Real Estate Investing

Archive for the ‘tax benefits’ Category

$8000 Tax Credit Goes to 1.4 million

money_clothesline.jpgIf you want in on the $8000 tax credit for first time home buyers, time is running out for qualified buyers - you can’t have owned a home in the past three years, there’s a $75,000 income limit for singles, $150,000 for couples, and you still have to be able to buy (qualify for home loan with good income, good credit score).  The home must close on or before November 30, 2009.  Over 1.4 million people have taken advantage of the tax credit, according to CNN.com.   While the government has sweetened home buying for some, the deadline is part of what is helping build the success.

Paul Henderson, a Realtor from Lacey, Washington, is ready for the tax credit to end OR to extend it to more than just first time buyers.  He posts on his Active Rain blog site,

All this talk about extending the $8000 tax credit makes my skin crawl. Every time I see this on TV my phone quits ringing. Extending, does take the urgency out of the program which will make the true fence sitters extremely happy. Why make a decision today, when you can wait 6 months?

We’re finding in my own area that the inventory for affordable first time homes is getting low.  I have at least two buyers now looking for houses under $100,000 - there would’ve been about 30 to choose from two months ago, but now we have about ten … and these are the ones that are run down and just a hot mess.  The time urgency is definitely having an impact here.

Meanwhile the National Association of Realtors is lobbying to extend the $8000 credit and not just to FIRST TIME buyers.  They want to see a home credit go to ALL buyers.  However, the tax credit is not a magic bullet. Carla Muss-Jacobs, a broker in Beaverton, Oregon, says the credit can hurt her negotiation position,

How does the $8000 tax credit hurt my deals? First, sellers KNOW about the BUYER credit . . . it’s NOT a secret.  And since the sellers know this, they’re not very willing to: reduce their list price, or offer concessions.  WHY?  Because they know there’s $8,000 on the table from the government, so why cut a deal and give the buyers ANOTHER $5,000 for closing costs, for example?

All interesting, valid points.  What do you think?  Should the program end? Should it be extended?  Expanded?  We’ll know in the next couple of months!

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Are You Ready for Tax Time?

tax-change.jpgAlthough April 15th is still almost three months away, people expecting to receive money back from Uncle Sam are already filing their tax returns.  Since becoming a real estate agent, my husband and I wait until April to file.  Though I save throughout the year and make quarterly payments, I still end up having to pay on April 15th.

Kiplinger’s has offered an article on the 11 Most Overlooked Tax Deductions and at least two are real estate related:

  1.  Moving expenses to take first job.  Here’s an interesting dichotomy: Job-hunting expenses incurred while looking for your first job are not deductible, but moving expenses to get to that first job are. And you get this write-off even if you don’t itemize. If you moved more than 50 miles, you can deduct the cost of getting yourself and your household goods to the new area, including 19 cents per mile for moves during the first six months of 2008, and 27 cents per mile for job move-related driving after June 30 (plus parking fees and tolls) for driving your own vehicle.
  2. Refinancing points. When you buy a house, you get to deduct points paid to obtain your mortgage in one fell swoop. When you refinance a mortgage, however, you have to deduct the points over the life of the loan. That means you can deduct 1/30th of the points a year if it’s a 30-year mortgage—that’s $33 a year for each $1,000 of points you paid. Doesn’t seem like much, but why throw it away? Also, in the year you pay off the loan—because you sell the house or refinance again—you get to deduct all the points not yet deducted, unless you refinance with the same lender. In that case, you add the points paid on the latest deal to the leftovers from the previous refinancing and deduct the expense, which is pro-rated over the life of the new loan.

Read the article for more tax tips.

The Menkiti Group offers further tax tips for homeowners.

For most people, the biggest tax break from owning a home comes from deducting mortgage interest. Your lender will send you Form 1098 in January listing the mortgage interest you paid during the previous year. That is the amount you deduct on Schedule A tax form. Be sure the 1098 includes any interest you paid from the date you closed on the home to the end of that month. This amount is listed on your settlement sheet for the home purchase. You can deduct it even if the lender does not include it on the Form 1098.

Be on the lookout for your W-2 forms coming by the end of this month.  Taking your receipts and other tax information to an accountant, tax attorney, or tax preparer may be well worth the cost and effort.

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Challenging A Tax Assessment

It’s great to deduct the interest of your mortgage payment at tax time!  At other times, it’s pretty hard to swallow what the tax assessor says your home is worth.  I’ve listened to buyers complain that their tax assessment is too high, “What do you mean I have to pay city AND county taxes?” and “This is ridiculous! My home isn’t worth that!”  I’ve also fielded calls from buyers who were irritated because the assessment of their home was too low, “Has my home lost that much value this year?!”  Actually, I’ve had more calls from people upset at lower tax rates because they automatically believe their homes are worth only what the assessor says.  This, of course, is not true… a home is worth what the market dictates it’s worth.

(And I prefer a lower assessment so my taxes won’t be as high.)

Meanwhile, if you’re really unhappy at the government’s interpretation of what your home is worth, you should read this story found in Trulia’s Carnival of Real Estate.  Real estate writer Cliff Jacobson told how to challenge the tax assessor and his story was picked up by the mainstream media.  A reporter contacted him and the resulting story made the front page of the Rochester Democrat and Chronicle.

Cliff did some research on behalf of his fiance’s mother and wrote a helpful piece about how to lower your tax assessment.  His tips include,

One way to have your assessment lowered is to challenge the description and features of your home. Make sure the square footage, lot size, number of bedrooms and bathrooms and garage size are correct. Might the assessor be counting unfinished space in the basement or garage; or improvements you don’t have? Document with pictures when and where possible.

The other tips offered are sensible and smart, so read the whole piece.  He wrote a second piece about the lessons learned from challenging assessments in his own community.  His third piece was about the how his challenge succeeded.  He highlights that in preparation his strategy was:  1) Information 2) Comparables and 3) Condition.

In my own corner of the world, our local county commissioner called me several days ago regarding a discussion on our community blog about tax assessments.  There was confusion that he wanted to clarify so I offered the opportunity for him to submit a guest column about the subject.  He did.

All this talk of tax assessments reminds me of the “How [fill in the blank] views your home” joke.  A sample:

How You View Your Home

yourhouse.jpg

How Your Lender Views Your Home

lenderhouse.jpg

There’s more and it’s funny!

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