Don’t rouse the IRS or pay more taxes than necessary — know the score on each home tax deduction and credit.
Sin #1: Deducting the wrong year for property taxes
You take a tax deduction for property taxes in the year you (or the holder of your escrow account) actually paid them. Some taxing authorities work a year behind — that is, you’re not billed for 2013 property taxes until 2014. But that’s irrelevant to the feds.
Enter on your federal forms whatever amount you actually paid in 2013, no matter what the date is on your tax bill. Dave Hampton, CPA, tax manager at the Cincinnati accounting firm of Burke & Schindler, has seen home owners confuse payments for different years and claim the incorrect amount.
Sin #2: Confusing escrow amount for actual taxes paid
If your lender escrows funds to pay your property taxes, don’t just deduct the amount escrowed, says Bob Meighan, CPA and vice president at TurboTax in San Diego. The regular amount you pay into your escrow account each month to cover property taxes is probably a little more or a little less than your property tax bill. Your lender will adjust the amount every year or so to realign the two.
For example, your tax bill might be $1,200, but your lender may have collected $1,100 or $1,300 in escrow over the year. Deduct only $1,200. Your lender will send you an official statement listing the actual taxes paid. Use that. Don’t just add up 12 months of escrow property tax payments.
Sin #3: Deducting points paid to refinance
Deduct points you paid your lender to secure your mortgage in full for the year you bought your home. However, when you refinance, says Meighan, you must deduct points over the life of your new loan. If you paid $2,000 in points to refinance into a 15-year mortgage, your tax deduction is $133 per year.
Sin #4: Misjudging the home office tax deduction
This deduction may not be as good as it seems. It's complicated, often doesn’t amount to much of a deduction, has to be recaptured if you turn a profit when you sell your home, and can pique the IRS’s interest in your return. Hampton’s advice: Claim it only if it’s worth those drawbacks. If so, here's what to know about what you can write off.
Sin #5: Failing to repay the first-time home buyer tax credit
If you used the original home buyer tax credit in 2008, you must repay 1/15th of the credit over 15 years. If you used the tax credit in 2009, 2010, or 2011 and then sold your house or stopped using it as your primary residence, within 36 months of the purchase date, you also have to pay back the credit.
The IRS has a tool you can use to help figure out what you owe.
Sin #6: Failing to track home-related expenses
If the IRS comes a-knockin’, don’t be scrambling to compile your records. Many people forget to track home office and home maintenance and repair expenses, says Meighan. File away documents as you go. For example, save each manufacturer's certification statement for energy tax credits and lender or government statements to confirm property taxes paid.
Sin #7: Forgetting to keep track of capital gains
If you sold your main home last year, don’t forget to pay capital gains taxes on any profit. You can exclude $250,000 (or $500,000 if you’re a married couple) of any profits from taxes. So if you bought a home for $100,000 and sold it for $400,000, your capital gains are $300,000. If you’re single, you owe taxes on $50,000 of gains. However, there are minimum time limits for holding property to take advantage of the exclusions, and other details. Consult IRS Publication 523.
Sin #8: Filing incorrectly for energy tax credits
If you made any eligible improvements in 2012 -- or will in 2013 -- such as installing energy-efficient windows and doors, you may be able to take a 10% tax credit (up to $500). But keep in mind, it's a lifetime credit. If you claimed the credit in any recent years, you're done. Fill out Form 5695.
Part II of the form, which covers systems eligible for a larger tax credit through 2016, such as geothermal heat pumps, can be incredibly complex and involves crosschecking with half a dozen other IRS forms. Read the instructions carefully.
Sin #9: Claiming too much for the mortgage interest tax deduction
You can deduct mortgage interest only up to $1 million of mortgage debt, says Meighan. If you have $1.2 million in mortgage debt, for example, deduct only the mortgage interest attributable to the first $1 million.
This article was original published in Jan. 2011.
This article provides general information about tax laws and consequences, but shouldn't be relied upon as tax or legal advice applicable to particular transactions or circumstances. Consult a tax professional for such advice.
