Child Care credits/deductions

I was doing some reading up on the economic stimulus plan that passed the house yesterday, looking for specific details about how it might put money in the pockets short term for the non-business owner like myself. I read this article and a couple others which all mention the same sort of thing with no fine details:

The bill also gives most taxpayers breaks of $500 each on their payroll taxes and increases tax breaks for college tuition, first-time homebuyers and child care.

So, it appears that there is some notion of getting $500 tax credits on payroll taxes as well as additional tax deductions or credits that are given for college tuition, first-time homebuyers, and child care. I never read much on the child care credits and was wondering how sending you child to preschool might be accounted so I read up on it.

Preschool is a valid child care tax expense however there are implications which may disallow claiming it for certain people. The child care expense tax implications are all explained in only a way the IRS can explain something, by calling it "IRS Publication 503" which can be found here. One of the interesting things is that if you have a stay at home parent with no earned income you cannot claim any child care expenses including preschool. To claim all of the preschool expenses, the stay at home parent would need to have an earned income of at least as high as what you are attempting to claim as expenses or you can only claim as much as they make. Here is an example from the IRS with some minor edits.

Your earned income for the year was $18,000. Your spouse's earned income for the year was $2,000. You paid work-related expenses of $3,000 for the care of your 5-year-old child and qualified to claim the credit. The amount of expenses you use to figure your credit cannot be more than $2,000 (the smaller of your earned income or that of your spouse).

See, its designed to be a "work related expense." the IRS says this means that both of these have to be true:

• They allow you (and your spouse if you are married) to work or look for work.
  
• They are for a qualifying person's care.
  

But it seems that according to the IRS the stay at home parent isn't working unless they have earned income. Tell that to a stay at home parent and you might get slapped ;-) I thought this was the last interesting part:

Volunteer work. For this purpose, you are not considered to be working if you do unpaid volunteer work or volunteer work for a nominal salary.

Snow Day

Yesterday was the biggest snow day (~4") since I moved to Raleigh in 2002. Here are some pictures of our house and us in the snow:















Yes, much to my disapproval my daughter was wearing jeans in the snow. At least they were lined. She lasted about 10 minutes, she is a good little warm weather southern gal :-) I was wearing m snowboarding gear and Heather was wearing what she called a snow bib and what we would call something else like snow pants.

Interest Rates

So, like many "homeowners" I have been watching the interest rates plummet and preparing to refinance. I finally began the process of refinancing on Tuesday when 15 year fixed rate mortgages hit between 4.25% and 4.5% locally. Heather and I are on an aggressive track to pay off our house and so we had to make sure our closing costs were as low as possible. I called many companies and here is my anecdotal occurrences with each of them:

• One of my friends had luck with Citi using our employee referral program and I contacted them. I immediately had the phone answered and they took my name and number on Tuesday. On Thursday, after having not received a callback, I called again and got someone after less than one minute on hold. They quoted me nice rates, gave me their contact information, and told me they would be available Friday and Saturday morning. When i called Friday the lady's voicemail said she was on vacation.
  
  
• Two companies never returned my calls - Wells Fargo and Chase.
  
  
• The current company who holds my mortgage, HSBC, had rates 3/8 higher (4.875) than the next highest person I contacted (4.5%) and still wanted a full origination point.
  
  
• My credit union, Coastal Federal, was the only one who came through. They had low closing costs, low rates, and gave me no hassle. You can check their rates here. They charges 1/2 pt origination, no discount points, no application fee, and I locked in a 4.5% 15 year mortgage which is a substantial savings from my current 5.875%. Overall closing costs were around $2100 which in NC seems to be a great deal.
  

Also on the interest rate front, the high interest online savings accounts are rapidly dropping their interest rates in the 2.5-3% range. My credit union has a pretty cool program called "Go Green Checking". The biggest issue I have is that who wants to put your real savings, like emergency savings and long term savings for cars, in a checking account with a card you use frequently. See, you have to use this card 12 times a month, which means you have 12 chances to get your numbers stolen. Sure, Visa says it will replace your money if stolen but reports say that this can take 2-4 weeks sometimes. This is my emergency savings, I don't know if thats secure enough for me. Thoughts?

Not the water cooler

Everyone here at work is outraged. Why? Because as of January 1st, we lost our "drink subsidy" which was a benefit not very well defined but often used. I often don't write about work stuff, but I think it says something about the state of the economy. Allow me to expand...

In early December we all got a note saying that the drinks were costing the company too much and the drink subsidy would be going away. We had $.25 sodas, free cheap coffee, and water coolers. We have had these things since I have been here in RTP, so almost 7 years. As of Jan 1, the sodas went to $.75, coffee was pay per cup at $.50, and the water coolers disappeared.

The money is only the start of complaints. The water fountains which were not really used for the past 7+ years do not chill or filter the water, in fact the tap water in the kitchen tastes better. Sodas are < $.25 per can if bought in 12 packs at Target or Walmart on sale, so justifying that $.50 hike is hard to do while trying to claim they are just stopping the subsidy. So, many people seem up in arms.

My sensible side, Heather, says that in the grand scheme people are losing their jobs left and right and here we are complaining about the water cooler. I guess the more I think about this is it is our first loss of benefits. Some companies have lost their 401k match and others have even lost part of their salary. I guess this little benefit seems to hurt because it is something tangible daily...but if put in perspective, its not as bad as it could be... :-/

Thoughts anyone?