Keep cost of caring for elderly parents under control

More than 40% of caregivers spend about $5,000 each year caring for a loved one; many individuals receiving care are parents of baby boomers (USAToday.com, Feb. 28).

If you're a caregiver, here are some ways to help cut costs that won't compromise quality of care:

• Seek government help--Your local Area Agency on Aging can suggest programs in your state that can help with the financial burden of caregiving. Fifteen states offer a Cash & Counseling program for low-income seniors who are eligible for Medicaid. The program helps seniors pay for in-home daycare, including care that family members provide.
• Pay family members for caregiving--More than one-third of caregivers have been forced to quit jobs, take early retirement, or reduce work hours because of their caregiving commitment. Consider paying yourself or another family member out of your parent's savings for the care you're providing. This "salary" can help offset lost income. To avoid disputes with other family members, create a contract that outlines the terms of the agreement.
• Hire outside help--A survey by the Hartford Group, Hartford, Conn., shows that 80% of boomer caregivers feel moderate to high levels of stress associated with caregiving. Younger boomers, between 45 and 54 years old, appear to be shouldering the greatest burden; half report that they worry about the impact that caregiving has on their jobs. Hiring someone to provide some care allows you to provide better care for your parent when you're fulfilling your caregiving role.
• Claim your parent as a dependent--You may be eligible to claim one or both of your parents as dependents, based on how much support you provide. To do this, your parent's income, excluding Social Security, must be less than the amount of the personal exemption. For 2010, the personal exemption was $3,650; for 2011 it's $3,700. You also must provide more than 50% of your parent's financial support to qualify. For more information, visit irs.gov.
• Deduct your parent's medical expenses--If you can't claim a parent as a dependent, you might be able to deduct medical expenses. To qualify, you must provide at least 50% of your parent's financial support; your parent doesn't have to meet income restrictions. The deduction is limited to medical expenses that exceed 7.5% of your adjusted gross income. Qualified expenses include in-home health care, the cost of a nursing home, dental care and prescription drugs.
• Consider your own long-term care--After seeing firsthand what being a caregiver means financially and emotionally, many boomers are making arrangements for their own long-term care. Paying for long-term care insurance policies isn't easy for families that also are saving for retirement and children's college expenses. About 20 million middle-age Americans are stuck between conflicting sets of responsibilities, according to stltoday.com: caring for their own kids--and their parents. You also can start preparing for your own long-term care, without draining your money, by drawing up a living will and a health-care proxy.

Follow fill-up tips as gas prices rise

You've probably felt the sting of climbing gas prices in recent weeks. The national average is $3.38 a gallon--19 cents more than last week and 68 cents more than one year ago, according to the Department of Energy.

Fortunately, you can take steps to lessen the financial burden. Use these strategies to save money on gas, even as prices soar.

• Use online tools and apps. Websites like GasBuddy.com compile gas prices in your neighborhood. Type in your ZIP Code to find the station with the lowest price near you. GasBuddy also offers mobile apps for the iPhone, Android devices, and Windows phones (ABCNews.com Feb. 28).
• Avoid brand names. Prices often are cheaper at independent stations that are not affiliated with oil companies or gas brands, because they buy gas from more than one company (Bankrate.com Feb. 25).
• Don't fill up near the highway. It's all about location: Gas stations near freeways or highways often demand higher prices for their convenience. To find a lower price, put some miles between you and the highway before you fill up (WalletPop.com Feb. 25).
• Take advantage of reward programs. Some grocery stores partner with chain gas stations to offer fuel discounts to shoppers. And if you belong to membership-based stores, like Costco, you also may be able to find cheaper prices if you fill up at their stations.
• Use cash. Find out if any gas stations in your area accept cash only or offer a cheaper price if you pay with cash. You often can find a lower price at these stations than you would at one that charges the same price for paying with cash or a credit card.

Money-saving tax tips for filers

Before filing your tax return this year, become familiar with important changes since tax year 2009. Then take advantage of every credit, deduction, and free resource available (The New York Times Feb. 18).

Last year, millions of taxpayers didn't understand that they needed to complete Schedule M to claim the Making Work Pay tax credit. Luckily, the Internal Revenue Service (IRS) gave eligible filers the credit anyway, but don't count on that going forward.

First stop: IRS Publication 17, which has a link for "What's New for 2010." And there are plenty of other resources to guide you through the tax-filing process, including websites, tax software, and free local assistance.

