Credit 
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comments

Best Charity Credit Cards

Charity credit cards, credit cards that donate a portion of your spending to a charitable organization, have increased in popularity the past few years as companies vie for your business. In the past, credit card companies often replaced reward programs with these charitable programs, keeping their costs the same while offering something new cardholders may prefer. Now, many of the charity credit cards offer both – the standard 1% rewards program plus a small donation based on your spending. With where transaction fees are nowadays, it doesn’t cut too deeply into their bottom line.

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 Taxes 
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Ten Easy Year-End Tax Tips

Year-End Tax TipsHave you thought about your taxes lately? Probably not, but this month is probably one of the most important months in tax planning because it’s the last time you’ll have an opportunity to effect any meaningful change to your taxes next year. Once December ends, 2008 is essentially frozen and your taxes will be what your taxes will be. So, what sorts of tax moves should you consider making?

Sell your stock losers. Any losses you realize from the stock market, that aren’t offset by gains, can be deducted from your regular income, up to a limit of $3,000 a year. If you’ve been thinking about dumping some losers, now’s the time to do it. If you have more than $3,000 in losses, you can carry those forward indefinitely (until death). More advanced traders may also consider tax loss harvesting as an option as well.

Donate to your favorite charities. Times may be tough but they’re even tougher for charities and philanthropies, who rely on generous contributions to stay in operation. Consider donating money, goods, clothes, your car, anything – to one of your favorite charities so that they can stay operating through these difficult economic times. If you itemize your deductions, you can deduct contributions from your regular income.

Delay bonuses and income. If you can swing it, try to push any additional payments until the new year. If you are paid this year, you have to pay taxes on it in a few months. If you are paid next year, you won’t have to pay taxes on it for an extra year. If your employer withholds taxes on your bonus payments, this is a less valuable strategy. :)

Prepay state and local taxes. This one is a little tricky, if you don’t think you’ll be subject to the AMT, consider prepaying your state and local taxes. State and local taxes are federal tax deductions so prepaying them today means you can deduct them today as well.

Accelerate other deductible expenses. If you have a mortgage, consider paying next month’s payment this month. If you pay it this month, you can deduct the interest payment against this year’s income. If you pay for it on January 1st, it’ll have to wait until you file 2009 taxes. This is true of any deductible expenses you may have from student loan debt to medical to your real estate taxes. If you want, you can make the payment with a credit card and then pay off the credit card next month and still have it be deductible for 2008.

Use up your $12,000 gift exclusion. Each year, you are allowed to give $12,000 to someone else tax-free. If you give more than $12,000, then you are subject to what is known as the gift tax. It’s a little backward but it’s a page out of the estate planning book since heirs to an estate are often taxed on that estate. Anyway, if you were planning on giving someone a very generous gift, don’t forget to to do it. Next year the limit rises to $13,000 so you can give $25,000 to someone within a week and avoid the gift tax ($12,000 on December 31st, $13,000 on January 1st). If you are married, you could give someone $50,000 ($25,000 from each spouse).

Beware buying into mutual funds with capital gains distributions. Mutual funds buy and sell stuff all year, then distribute a bit of that at the end of the year. What you won’t want to do is buy into a mutual fund that is set to make a year-end capital gains distribution because you’ll be immediately taxed on that distribution. Imagine a mutual fund that costs $100 a share. You buy it and the next day it makes a $1 per share distribution, lowering the cost per share to $99. You just bought the thing and already are on the hook for $1 per share in taxes. Boo!

Contribute to your retirement. If you aren’t maxed out on your 401(k), or similar, plan, consider doing it because each dollar contributed is entirely deductible. The 2008 contribution limit for your 401(k) is $15,500 ($20,500 if you’re 50 or greater). Another good idea is to contribute towards your IRAs but you have until April 15th to accomplish that.

Get married. Your tax filing status is based on your status as of December 31st, 11:59 PM. If you were married on December 31st, you’re considered married for the year. If that helps your tax situation, you might want to consider it. :)

Get everything ready. If you’re due a refund, try to get all your ducks in a row as soon as possible so the government will mail you your refund check ASAP. All you’re really waiting for is the official W-2 from your employer, which they are required to mail out by January 31st, and you should be ready to hit the e-file button.

(Photo: thetruthabout)


 Taxes 
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5 Reasons You Should Donate Your Car

Donate Your Car - Free Towing!If you’ve bought yourself a new car and are looking to get rid of your old one, or simply want to get rid of a car, consider donating it to an organization that accepts car donations. Selling the car will almost always be better than donating from a financial standpoint, but donating offers benefits that may trump the money depending on your situation. After detailing five reasons why you should donate your car, I’ll give a few scenarios where donating is better than selling.

