Financial Beat

By Yvonne Chilik Wollenberg

Taxes: Education IRAs get more powerful

Tucked away in the new tax law is the first federal subsidy for private school.

The law will let you use proceeds from education IRAs for private elementary or secondary tuition or to pay expenses for private or public school, grades K-12, as well as for college, beginning in 2002.

Covered costs include tutoring, computer equipment, room and board, uniforms, and extended-day programs. The law also increases the maximum annual contribution to an education IRA from $500 to $2,000. The accounts, which are free from federal taxes if used for qualified expenses, are open to joint filers with adjusted gross incomes under $190,000, an increase over the previous limit of $150,000.

The new tax law will also allow parents to deduct up to $3,000 for college expenses if their joint income is below $130,000. This deduction begins next year and increases to $4,000 in 2004, but expires after 2005.

Travel: Is it safe to go into the water?

Before you head for the beach this summer, check out the Clean Beaches Council Web site for a list of certified beaches. About 60 around the nation have been certified as clean and safe by the nonprofit council, which monitors beaches for environmental quality and public safety conditions. The group has approved beaches in California, Delaware, Florida, Maryland, Massachusetts, Michigan, New Jersey, New York, North Carolina, Texas, Virginia, and Wisconsin. You'll find a complete list at www.cleanbeaches.org .

The voluntary program offers a stamp of approval to beaches that meet health and safety standards, including federal Environmental Protection Agency water quality guidelines. Resort beaches must have lifeguards, drinking water, pay phones, clean toilet facilities, and parking available within a reasonable distance. Rural, undeveloped beaches must offer access to emergency personnel and provide warnings of potential hazards.

Mutual Funds: You might have to pay if you cash out early

The number of mutual funds that penalize shareholders for selling their holdings too soon has jumped 82 percent from December 1999 to March 2001. Some 585 funds now carry redemption fees, according to the Financial Research Corp., a Boston-based consulting firm. Funds are charging an average of 1.1 percent if investors redeem shares before a minimum time limit, which now averages 9.4 months. Funds investing in technology and communications stocks are the most likely to charge the fees, which are designed to discourage frequent trading. When fund shares are exchanged too often, the manager may have to sell securities to meet redemption demands. That can trigger capital gains tax for all fund shareholders.

Cars: Automotive Web sites are often wrong

Online car-pricing sites miss the mark by an average of $630, according to CNW Marketing/Research, an automotive research firm in Bandon, OR. The firm checked the manufacturer's suggested retail and dealer invoice prices quoted at 10 Web sites for 92 current models. Chrome Data had the most accurate prices and was off by an average of only $24; the least accurate prices were at CarsDirect.com, whose prices were wrong by an average of $1,516.

Some sites let you price out cars that can't be built by putting together mutually exclusive options, such as adding a sunroof on a convertible. The worst site in this regard was also CarsDirect.com, which allowed impossible combinations for about 15 percent of the vehicles studied.

Accuracy of car-pricing sites

*Prices were based on cars with feasible options.

Source: CNW Marketing/Research

 

Yvonne Wollenberg. Financial Beat. Medical Economics 2001;13:10.