Here are some suggestions:

• Find all tax deductions. A deduction reduces the amount of your taxable income. Common examples include mortgage interest you paid, charitable contributions, and medical and dental expenses that exceed 7.5% of your adjusted gross income. For more information about tax deductions for the 2010 tax year, visit irs.gov or efile.com/tax-deduction.
• Don't overlook a single tax credit. A credit is better than a deduction because it cuts your actual tax bill. Common examples include the child tax credit, dependent care tax credit, savers credit, and first-time homebuyer tax credit. For a list of family, work, and home-related tax credits, visit efile.com/tax-credit/federal-tax-credits.
• Let go of some tax breaks. Tax breaks that disappeared for tax year 2010 include the exclusion from income of up to $2,400 in unemployment compensation, which means that all 2010 unemployment payments are taxable; and a deduction for state or local sales or excise taxes on new vehicle purchases (unless you bought the vehicle in 2009 after Feb. 16, but you paid the tax in 2010). And the first-time homebuyer's credit is available only if you signed a contract before May 1 and closed before Oct. 1, 2010 (New York Times Feb. 18).
• E-file if possible. Visit irs.gov for options. Or you can e-file with commercial tax software or through a paid tax preparer. Shop around, and take into account the filing costs for both federal and state returns.
• E-file with Free-file if you're eligible. If your income is less than $58,000, visit irs.gov for information about 20 tax software companies that make their products available for free; some also support state tax returns for free. If you make more than $58,000 and are comfortable preparing your own tax return, consider Free File Fillable Forms at irs.gov/freefile.
• Use direct deposit. This is the fastest, safest way to receive your tax refund.
• Get free help from VITA. The Volunteer Income Tax Assistance program offers free tax help to low- to moderate-income taxpayers, generally with incomes $49,000 and below. Certified volunteers are at VITA sites throughout the community—neighborhood centers, senior centers, libraries, schools, malls, and many credit unions. Most offer free e-filing. Call 800-906-9887 for the nearest VITA site.
• Visit Taxpayer Assistance Centers (TACs). If you don't think your tax issue can be handled online or by phone, TACs provide face-to-face assistance through April 9. Visit irs.gov/localcontacts to find the TAC closest to you.
• Use Taxpayer Advocate Service (TAS) as a last resort. The TAS helps taxpayers resolve problems with the IRS. It's free and confidential after you've tried to resolve the problem through regular IRS channels. Call 877-777-4778.

Finally, plan ahead. The average refund last year was $3,003. Rather than giving an interest-free loan to Uncle Sam, file a new Form W-4 with your employer and have less money withheld from your salary, putting more money in your pocket throughout the year.

'Brady Bunch' families face financial challenges

-Blended families are the new normal. Divorce, remarriage, and living outside conventional marriage have changed families and created an expanded network of step relatives.

With more than half of all marriages ending in divorce and more than 40% of all Americans having at least one step relative, it's imperative to talk about money and how you'll handle it before entering into a new marriage (USAToday.com Feb. 6).

To keep your relationship sane and decrease money problems:

• Find common ground--Talk about money before blending families. Decide if you'll have separate or joint accounts, or both, as well as who'll be responsible for each child's expenses. What contributions can you count on from ex-spouses; what financial commitments have you made to ex-spouses?
• Discuss money issues with family members--Your children might have to change habits or get used to new rules pertaining to money, but including the kids in discussions about finances early on will lessen future problems.
• Plan ahead--If you're remarried and you and your new spouse each bring children to the new marriage, discuss how you'll pay for your children's college education. Will you both chip in for each child or will you be responsible for paying for only your own children? Will your former spouse, and perhaps the child's grandparents, play a role?
• Check insurance policies and wills--Read policies carefully to be certain that all family members are covered the way each parent wishes. It's just as important to check your wills to make sure the wording includes all children, both natural and adopted.
• Consider estate planning--Meet with an attorney and make sure all kids from past marriages are considered. This includes looking at college educations, inheritances, and even custody issues. Determine who will be responsible for your children if you die.

Act to lower your credit card rate

With the national average interest rate for credit cards reaching a record high of 14.73% (creditcards.com Feb. 2), you'll want to make sure you're getting the best deal possible.

The Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009 restricts issuers' ability to raise rates, but whenever they can, you can be sure that many will. Here's some advice from the Credit Union National Association's Center for Personal Finance for getting the lowest rate possible on a credit card:

• Get a card from a credit union. A credit union credit card typically has a significantly lower interest rate than a bank credit card. For example, right now the national average rate for a high-limit "platinum" card is 2.34 percentage points higher at a bank than at a credit union ( Informa Research Services Inc. Feb 6).
• Use your card for convenience only. The very best way to control credit card costs is to use your card for its primary advantages only--as a convenient and secure way to make daily purchases or cover emergency expenses. Then always pay off your balance as soon as possible--preferably within the grace period, when no interest charges apply.
• Use a different kind of credit. Suppose you're buying a big-ticket item, such as a computer, or paying for major car maintenance. Rather than use your expensive credit card, consider "closed-end" credit, a loan with a set number of monthly payments. A personal installment loan, even if it's unsecured--that is, not backed by collateral--will have lower finance charges.
• Tend to your credit score. The rate a credit card issuer will offer you is highly sensitive to your credit history and the score derived from it. The credit score is the lender's estimate of the risk that you won't repay your card balance. That's why you'll want to do everything you can to demonstrate that you're creditworthy, such as by paying all your bills on time, without fail.
• Use a secured card. A credit card backed by money you've set aside in a special account is a good way to start improving a weak credit score. Your lender will give you a better interest rate because it can always take money from your account if you don't make your payments. But if you do, your credit record will improve and, over time, so will your score and your future cost of credit.

Don't pass up retirement tax credit

Hard to believe, but as many as 88% of taxpayers who could benefit from it don't even know about the Saver's Credit.

Officially named the Retirement Savings Contribution Credit, the 10-year-old saver's credit was designed to encourage low- to middle-income workers to save for retirement. But a survey released mid-January by the Transamerica Center for Retirement Studies of 3,598 full- and part-time workers with incomes of less than $50,000 indicates that as few as 12% of those who could benefit from the credit are aware of it (TheStreet Jan. 17).

One possible explanation for low awareness is that tax filers must use Internal Revenue Service (IRS) Forms 1040A, 1040, and 1040NR to claim the credit; it is not available if you file using Form 1040EZ. Thus, lower- to middle-income workers, those most likely to use 1040EZ and eligible for the credit, may miss it or remain unaware of it.

An eligible worker can apply the credit to the first $2,000 of voluntary contributions to a 401(k) or similar employer-sponsored retirement plan or individual retirement account (IRA). There are credits of up to $1,000 for single filers and $2,000 for married couples. The saver's credit is available to workers aged 18 years and older who contributed to a company-sponsored retirement plan or IRA in the past year and are:

• Single or married filing separately, with adjusted gross income (AGI) of up to $27,750 in tax year 2010 or $28,250 in 2011.
• Head of a household with AGI of up to $41,625 in 2010 and $42,375 in 2011.
• Married and filing a joint return with AGI of up to $55,500 in 2010 or $56,500 in 2011.

You may not claim the saver's credit if you're a full-time student or claimed as a dependent on someone else's return.

If you use tax preparation software, look for prompts that refer to the saver's credit, retirement savings contributions credit, or credit for qualified retirement savings contributions. If you work with a professional tax preparer, make sure he or sure is knowledgeable about the credit. And if you prepare your own forms, complete Form 8880 to determine the credit rate and amount; transfer that amount to the appropriate line on Form 1040A, 1040, or 1040NR.

Do falling home prices signal time to buy?

Home prices in many of America's largest cities continue to fall. The recently released Standard & Poor's/Case-Shiller home price index reports average home prices slipped 1.6% in 20 U.S. cities during November. Prices in eight cities sank to their lowest levels since 2006 and 2007 (nytimes.com Jan. 25).

These circumstances could mean it's an excellent time to buy a home. Here are three things to consider before taking the plunge:

1. How do you want to spend your extra money? Once you buy a house, you have to maintain it. You may need money you previously spent on life's little luxuries to repair a leaky roof, fix a broken window, or replace light fixtures.
2. Would you benefit from tax breaks? Owning a home means you can deduct mortgage interest and property taxes you pay throughout the year from your taxes, but you must itemize these on your tax return. You benefit from tax breaks afforded to homeowners only if itemized deductions will be greater than the standard deduction.
3. Can you afford a monthly house payment? The 26/38 rule can help you identify how much house you can afford. A monthly house payment should be less than 26% of your monthly gross income and includes your mortgage, property insurance, and property taxes. Your total monthly debt obligations—including house payment, car loans, and student loans, for example—shouldn't exceed 38% of your monthly gross income. This standard has some wiggle room; talk to your credit union home loan specialist for guidance.