Here are five solid reasons why you should donate your car:

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 Credit 
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Kiva BusinessCard: A Philanthropic Credit Card

The Kiva BusinessCardUnfortunately, the Advanta Kiva BusinessCard has been discontinued.

I was really surprised when I heard about the Kiva BusinessCard, a credit card offered by Advanta, because it sounded asymmetric with the types of offers credit cards usually have. Advanta has been really innovative in the types of cards they’ve been offering, trying to capture those smaller markets, and I believe this card is yet another attempt to do so. First, they were offering up a business credit card for online marketers, now they’re offering a business card with a philanthropic twist known as the Kiva BusinessCard.

Kiva - Philanthropic MicrolendingKiva, a program I’ve only written about briefly in the past, is an international, philanthropic microlending organization. They give loans to aspiring entrepreneurs in developing countries in an attempt to lift them from poverty, you can read more from their about page. It’s the embodiment of the old maxim: “Give a man a fish; you have fed him for today. Teach a man to fish; and you have fed him for a lifetime.” I wrote that in the past I would give it a try but that fell on the back burner as, at the time, many of their loans were 100% funded.

So, what is Advanta offering with their card? If you offer a loan through the Kiva system, paying for it with the Kiva BusinessCard, they will match it dollar for dollar up to $200 per month. In actuality, since Advanta won’t know the exact loan you’re funding, Advanta supplies the funds to Kiva and they loan it out as needed but the intent and effect is still the same – an aspiring entrepreneur gets funds they otherwise wouldn’t get if you used another card. After the loan is repaid, the funds are given back to Advanta, just as they are to you after a loan, but they retain it (you have the option of retaining it or making another loan).

The 5% bonus cash back transaction categories are Kiva loans and charitable donations of up to $1,200 a year; 1% on everything else with no limit. $1,200 isn’t a tremendous amount but that’s 5% more you can give to charitable organizations each year, not counting the charitable income tax deduction you’d get.

Some other notable features of the card:

  • 15 month 0% APR balance transfer promotional period,
  • $0 fraud liability,
  • No annual fee

It’s an interesting offer, wonder how popular it’ll be.


 Your Take 
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Your Take: Do You Give To Panhandlers?

I always suspected that not all the panhandlers (or beggars, whatever term you prefer) were in the situations they claimed to be in and had heard unsubstantiated stories about “professional panhandlers.” One rumour back in Pittsburgh was that a particular panhandler on Forbes near PITT owned an Escalade (this was something I heard eight years ago, before high gas prices) and was seen turning the corner and hopping in it after “work.”


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 Personal Finance 
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Bankrupt Retailers, Bankrupt Campaigns & Just Banks

You can delay the reaper but you can rarely totally avoid him and this past week Linens ‘n Things filed for Chapter 11 bankruptcy, a few weeks after they were originally predicted to have succumbed. If you read my post about how they were going under and how you shouldn’t hold onto gift cards, then you wouldn’t be one of the 400,000 customers stuck with $42M in worthless gift cards.

Mrs Micah talked a little about contributing to presidential campaigns and how the contributions amount to very speculative investing. It’s an interesting thought, especially after noting people contributing to “lost cause” campaigns like Huckabee’s, that definitely gets you thinking. I was never one for political campaign contributions, I think my money is better served going towards health/medical related charitable causes.

Lastly, I did a roundup of the best high yield savings accounts.


 Personal Finance 
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Giving Makes You Happier Than Spending (Both Cost Money)

An article in LifeScience says that the key to happiness is to spend your money on others. It could be charitable donations to a worthy cause of choice or it could be buying gifts for friends and family members, but the warm and fuzzies lasted much longer if you spent the money on others than if you spent it on yourself. “New research reveals that when individuals dole out money for gifts for friends or charitable donations, they get a boost in happiness while those who spend on themselves get no such cheery lift.”

One of the teams involved in the experiments theorized why this was the case and had a few decent theories. One theory, one that I thought made the most sense, was that people spend a lot of money to make their lives seem more “meaningful, significant, and important,” and that giving away money is a much more effective way of doing that. If you impact someone else’s life in a positive way, that certainly gives you more meaning, significance, and importance than you did if you spent it on yourself.

