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Jewish World Review Jan. 19, 2000 /12 Shevat, 5760

Bruce Williams

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Selling a second home -- DEAR BRUCE: I am a 53-year-old educator who was given campus housing as part of my work. I bought a home in town years ago for $40,000, which I rent out for the amount of my refinanced house payment. I do enjoy the nice year-end deductions and interest on repairs. The home is currently worth $250,000. If I were to sell, the taxes could be high, and I doubt it could be turned into a primary residence. Do you think I should sell? -- R.D. Ojai, Calif.

DEAR R.D.: I'd sell it in a heartbeat. Yes, you will pay capital-gains tax. Assuming that you have depreciated it down to nothing, that still would be only $50,000, which would leave you $200,000 after taxes to invest as you choose. On a modest 12-percent overall growth and interest return annually, you would be grossing $24,000 a year before taxes. This is probably more then you are getting in deductions and other expenses unless this rental goes for at least $2,000 to $2,500 a month. I am betting you get a whole lot less.

DEAR BRUCE: My husband and I have $12,000 in credit-card debt; $24,000 in auto loans; $34,000 for a home loan; $40,000 in student loans; and nothing in our savings account. We have tried to sell both cars, but we have found that they are "too new." We are buying our home on a contract with a high interest rate. My husband and I both have full-time jobs (I also have a part-time job) that generate enough to pay our bills. Should we be putting some of this money into savings or concentrating on reducing our bills? Should we consider trading down on our vehicles? -- T.D. Moline, Ill.

DEAR T.D.: In addressing your vehicles first, you are "upside down" on each of your vehicles, which means that you owe more than they are worth. When you are in that kind of a situation there is not much that you can do but continue to try to make the payments.

On the other issues I would work on the highest-interest debt first, which is likely the credit-card debt. The next would be the student-loan debt, and the final would be the home loan. On all of the above, you would have to make minimum payments except on the credit-card debt, making as large a payment as you can on the principal.

At this point, I wouldn't worry about savings -- I would be more concerned about getting your financial house in order.

DEAR BRUCE: I am the head of a household -- divorced, with a son in college -- and I am fully vested into a pension plan. Does this exclude me from making an additional tax-deductible IRA contribution? -- T.W. Rockford, Ill.

DEAR T.W.: If you are covered by the one plan in any given year, you are excluded from making a tax-deductible contribution to an IRA. There is nothing, however, preventing you from making an after-tax contribution to a traditional IRA or a Roth IRA. All things being equal, I would consider a Roth IRA.

Send your questions to JWR contributor Bruce Williams by clicking here. (Questions of general interest will be answered in future columns. Owing to the volume of mail, personal replies cannot be provided.) Interested in buying or selling a house? Let Bruce Williams' "House Smart" be your guide. (Sales of the book help fund JWR).


01/18/00: Running from a time-share
01/14/00: Don't be a spendthrift!
01/13/00: Who gets the house?
01/11/00: It all depends on size of estate
01/06/00: Check references before hiring an advisor
01/04/00: Savings bonds a bad investment
12/31/99: Out of state ain't that great
12/29/99: Warranty rip-offs
12/27/99: Checking up on investment handlers
12/23/99: Options good only when company's strong
12/20/99: Capital gains tax sometimes best
12/17/99: Don't give up your nest egg
12/15/99: Small-claims court no panacea
12/13/99: Termite company not liable for termites?
12/10/99: Services provided must be paid for
12/06/99: How do we minimize house-sale gain?
12/06/99: Maximize your tax shelter!
12/02/99: My neighbor won't maintain even a modicum of civility
12/01/99: Long-distance rentals a bad idea
11/29/99: Mortgage strategy A-OK
11/18/99: Students can work and learn
11/16/99: Value is what will sell
11/11/99: Y2K: No big deal for real estate
11/08/99: Real life is tough luck
11/03/99: The right time to cash a savings bond
11/01/99: Slow road for savings accounts
10/29/99: What do you want from insurance?
10/27/99: You have a right to see your tax forms!
10/25/99: Why own a house at 65?
10/22/99: Online fine, but CDs?
10/20/99: Love, honor -- and separate credit
10/18/99: Find the value of your stocks
10/15/99: Property lien prevents trade
10/13/99: Clear up debt, only then tie the knot
10/11/99: If it ain't broke...
10/04/99: Should I stick with the company IRA?
10/04/99: Get a financial education!
10/01/99: Insurance: Not much one person can do
09/30/99: Lost tickets are lost cash
09/29/99: Trusting only one financial planner
09/27/99: Adult children should help out
09/24/99: Tips for first-time home buyers
09/21/99: Use the rule of 72s!
09/17/99: Legal strategy can be a pain
09/15/99: Teen drivers drive up insurance
09/13/99: Always use an attorney!
09/10/99: Whose taxes are they, anyway?
09/08/99: How do I roll over my 401(k)?
09/03/99: How can I work out my IRS payments?
09/01/99: When your company can't pay you
08/30/99: Beware of shady viatical investments
08/26/99: Landlords vary on security deposits
08/25/99: Educational IRAs must be spent on education
08/23/99: Finding out the value of old stocks
08/20/99: How to get an FHA refund
08/19/99: 100 percent financing is a scam
08/16/99: Will I have to pay a capital gains tax?
08/16/99: Thinking about PMI
08/13/99: Short-term mutual funds a-OK
08/11/99: It's your job to shop around
08/10/99: Sometimes, roots need to be uprooted
08/09/99: 'Pre-approved' doesn't mean a thing
08/06/99: Only you can determine your investments
08/04/99: Bank IRA the lowest-risk option
08/03/99: Reverse mortgages good for the elderly
08/02/99: Get the survey BEFORE you buy the house!
07/28/99: Get a lawyer -- it's worth it!
07/27/99: If it ain't broke...

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