Thursday, February 14, 2013
Tuesday, January 15, 2013
How to Get Rid of Stuff and Declutter Your Life
-
How to Get Rid of Stuff and Declutter Your Life
You can get that warm, fuzzy holiday feeling and make a few bucks by responsibly ditching all the excess stuff you accumulate, particularly at this time of year. Read
Visit houselogic.com for more articles like this.
Copyright 2013 NATIONAL ASSOCIATION OF REALTORS®
Monday, September 3, 2012
Allergies at Home
If you have allergies at home, you’re hosting allergens with specific needs. If those pollutants could write classified ads, here’s what they’d want.
DUST MITES in need of a cozy mattress. Please, no dust mite-proof covers (we can’t hack latex mattresses or silk bedding, either). Bedding and comforters must be rarely washed. Absolutely NO water heaters set above 130 degrees -- we’d be goners. Prefer natural materials for hanging out -- no synthetics or air purifiers with HEPA (high-efficiency particulate air) filters, please, as we find them inhospitable.
POLLEN wants airy home with windows and doors frequently left open. Prefer windows where mold and condensation are never cleaned from window frames and sills. Definitely prefer a location with no HVAC air filtration system so we can easily circulate to keep eyes watering and noses running. Absolutely NO small-particle or HEPA filters allowed.
MODERN ALLERGEN FAMILY (dust, pollen, pet dander, and dust mites) in need of carpeting. Thick carpet piles that are rarely shampooed or vacuumed given preference. No homes with hardwood, laminate, or vinyl flooring considered because there’s nowhere for us to hide. Also, no calls accepted from homes where surfaces are steam-cleaned or that feature low-pile carpets that are regularly vacuumed (equipped with a HEPA filter). Washable area rugs not considered.
RESPIRATORY AILMENTS willing to trade a clean-burning gas fireplace for an old-fashioned, inefficient wood-burning model that produces plenty of smoke and gasses. Please, no wood-burning fireplace inserts. Also looking to sell our vented range hood (which really sucks the life out of us).
WANTED: Horizontal blinds where dust and pollen can settle undisturbed. Please, no natural and synthetic curtains that are regularly washed, or we’re down the drain.
DUST AND OTHER ALLERGENS seek comfy home fully furnished with upholstered goods that are never vacuumed. No leather, wood, metal, or plastic furnishings considered, as we don’t find these hospitable.
MOLD AND MILDEW need hot, humid home with no air conditioning and no dehumidifier. (A place with a dehumidifier may be considered if it’s rarely cleaned. We’ve found these make a nice home too.) Especially happy in a location with water damage: damp carpeting, a soggy basement, leaky plumbing, and a clothes dryer that isn’t vented outside. Also interested in locations with non-ventilated bathrooms lined with wallpaper, and equipped with a shower, tub, mats, and curtains that are rarely cleaned. Leaky toilets considered a plus. Please, no tiled bathrooms.
CLUTTER WANTED: Dust and pollen seek a variety of knickknacks, books and magazines, dried flowers, toys (especially stuffed animals), wicker baskets, and other items to collect on. No dusting considered. Also, please don’t wash stuffed animals monthly in hot (130 degree) water as this is a killer move when it comes to us allergens! And, if you’ve heard about putting nonwashable stuffed animals in the freezer for 24 hours and then rinsing the dead dust mites off with cold water -- don’t do that either.
MUST SELL: HEPA filters for heating and cooling system. Allergens can’t thrive when these filters are changed in the furnace once a month. Priced for quick sale.
COCKROACHES seek dine-in home where food and garbage are easily accessible. (i.e. Don’t wipe down the stove, countertop, or table after dinner. DO pile unwashed dishes in the sink and leave the trashcan uncovered.) Please, no food stored in airtight containers. Positively no homes accepted where poison baits, boric acid, or insect traps are in use.