What’s funny is that I said something similar my wife while we were on our honeymoon. I mentioned that it’s much easier for me to spend money on other people, such as gifts on her (which she smiled at and then hit me), than it is to spend on myself. If I want to buy a new bicycle, for example, I’ll spend way too long researching different bicycles, comparison shopping, and price searching before I’ll pull the trigger (I’m still “researching,” it’s been nearly a year).

Part of the reason is because I want a good deal but I also have to get over the fact that I’m buying something selfish that I could save for the future, either for my retirement, my future children, etc. However, last year we donated money to charity last year in relative blink of an eye (there was some research on Charity Navigator) and I attribute that to the lack of the “selfish” hurdle (the tax deduction helps too). Of course, the happiness (and heart-wrench, if that’s a word) from receiving letters from organizations like Operation Smile (it’s a charity my mom told me about and supports) and the kids that have benefited from its work do help as well.

As an extension of this, I bet that the same happiness effect would apply if you spent time volunteering rather than working on a particular day (or weekend). It’s not as quick as spending money, but perhaps the happiness effect would be more pronounced. Either way, the lessons seems to be that if you want to make your life a little brighter for a little longer, do something philanthropic today. You can always get that bicycle tomorrow (or the next day, or the next day). :)


 Philanthropy 
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Fidelity Charitable Gift Fund

Earlier this year I discussed how I was going to follow Flexo’s lead and open up a Fidelity Charitable Gift Fund. The idea behind the Fidelity Charitable Gift Fund is that you can make a charitable donation now, have the assets appreciate, and then decide where donations will go later on. Much like how a mutual fund is actually an organization, the Fidelity Charitable Gift Fund is an organization. When you donate money, you are donating to the Fidelity Charitable Gift Fund and you have two options as to where the money goes. You can either open up a Giving Account under your name (or any name you wish) or open up a Pooled Income Fund.

Giving Account

This is the type of account Flexo talked about and one that I was seriously considering. What you do is open a Giving Account, contribute funds, direct how the funds are to be invested, and then recommend grants. You will notice that all the documents say that you will “recommend” which organizations will be the beneficiary of your funds, but they aren’t legally bound to honor your wishes. I think that specific language is used for legal purposes but they honor most recommendations.

Pooled Income Fund

This is the second option and one I hadn’t considered. It’s part charitable fund and half income generation, akin to an annuity, though the final payout goes to a charitable organization (up to 10). So let’s say you contribute $10,000. You direct where the contributions will be invested and you can select up to two beneficiaries. Each quarter, the proceeds from your investments will be paid out to the beneficiaries. Upon the death of the final beneficiary, the value of the account goes towards charities. It’s different than the Giving Account and less desirable for what I’d like to accomplish.

Considerations

So, it sounds pretty easy right? Why wouldn’t everyone do this? (these concerns cover only the Giving Account)

  • Initial limits and fees: The initial contribution has to be greater than $5,000 and each additional contribute has to be greater than $1,000. The fees include the expenses of the investments plus an Annual Administrative Fee. The administrative fee is the greater of 0.60% of the total fund value or $100 for the first half million, 0.3% for the second half million, 0.2% for the next million and a half, and 0.15% for the rest up to five million. Beyond that and the fees are different. If you were to contribute $5,000, you’d be talking an administrative fee of 2% plus the underlying investment fees. If you don’t have $5,000 or you don’t want to pay any of these fees, you might want to just donate directly to a charity.
  • Time horizon: Since you do select investments for your contributions, there is the potential that your investments will lose value. So, if you plan on doing this, contribute funds you think you might want to use next year or the year after (or, ideally, in five years). Increasing the time horizon will smooth out the random walk of the stock market.
  • Tax benefit: As much fun as it would be to have the Jim Charitable Trust, the tax benefits are better if you contribute appreciated stock. When you donate appreciated stock that you’ve held for over a year, you can deduct the entire value of the stock from your income, including the appreciation. (For more on that, read this article about reducing your capital gains by donating stock) With the Giving Account, you deduct your initial contribution and not the amount actually granted, so you never actually benefit from the appreciation (but you can donate appreciated stock).
  • Grant exclusions: Almost any recommendation you give will be accepted with the exception of several groups, though there are very good reasons. For example, you cannot recommend any donation that would result in you receiving any sort of gift or preferential treatment. The list is available here.

I’ll be honest, the idea of opening a small charitable gift fund in our name does sound like fun and it would be great to be able to leverage the market to help further our philanthropic goals but with a $5,000 start price and those annual fees, I may wait a little while before opening one up. The uncertainty of the market (and a short time horizon) are also serious considerations as well… what do you all think? Good idea? Bad idea? Wait? Go now? :)


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