Don't Miss These Home Tax Deductions

Don’t Miss These Home Tax Deductions

To view the orignal article and repost the same click the image in the article.

From mortgage interest to property tax deductions, here are the tax tips you need to get a jump on your returns.  Owning a home can pay off at tax time.  Take advantage of these home ownership-related tax deductions and strategies to lower your tax bill:

Mortgage Interest Deduction 

One of the neatest deductions itemizing homeowners can take advantage of is the mortgage interest deduction, which you claim on Schedule A. To get the mortgage interest deduction, your mortgage must be secured by your home — and your home can be a house, trailer, or boat, as long as you can sleep in it, cook in it, and it has a toilet.
Interest you pay on a mortgage of up to $1 million — or $500,000 if you’re married filing separately — is deductible when you use the loan to buy, build, or improve your home.  If you take on another mortgage (including a second mortgage, home equity loan, or home equity line of credit) to improve your home or to buy or build a second home, that counts towards the $1 million limit.  If you use loans secured by your home for other things — like sending your kid to college — you can still deduct the interest on loans up $100,000 ($50,000 for married filing separately) because your home secures the loan.
Prepaid Interest Deduction

Prepaid interest (or points) you paid when you took out your mortgage is generally 100% deductible in the year you paid it along with other mortgage interest.

If you refinance your mortgage and use that money for home improvements, any points you pay are also deductible in the same year.  But if you refinance to get a better rate or shorten the length of your mortgage, or to use the money for something other than home improvements, such as college tuition, you’ll need to deduct the points over the life of your mortgage. Say you refi into a 10-year mortgage and pay $3,000 in points. You can deduct $300 per year for 10 years.

So what happens if you refi again down the road?

Example: Three years after your first refi, you refinance again. Using the $3,000 in points scenario above, you’ll have deducted $900 ($300 x 3 years) so far. That leaves $2,400, which you can deduct in full the year you complete your second refi. If you paid points for the new loan, the process starts again; you can deduct the points over the life of the loan. 

Home mortgage interest and points are reported on Schedule A of IRS Form 1040.  Your lender will send you a Form 1098 that lists the points you paid. If not, you should be able to find the amount listed on the HUD-1 settlement sheet you got when you closed the purchase of your home or your refinance closing.
Property Tax Deduction

You can deduct on Schedule A the real estate property taxes you pay. If you have a mortgage with an escrow account, the amount of real estate property taxes you paid shows up on your annual escrow statement.  If you bought a house this year, check your HUD-1 settlement statement to see if you paid any property taxes when you closed the purchase of your house. Those taxes are deductible on Schedule A, too.

PMI and FHA Mortgage Insurance Premiums

You can deduct the cost of private mortgage insurance (PMI) as mortgage interest on Schedule A if you itemize your return. The change only applies to loans taken out in 2007 or later.  What’s PMI? If you have a mortgage but didn’t put down a fairly good-sized down payment (usually 20%), the lender requires the mortgage be insured. The premium on that insurance can be deducted, so long as your income is less than $100,000 (or $50,000 for married filing separately).

Besides private mortgage insurance, there’s government insurance from FHA, VA, and the Rural Housing Service. Some of those premiums are paid at closing, and deducting them is complicated. A tax adviser or tax software program can help you calculate this deduction.  Also, the rules vary between the agencies.

Vacation Home Tax Deductions

The rules on tax deductions for vacation homes are complicated. Do yourself a favor and keep good records about how and when you use your vacation home.

• If you’re the only one using your vacation home (you don’t rent it out for more than 14 days a year), you deduct mortgage interest and real estate taxes on Schedule A.

• Rent your vacation home out for more than 14 days and use it yourself fewer than 15 days (or 10% of total rental days, whichever is greater), and it’s treated like a rental property. Your expenses are deducted on Schedule E.

• Rent your home for part of the year and use it yourself for more than the greater of 14 days or 10% of the days you rent it and you have to keep track of income, expenses, and allocate them based on how often you used and how often you rented the house.

Homebuyer Tax Credit

This isn’t a deduction, but it’s important to keep track of if you claimed it in 2008.

There were federal first-time homebuyer tax credits in 2008, 2009, and 2010.  If you claimed the homebuyer tax credit for a purchase made after April 8, 2008, and before Jan. 1, 2009, you must repay 1/15th of the credit over 15 years, with no interest.

The IRS has a tool you can use to help figure out what you owe each year until it’s paid off. Or if the home stops being your main home, you may need to add the remaining unpaid credit amount to your income tax on your next tax return.
Energy-Efficiency Upgrades

The Nonbusiness Energy Tax Credit lets you claim a credit for installing energy-efficient home systems. Tax credits are especially valuable because they let you offset what you owe the IRS dollar for dollar, in this case, for up to 10% of the amount you spent on certain upgrades. 

The credit carries a lifetime cap of $500 (less for some products), so if you’ve used it in years past, you’ll have to subtract prior tax credits from that $500 limit. Lucky for you, there’s no cap on how much you’ll save on utility bills thanks to your energy-efficiency upgrades.

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; tax laws may vary by jurisdiction.

Bottom Line

If you are ready and willing to buy, contact Liz Sandwick, your Coldwell Banker Burnet Real Estate Professional, to analyze all of the options and opportunities available to you in today’s marketplace. 

Liz Sandwick, Coldwell Banker Burnet REALTOR® helping buyers & sellers in areas like: Apple Valley, Lakeville, Burnsville, Prior Lake, Savage, Farmington, Rosemount & more!

Final 2015 Housing Numbers Now In

Final 2015 Housing Numbers Now In

Many have questioned the stability of certain sectors of the U.S. Economy, one section in particular is the housing market. Today we would like to share how the experts feel about how we ended 2015 and where they think we are headed in 2016.