By: Jan Soults Walker Published: June 22, 2012
DUST MITES in need of a cozy mattress. Please, no dust mite-proof covers (we can’t hack latex mattresses or silk bedding, either). Bedding and comforters must be rarely washed. Absolutely NO water heaters set above 130 degrees -- we’d be goners. Prefer natural materials for hanging out -- no synthetics or air purifiers with HEPA (high-efficiency particulate air) filters, please, as we find them inhospitable.
POLLEN wants airy home with windows and doors frequently left open. Prefer windows where mold and condensation are never cleaned from window frames and sills. Definitely prefer a location with no HVAC air filtration system so we can easily circulate to keep eyes watering and noses running. Absolutely NO small-particle or HEPA filters allowed.
MODERN ALLERGEN FAMILY (dust, pollen, pet dander, and dust mites) in need of carpeting. Thick carpet piles that are rarely shampooed or vacuumed given preference. No homes with hardwood, laminate, or vinyl flooring considered because there’s nowhere for us to hide. Also, no calls accepted from homes where surfaces are steam-cleaned or that feature low-pile carpets that are regularly vacuumed (equipped with a HEPA filter). Washable area rugs not considered.
RESPIRATORY AILMENTS willing to trade a clean-burning gas fireplace for an old-fashioned, inefficient wood-burning model that produces plenty of smoke and gasses. Please, no wood-burning fireplace inserts. Also looking to sell our vented range hood (which really sucks the life out of us).
WANTED: Horizontal blinds where dust and pollen can settle undisturbed. Please, no natural and synthetic curtains that are regularly washed, or we’re down the drain.
DUST AND OTHER ALLERGENS seek comfy home fully furnished with upholstered goods that are never vacuumed. No leather, wood, metal, or plastic furnishings considered, as we don’t find these hospitable.
MOLD AND MILDEW need hot, humid home with no air conditioning and no dehumidifier. (A place with a dehumidifier may be considered if it’s rarely cleaned. We’ve found these make a nice home too.) Especially happy in a location with water damage: damp carpeting, a soggy basement, leaky plumbing, and a clothes dryer that isn’t vented outside. Also interested in locations with non-ventilated bathrooms lined with wallpaper, and equipped with a shower, tub, mats, and curtains that are rarely cleaned. Leaky toilets considered a plus. Please, no tiled bathrooms.
CLUTTER WANTED: Dust and pollen seek a variety of knickknacks, books and magazines, dried flowers, toys (especially stuffed animals), wicker baskets, and other items to collect on. No dusting considered. Also, please don’t wash stuffed animals monthly in hot (130 degree) water as this is a killer move when it comes to us allergens! And, if you’ve heard about putting nonwashable stuffed animals in the freezer for 24 hours and then rinsing the dead dust mites off with cold water -- don’t do that either.
MUST SELL: HEPA filters for heating and cooling system. Allergens can’t thrive when these filters are changed in the furnace once a month. Priced for quick sale.
COCKROACHES seek dine-in home where food and garbage are easily accessible. (i.e. Don’t wipe down the stove, countertop, or table after dinner. DO pile unwashed dishes in the sink and leave the trashcan uncovered.) Please, no food stored in airtight containers. Positively no homes accepted where poison baits, boric acid, or insect traps are in use.
By: Jan Soults Walker Published: June 22, 2012
Tuesday, August 28, 2012
-
Home Tool Hacks From Your Closet and Bath
If you’re tool-less (but not clueless), here’s how to use everyday beauty items to fix, patch, and repair your home. Read
-
Are You Looking for Energy Savings in All the Wrong Places?
Ack! Our energy costs are going up because too many of us are making the wrong judgment calls about how to save energy. Here’s why we’re having a disconnect. Read
Visit houselogic.com for more articles like this.
Copyright 2012 NATIONAL ASSOCIATION OF REALTORS®
Thursday, July 19, 2012
Turned Down for a Refinance? Don’t Take No for an Answer
When a lender says you don’t qualify for a mortgage refinance, you may be able to fix what’s wrong or find another lender willing to step up.
