Working teens need to file

If your teenage child is working, or earns money from investments, he or she may well need to file an income-tax return this year. Children must file a return if they had unearned income (such as dividends, interest or capital gains) exceeding $800 or earned income (wages, salaries and tips) of $4,850 or more.

Even if your child isn’t required to file a return, it can be beneficial to do so. If taxes have been taken out of teenagers’ paychecks, they can usually get a refund.

If your child does file an income tax return, you can still claim him or her as a dependent on your return under the following circumstances: he or she was under the age of 19 at the end of 2004; is under the age of 24 at the end of 2004 and was also a student; or is 25 or older and had a gross income of less than $3,100 during 2004.

Avoid unpaid credit card balances

That unpaid balance on your credit card can really hurt your finances.

Most people know that if you make only the minimum monthly payment on your card, it can take you months — or even years — longer than you had intended before you can finally pay off the balance. But how bad is that, really?

Say you have $3,000 in debt on a credit card with a 15 percent interest rate. You only pay $75 per month on the card. At that rate, if you never again add to the card’s balance, you’ll pay off the card in 18 years. And you’ll also pay a walloping $2,757.81 in interest! Ouch.

To find out how much your credit-card balance is costing you, check out the calculator at Bankrate.com: www.bankrate.com/brm/calc/ MinPayment.asp?ccBalance3000 &ccArate15&ratio.025&ccMin Payment75.00&ccPayment75&payment Typemin&SubmitCalculate.

AMT rules can be confusing

Are you an Alternative Minimum Tax-payer? More and more people are. If so, you may not know that interest on home equity loans not used to buy, build or improve a home is not deductible under the AMT.

Also, mortgage-interest rules can become particularly confusing in refinancings, especially multiple ones. To help clarify things, the IRS said recently that interest in multiple refinancings remains “qualified housing interest,” which means deductible for the AMT, “to the extent that the amount of the loan is not increased.” That means that as long as the taxpayer doesn’t borrow more than the outstanding principal balance, he or she may deduct the interest.

The IRS analysis goes like this: Ms. Smith buys a house in 1990 and borrows $100,000 to finance it. In 2000, by which time the loan balance has been paid down to $90,000, she refinances it, borrowing $90,000. Since she didn’t borrow more than the outstanding balance, interest on the new loan is completely deductible. But in 2004, with the loan balance now down to $80,000 she refinances and borrows $110,000. For the AMT, she may deduct only the portion of the interest attributable to $80,000.

It’s Revenue Ruling 2005-11, available on www.irs.gov.