valuable if you have trouble recalling all of your credit cards and their numbers, at what could be a stressful time.
Even if you use one of these services, it's still a good idea to keep a list of card numbers in a safe place.
If you receive one of these offers, don't sign up for the first offer you get; it shouldn't cost more than $10 a year and some organizations, like automobile travel clubs, give their members this service for free. If you have a question, please send it to: Personal Finance Questions, The Christian Science Monitor, One Norway St., Boston, MA 02115. Questions should be brief and of interest to as many readers as possible. We'll answer as many questions here as we can, but we cannot answer letters individually.