The five things that most often stop a refinance from going through:
Your home is worth less than your current mortgage (also known as being underwater). Your credit score is too low. You can’t document your income. The lender thinks you’re not making enough money to cover your bills. Your home is listed for sale. You can overcome some of those five issues fairly quickly, but others will take time.
Your owe more on your mortgage than your home is worth
You have three options:
1. Tell the lender you’ll bring cash to the closing table to create a downpayment on the new loan. For example, if your home is worth $100,000 and you owe $110,000 on your existing mortgage, bring the $10,000 difference between what you owe and what your house is worth. Plus, you’ll need to bring the minimum downpayment that the lender requires.
If you’re seeking an FHA loan, add another 3.5%, or $3,500 in this example, to meet FHA’s minimum 3.5% downpayment requirement, suggests finance columnist Jack Guttentag, a professor at the Wharton School. Some loan programs requre a 5% minimum downpayment.
Although the cash you bring to closing will help build equity, treat it as an expense when you calculate your refinancing costs, and when figuring if refinancing saves you money.
2. Double check the accuracy of the appraisal, and share anything concrete with your lender that the appraiser doesn’t know. Check to make sure the information in the appraisal is correct, such as square footage and number of bedrooms and bathrooms. Note amenities, such as a deck, an extra-large lot, and green improvements, and make sure they’re properly valued.
Guttentag cites the case of a home owner who knew an identical house across the street that sold for a low price because the home owners sold to a family member. The borrower got documentation of why the price was low, the lender ordered a new appraisal, and the refinance went through.
3. See if you qualify for the federal program Making Home Affordable, which helps home owners in your situation, or a program run by your mortgage lender.
Your credit score is too low
These days, the minimum credit score you’ll need to get a mortgage is higher than what was required just a few years ago. It’s possible that even if your credit score hasn’t fallen, it’s now too low for you to refinance the loan you already have.
In general, the lowest acceptable credit score is 620. To get the best rates, you need a 740 or higher, says Keith Gumbinger of HSH.com, one of the nation's largest publishers of mortgage loan information.
Today, lenders make you prove every dime of income you use to qualify for your refinance. To ensure consideration:
Report all your income to the IRS on your tax returns. You need a two-year income history to refinance.
Try applying for a mortgage at a local bank that holds onto the mortgage loans it makes instead of selling them. These banks can make their own rules about loans. Try credit unions, community banks, or lenders recommended by the REALTOR® who sold you your home. Apply for a loan from the “Bank of Mom and Dad.” Cash-rich relatives might welcome the chance to earn 4% by giving you a mortgage.
Your lender says you’re not making enough money
Lenders look at your monthly expenses and compare that with your monthly income to come up with debt-to-income ratios. Improve yours by either lowering your debt or increasing your income. Strategies include:
Borrowing money from family members to pay down your debts. Borrowing against your 401(k), if the advantages outweigh the risks for you. The cons are many, including the fact that you’ll pay a 10% early withdrawal penalty if you’re younger than 59 1/2. But it’s often a lower cost of borrowing. So do your homework. Going with an FHA loan. FHA allows borrowers to qualify using the income of family members willing to co-sign your mortgage. The family member doesn’t have to own your house, but the person does have to meet the same underwriting requirements as the main borrower (that’s you) does.
Your home is listed for sale
Because it can take a year or more to sell your home in some areas, it’s possible you’ll want to pursue a refinance while your home is on the market. But lenders won’t grant a refinance mortgage while your home is listed for sale. Some lenders will give you a mortgage refinance the day after you take your house off the market, others make you wait 60 days. When you and your REALTOR® discuss taking your house off the market, ask her for a referral to a lender that won’t make you wait 60 days.
If these tactics all fail, try waiting until the latest refinance boom ends and lenders aren’t so busy. “When lenders are scrapping for business, they’re more likely to work with you or take you though manual underwriting,” Guttentag says.
By: Dona DeZube
Published: November 1, 2011 .
