San Diego, CA - "Negative equity",
"qualifying child" and "critical illness" are six words
you may start to hear a lot more about in 2006. Here is
"Negative equity" is a term coming into the main
stream as a result of a surprisingly number of homeowners
reporting minimal and even negative equity holdings. The
so-called housing pricing bubble, which some experts say
is a misnomer because as long demand fueled by new
households remains high and supply being curtailed by
restrictive zoning remains low, prices will continue to
grow and not collapse. In some markets prices have
stabilized and homes remain on the market longer. Negative
equity is something that will be experienced by many for
the first time homebuyers who got into a hot housing
market while prices were on the rise, without making a
down payment. Included in that group will be many
speculators who bought property with 100% equity loans,
hoping the rental income will be more than the monthly
payments. When that equation goes negative, usually the
negative equity follows. Many real estate speculators will
flood the market new property re-sales, most of which will
be condos which will depress prices and homes will stay on
the market longer. According to Kenneth Harney, a
nationally syndicated real estate columnist, in 2004-2005
nearly ten percent of the borrowers were in zero or
negative equity and five percent of that group were more
than ten percent negative. He also reported that
state-by-state net equity holdings found more than 28
percent of Colorado buyers or refinancers, for example,
had less than five percent equity in their properties and
nearly 24 percent of Ohio owners were in the same boat. He
contends equity levels are vital measures of household
financial health and a key component of net worth.
"Qualifying child" is a relatively new term
courtesy of the IRS. The uniform definition is: A
"qualifying child" may enable a taxpayer to claim several
tax benefits, such as head of household filing status, the
exemption for a dependent, the child tax credit, the child
and dependent care credit and the earned income tax
credit. Prior to 2005, each of these items defined a
qualifying child differently, leaving many taxpayers
The Working Families Tax Relief Act of 2004 set a uniform
definition of a qualifying child, beginning for Tax Year
2005. This standard definition applies to all five of the
tax benefits noted above, with each benefit having some
In general, to be a taxpayer's qualifying child, a person
must satisfy four tests:
' Relationship -- the taxpayer's child or stepchild
(whether by blood or adoption), foster child, sibling or
stepsibling, or a descendant of one of these.
' Residence -- has the same principal residence as the
taxpayer for more than half the tax year. Exceptions
apply, in certain cases, for children of divorced or
separated parents, kidnapped children, temporary absences,
and for children who were born or died during the year.
' Age -- must be under the age of 19 at the end of the tax
year, or under the age of 24 if a full-time student for at
least five months of the year, or be permanently and
totally disabled at any time during the year.
' Support -- did not provide more than one-half of his/her
own support for the year.
Additional Rules While the four qualifying child tests
generally apply for the five tax benefits noted above,
there are some additions or variations for particular
provisions: Dependent -- a qualifying child must also meet
' Nationality -- be a U.S. citizen or national, or a
resident of the U.S., Canada or Mexico. There is an
exception for certain adopted children.
' Marital status -- if married, did not file a joint
return for that year, unless the return is filed only as a
claim for refund and no tax liability would exist for
either spouse if they had filed separate returns.
Credit for Child and Dependent Care Expenses -- a
qualifying child must be under the age of 13 or
permanently and totally disabled. A qualifying child is
determined without regard to the exception for children of
divorced or separated parents and the exception for
Child Tax Credit -- a qualifying child must be under age
17 and a U.S. citizen or national or a U.S. resident.
Earned Income Tax Credit -- a qualifying child does not
have to meet the support test. Also, a qualifying child
must have lived with the taxpayer in the United States for
more than half the year and have a social security number
that is valid for employment in the United States. A
qualifying child is determined without regard to the
exception for children of divorced or separated parents.
If a qualifying child is married, he or she must also meet
the marital status and nationality tests for a dependent
"Critical Illness" is another term brought about by
necessity- the lack of health insurance coverage.
"Critical illness" insurance" pays cash to help patients
and families fill a financial hole caused by health
problems. It is usually a lump sum cash payment to the
insured to be used anyway they choose, after the
beneficiary is diagnosed with one of a number of
pre-specified serious health problems such as cancer or a
stroke. Policies do vary in cost and benefits. Critical
illness insurance was not designed as a substitute for
comprehensive health insurance, but rather as a
supplement. Critical illness policies began to appear in
1999 and have become more popular as health care costs
increase and many insurance plans now require insured
individuals to pick up more of the expenses. The National
Association for Critical Insurance says this is not an
outgrowth of cancer insurance, which has been around for
many years, and paid benefits relative to what the patient
spent on care. Critical illness policies have become more
widespread because of the range of diseases they cover.
Premiums depend on a variety of factors including age,,
the number of diseases the policy holder wants covered and
the amount of the coverage. About 75 percent of critical
illness policies are purchased through employers as an
additional benefit. Consumers Reports, on the other hand,
says these policies are too restrictive and besides it is
impossible to judge what diseases an individual may get.
About the ICFE:
The Institute of Consumer Financial Education (ICFE) was founded in 1982 by the late Loren Dunton (creator of the Certified Financial Planner (CFP) designation). The ICFE is dedicated to helping consumers of all ages to improve their spending, increase savings and use credit more wisely.
The ICFE is an award winning, nonprofit, consumer education organization that has helped millions of people through its education programs and Resources. It publishes the Do-It-Yourself Credit File correction Guide, which is updated annually. The ICFE has distributed over one million Credit/Debit Card Warning Labels and Credit/Debit Card Sleeves world wide.
The ICFE became an official partner with the Department of Defense/Financial Readiness Campaign in June of 2004.The ICFE was an active partner in the California Student Debt Resource Awareness Project (CASDRAP) which resulted in a new web site: (studentdebthelp.org). CASDRAP disbanded in 2010, shortly after the web site project was completed. In 2011 the ICFE assumed the single sponsorship of the (studentdebthelp.org) web site and is now responsible for its content and operation.
The ICFE is also an on-line help for consumers who spend too much. ICFE's spending help was featured in PARADE Magazine in the Intelligence Report section. The money helps and tips are from the ICFE's Money Instruction Book, our course in personal finance.
Visit the ICFE's other web sites at: www.financial-education-icfe.org and studentdebthelp.org. Both sites helps consumers and students with mending spending, learning about the proper use of credit, budget and expense guidelines, how to set up and implement a spending-plan and also how to access financial education courses and how to teach children about money. Other ICFE services include: Ask Mr. G, a free eNews, and an online resource center for students, parents and educators, plus financial education learning tools and a book store.