Money
Sweeping Tax Changes Coming

Q: Recently, you talked about personal finance books. A great one is "Personal Finance for Dummies."

A: That's not exactly a question, but I welcome your comment and endorsement of the book. I've heard people say the same thing about the "Mutual Funds for Dummies" book by Eric Tyson. Many investors say they built their entire investment base with information from that book.

I think each of us is willing to admit that there are certain areas that we know very little about, where we are "dummies" and we are eager to get the most basic advice possible. Too many books talk over our heads.

Q: Can you tell me anything about the guidelines for teachers buying a house for half price?

A: I had to turn to the folks at NEA Member Benefits for help on this one. Here's what they tell me: The Teacher Next Door Program is a nationwide government program that offers single family homes acquired by the Department of Housing and Urban Development (HUD) to teachers at 50% off their appraised value. HUD has acquired the homes because they were previously insured by another federal agency, the Federal Housing Administration (FHA), and then foreclosed on when owners did not continue the mortgage payments.

HUD defines a teacher as an individual employed full time by a public school, private school, or federal, state, county, or municipal education agency as a state-certified classroom teacher or administrator in grades K-12. The teacher does not have to be currently performing classroom duties.

Teacher Next Door properties are located in areas designated by HUD as revitalization areas, typically in low- and moderate-income neighborhoods. To qualify for the program, a teacher need not be a first-time home buyer; however, the teacher cannot own any other residential real estate. A teacher must purchase a home in the same school district or jurisdiction in which he or she is employed and must live in the home as a sole resident for at least three years. He or she may then sell it and take the profits.

If the home is purchased with an FHA-insured mortgage, the down payment is just $100. Down payments for other types of mortgages vary. The home can be purchased directly from HUD or with the help of a broker. Teacher Next Door properties are listed on HUD's Web site at www.hud.gov/tnd. More information about this program, including details on financing, is available from NEA Member Benefits at 800/NEA-4-YOU (800/632-4968) or online at www.neamb.com/loans/hmftnd.html.

Q: Every year I look for a way to cut my taxes, and I always realize I'm too late. Any good news for me this year?

A: Not much. But wait until next year! For 2001, you can still do the typical things like put money in an IRA if you have income from tutoring or consulting. Also make certain you deduct expenses from any sideline business you have. That's about it.

But there are sweeping tax changes coming into effect in 2002, many of them affecting retirement plan savings. Many Americans have not been saving enough for retirement, and the government is getting the picture. Beginning in the 2002 tax year, workers will be allowed to set aside up to $11,000 from their salaries for 401(k), 403(b), or 457 plans, up from $10,500 for 2001, and that amount will go up by $1,000 a year until it hits $15,000 in 2006. In addition, workers who participate in both 403(b) and 457 plans can contribute the maximum amount allowable to both plans. This change is a particularly welcome one for those with 457 plans who could set aside only $8,500 under the old rules.

In addition, IRA limits go up to $3,000 for 2002?2004, $4,000 for 2005?2007, and then to $5,000 in 2008. These are not changes to be sneezed at. The difference in retirement savings can be substantial for those who tuck away the new maximums.

There are also some happy developments in the "paying for college" department. The state-sponsored programs named after section 529 of the tax code (529 programs) get a big boost because the earnings can be withdrawn tax free if used to pay for college. Further, contribution limit for education IRAs goes up to $2,000 for 2002.

So, the short answer to your question is no, there is little you can do in the next couple of weeks, but you might be surprised about what can be done for your 2002 tax bill. So get started soon.

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Mary Rowland is an author and contributor to several financial planning magazines. E-mail your personal finance questions to MoneyQuestions@neamb.com.

Thrifty Educator

This month's tips come from Marcia Fox, a sixth grade teacher from Warmego, Kansas, and Tiffany Hayes, a content mastery teacher in Leander, Texas.

Fox: My tip is to help organize lunch count and attendance in the mornings. When my students enter the room I have Popsicle sticks with their names on them lying on the table by the door. There is also a monthly menu taped to the table and three cups labeled hot lunch, salad bar, and not eating/sack lunch. Students place their Popsicle stick into the cup that shows their choice for the day. I can count the sticks in each cup and fill out the lunch count slip. It's also very easy to tell who is absent. All this is done without roll call or disrupting the quiet thinking time.

Hayes: Students who leave my classroom to return to general education classes often completely 'forget' to return to class. To solve this problem, I had my hall passes printed on carbonless, duplicate paper. Now, when I write a pass with the departure time on it, the student gets one copy and I save the other copy to drop in the general education teacher's box. The teacher is also kept informed about when that student left class.

Got an Idea?
If you have a suggestion for how your colleagues can save money at school, send it along to neatoday@nea.org.

Heads Up from NEA Member Benefits

Get ready for summer by equipping yourself with the convenience of "calling at your fingertips." Take advantage of one of the newest NEA Member Benefits programs: NEA Cellular.

NEA Cellular offers you great deals on digital telephones and cellular service. You get to pick out a free phone (after rebate) from some of the top names in cellular telephone equipment, like Nokia, Ericsson, and Motorola.

Second, major wireless service providers participate in NEA Cellular. Members can choose one of the available carriers in their area, including AT&T Wireless, Verizon, Cingular, Voicestream, and WorldCom. Members are also guaranteed the lowest published carrier rates--a very attractive feature!

But that's not all. Orders include free shipping and a free cellular telephone accessory pack that consists of an in-car charger, hands-free kit, and belt clip. Soon, NEA Cellular will allow members the option to customize their phones to receive news, weather, and other wireless updates. All orders are shipped within 24 hours.

NEA Cellular customer service representatives are dedicated to excellent customer support and will assist members in the ordering process, including how to determine which option is most suitable for their needs.

For more information or to place an order, visit the NEA Member Benefits Web site at www.neamb.com or call NEA Cellular toll-free at 866/327-2219.