Credit Cards Online Information

Dear Bruce: I have a good credit score, which I want to maintain. I have a couple of credit cards I never use, and I would like to cancel them.

I have heard that canceling credit cards can actually have an adverse effect on your credit score. Is that true and, if so, why?

I would think reducing the number of credit cards to only those in active use, plus perhaps a backup, would be a good thing. Thanks for your help. - D.M., Encinitas, Calif.

Dear D.M.: Assuming the cards cost you nothing, meaning annual fees, I don't see any reason why you couldn't keep them and have them available. However, if you want to cancel them, by all means go ahead. Your credit score isn't going to suffer because you have decided to discontinue a business relationship, as long as there are no outstanding balances or issues.

Dear Bruce: I thought I had heard you say (at one time) that if a parent goes into a retirement (health care) home, they can't "gift" some of their money to a child so they won't have to use it all for their care. Is this the case? We don't have a lot of money, so this is important to us. - J.W., via e-mail

Dear J.W.: It is true that one can dispose of one's assets in order to avoid paying it for health care. However, there is a look- back period to be satisfied.

The current look-back period is three years. That means you have to make the gift this far in advance of any need for public support.

Dear Bruce: I have a house in another state where I lived for 10 years and have now rented for 15 years. I have depreciated it on my taxes as a rental, and it has appreciated.

I have considered selling it, but the value of this house is $120,000 above its current basis. I am about two years from retirement.

When I retire, I probably will move back to the community where my house is. Should I sell the house now, or should I wait and move back in for two years and sell it later as my primary residence? How different would the tax consequences be? - M.P., Richmond, Va.

Dear M.P.: If you sell a house now, your accountant will have to compute what your current basis is, and the difference between that, expense of sale, etc., will be the amount on which you will be taxed. If you move back into the house for two years, it will once again become your primary residence; then, if you sell it, any profit up to $250,000 will be a totally non-taxable event.

It seems to me you have hung on for this long, why not wait the extra two years, unless the house is rented for a very small amount of money. This might swing the pendulum in favor of a current sale.

# posted by Medical Information : 3:09 AM