Q: My mom wants to sell our family home due to financial difficulties. She has a $50,000 line of credit on this property that she would like to pay off. She was going to sell it for a mere $150,000 and our childhood home would be gone. I asked her if she would consider selling to me. She agreed, at a price of $50,000. But it seems my credit is so bad that I can't get the financing. Help!
- L.C., Hilo, Hawaii
A: Sit down with a phone, pen, and paper, and shop 'til you drop, suggests Denver certified financial planner Pamela Hesselgrave. Shop for lenders: banks, thrifts, credit unions, mortgage firms, anyone with money to lend.
If the house is really worth $150,000 and you want to borrow only $50,000 or $100,000, Ms. Hesselgrave is pretty sure there are lenders who will make a loan based more on the house than on you. If this would be your first home, there may be special financing for you. Call the US Department of Housing and Urban Development to see what is available. They may give you other numbers to call, so just keep dialing. Your state may offer special loans for first-time buyers, too.
While you're on the phone with HUD, ask about FHA loans. If you are a veteran, call the Department of Veterans Affairs. Call philanthropic groups interested in helping people get back on their feet, including the local Junior League, Optimist Club, and Rotary.
Lastly, you might want to look into a reverse mortgage for your mother (not you). This is a loan that requires no payments until she dies or the house is sold. The amount is based on her age and the value of the house. She can pay the interest monthly, or pay nothing and let the interest accrue during the term of the loan.
When your mother dies or the house is sold, all the accrued interest, if any, plus the amount loaned to her is due in full. If you can repair your credit by then, you could then purchase and refinance the house in your own name.
Q: My credit-card company donates a percentage of my monthly charges to the Sierra Club. Is this contribution tax-deductible? If so, how can I find out the amount? What documentation does the IRS require?
- E.S., via e-mail
A: If the credit-card company is simply telling you it's donating a portion of your payment to a charitable organization, even if you can choose the charity, the donation can't be deducted on your personal tax return. That's what the IRS says.
However, it also says that if the credit-card company gives you a choice of either receiving the money as a rebate or donating it to a qualified charity, and you choose to donate it to the charity, you can deduct the donation. The deduction is available in the tax year the company transfers the rebate to the charity.
The credit-card company is responsible for providing information on the amount and time of transfer. Any single donation of $250 or more requires written documentation from the charity.
Q: My daughter married in September 2003. Can I still claim her as a dependent for eight months, since I supported and paid for her education during 2003?
- M.A., via e-mail
A: Once a child is married, it's a lot harder to claim him or her as a dependent. In addition to the support test and other dependency tests that your daughter might meet, there is what the IRS calls the joint-return test. Because your daughter was already married as of Dec. 31, for tax purposes her status is married for the entire year.
The joint-return test says that generally you cannot claim a dependent who files a married-filing-joint return. The only exception is a joint return that's filed only to claim a refund. In this case, the income must be sufficiently low that the tax would be zero even if married-filing-separate returns were filed.
Q: Is it OK to consolidate a traditional (contributory) IRA with a Simplified Employee Pension account?
- C.M., Philadelphia
A: As long as the SEP is "active" (that is, annual contributions continue to be made), it must remain separate, says Elaine Bedel, a certified financial planner in Indianapolis. Once the SEP is no longer used for contributions, it can be rolled into the traditional IRA.