The five things that most often stop a refinance from going through:
Your home is worth less than your current mortgage (also known as being underwater). Your credit score is too low. You can’t document your income. The lender thinks you’re not making enough money to cover your bills. Your home is listed for sale. You can overcome some of those five issues fairly quickly, but others will take time.
Your owe more on your mortgage than your home is worth
You have three options:
1. Tell the lender you’ll bring cash to the closing table to create a downpayment on the new loan. For example, if your home is worth $100,000 and you owe $110,000 on your existing mortgage, bring the $10,000 difference between what you owe and what your house is worth. Plus, you’ll need to bring the minimum downpayment that the lender requires.
If you’re seeking an FHA loan, add another 3.5%, or $3,500 in this example, to meet FHA’s minimum 3.5% downpayment requirement, suggests finance columnist Jack Guttentag, a professor at the Wharton School. Some loan programs requre a 5% minimum downpayment.
Although the cash you bring to closing will help build equity, treat it as an expense when you calculate your refinancing costs, and when figuring if refinancing saves you money.
2. Double check the accuracy of the appraisal, and share anything concrete with your lender that the appraiser doesn’t know. Check to make sure the information in the appraisal is correct, such as square footage and number of bedrooms and bathrooms. Note amenities, such as a deck, an extra-large lot, and green improvements, and make sure they’re properly valued.
Guttentag cites the case of a home owner who knew an identical house across the street that sold for a low price because the home owners sold to a family member. The borrower got documentation of why the price was low, the lender ordered a new appraisal, and the refinance went through.
3. See if you qualify for the federal program Making Home Affordable, which helps home owners in your situation, or a program run by your mortgage lender.
Your credit score is too low
These days, the minimum credit score you’ll need to get a mortgage is higher than what was required just a few years ago. It’s possible that even if your credit score hasn’t fallen, it’s now too low for you to refinance the loan you already have.
In general, the lowest acceptable credit score is 620. To get the best rates, you need a 740 or higher, says Keith Gumbinger of HSH.com, one of the nation's largest publishers of mortgage loan information.
Today, lenders make you prove every dime of income you use to qualify for your refinance. To ensure consideration:
Report all your income to the IRS on your tax returns. You need a two-year income history to refinance.
Try applying for a mortgage at a local bank that holds onto the mortgage loans it makes instead of selling them. These banks can make their own rules about loans. Try credit unions, community banks, or lenders recommended by the REALTOR® who sold you your home. Apply for a loan from the “Bank of Mom and Dad.” Cash-rich relatives might welcome the chance to earn 4% by giving you a mortgage.
Your lender says you’re not making enough money
Lenders look at your monthly expenses and compare that with your monthly income to come up with debt-to-income ratios. Improve yours by either lowering your debt or increasing your income. Strategies include:
Borrowing money from family members to pay down your debts. Borrowing against your 401(k), if the advantages outweigh the risks for you. The cons are many, including the fact that you’ll pay a 10% early withdrawal penalty if you’re younger than 59 1/2. But it’s often a lower cost of borrowing. So do your homework. Going with an FHA loan. FHA allows borrowers to qualify using the income of family members willing to co-sign your mortgage. The family member doesn’t have to own your house, but the person does have to meet the same underwriting requirements as the main borrower (that’s you) does.
Your home is listed for sale
Because it can take a year or more to sell your home in some areas, it’s possible you’ll want to pursue a refinance while your home is on the market. But lenders won’t grant a refinance mortgage while your home is listed for sale. Some lenders will give you a mortgage refinance the day after you take your house off the market, others make you wait 60 days. When you and your REALTOR® discuss taking your house off the market, ask her for a referral to a lender that won’t make you wait 60 days.
If these tactics all fail, try waiting until the latest refinance boom ends and lenders aren’t so busy. “When lenders are scrapping for business, they’re more likely to work with you or take you though manual underwriting,” Guttentag says.
By: Dona DeZube
Published: November 1, 2011 .
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