How did we do in 2015?

The National Association of Realtors

“Overall, a resilient U.S. economy and very solid job growth in recent years made 2015 a great rebound year for the housing market.

Existing-home sales were at the highest pace (5.26 million) since 2006 (6.48 million) and the Pending Home Sales Index came in at an average of 108.8, the highest annual reading since…you guessed it: 2006 (111.7).”

The National Association of Home Builders

“With the December report on housing starts and permits, preliminary totals for 2015 are now available. Total housing starts at 1.11 million were up 10.8% in 2015 compared to 2014. Single-family starts were up 10.4% to 715,300. All four census regions also experienced increases in single-family starts for 2015.”

What can we expect to start 2016?

Jonathan Smoke, Realtor.com Chief Economist

“All indicators point to this spring being the busiest since 2006…Demand for for-sale housing will grow and will continue to be dominated by older millennials, aged 25 to 34. This demographic has the potential to claim a third of home sales in 2016 and represent 2 million home purchases.”

_________________________________________________________________________________Final 2015 Housing Numbers Now In

Many have questioned the stability of certain sectors of the U.S. Economy, one section in particular is the housing market. Today we would like to share how the experts feel about how we ended 2015 and where they think we are headed in 2016.

How did we do in 2015?

The National Association of Realtors

“Overall, a resilient U.S. economy and very solid job growth in recent years made 2015 a great rebound year for the housing market.

Existing-home sales were at the highest pace (5.26 million) since 2006 (6.48 million) and the Pending Home Sales Index came in at an average of 108.8, the highest annual reading since…you guessed it: 2006 (111.7).”

The National Association of Home Builders

“With the December report on housing starts and permits, preliminary totals for 2015 are now available. Total housing starts at 1.11 million were up 10.8% in 2015 compared to 2014. Single-family starts were up 10.4% to 715,300. All four census regions also experienced increases in single-family starts for 2015.”

What can we expect to start 2016?

Jonathan Smoke, Realtor.com Chief Economist

“All indicators point to this spring being the busiest since 2006…Demand for for-sale housing will grow and will continue to be dominated by older millennials, aged 25 to 34. This demographic has the potential to claim a third of home sales in 2016 and represent 2 million home purchases.”

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Don’t Miss These Home Tax Deductions

To view the orignal article and repost the same click the image in the article.

From mortgage interest to property tax deductions, here are the tax tips you need to get a jump on your returns.  Owning a home can pay off at tax time.  Take advantage of these home ownership-related tax deductions and strategies to lower your tax bill:

Mortgage Interest Deduction 

One of the neatest deductions itemizing homeowners can take advantage of is the mortgage interest deduction, which you claim on Schedule A. To get the mortgage interest deduction, your mortgage must be secured by your home — and your home can be a house, trailer, or boat, as long as you can sleep in it, cook in it, and it has a toilet.
Interest you pay on a mortgage of up to $1 million — or $500,000 if you’re married filing separately — is deductible when you use the loan to buy, build, or improve your home.  If you take on another mortgage (including a second mortgage, home equity loan, or home equity line of credit) to improve your home or to buy or build a second home, that counts towards the $1 million limit.  If you use loans secured by your home for other things — like sending your kid to college — you can still deduct the interest on loans up $100,000 ($50,000 for married filing separately) because your home secures the loan.
Prepaid Interest Deduction

Prepaid interest (or points) you paid when you took out your mortgage is generally 100% deductible in the year you paid it along with other mortgage interest.

If you refinance your mortgage and use that money for home improvements, any points you pay are also deductible in the same year.  But if you refinance to get a better rate or shorten the length of your mortgage, or to use the money for something other than home improvements, such as college tuition, you’ll need to deduct the points over the life of your mortgage. Say you refi into a 10-year mortgage and pay $3,000 in points. You can deduct $300 per year for 10 years.

So what happens if you refi again down the road?

Example: Three years after your first refi, you refinance again. Using the $3,000 in points scenario above, you’ll have deducted $900 ($300 x 3 years) so far. That leaves $2,400, which you can deduct in full the year you complete your second refi. If you paid points for the new loan, the process starts again; you can deduct the points over the life of the loan. 

Home mortgage interest and points are reported on Schedule A of IRS Form 1040.  Your lender will send you a Form 1098 that lists the points you paid. If not, you should be able to find the amount listed on the HUD-1 settlement sheet you got when you closed the purchase of your home or your refinance closing.
Property Tax Deduction

You can deduct on Schedule A the real estate property taxes you pay. If you have a mortgage with an escrow account, the amount of real estate property taxes you paid shows up on your annual escrow statement.  If you bought a house this year, check your HUD-1 settlement statement to see if you paid any property taxes when you closed the purchase of your house. Those taxes are deductible on Schedule A, too.

PMI and FHA Mortgage Insurance Premiums

You can deduct the cost of private mortgage insurance (PMI) as mortgage interest on Schedule A if you itemize your return. The change only applies to loans taken out in 2007 or later.  What’s PMI? If you have a mortgage but didn’t put down a fairly good-sized down payment (usually 20%), the lender requires the mortgage be insured. The premium on that insurance can be deducted, so long as your income is less than $100,000 (or $50,000 for married filing separately).

Besides private mortgage insurance, there’s government insurance from FHA, VA, and the Rural Housing Service. Some of those premiums are paid at closing, and deducting them is complicated. A tax adviser or tax software program can help you calculate this deduction.  Also, the rules vary between the agencies.

Vacation Home Tax Deductions

The rules on tax deductions for vacation homes are complicated. Do yourself a favor and keep good records about how and when you use your vacation home.

• If you’re the only one using your vacation home (you don’t rent it out for more than 14 days a year), you deduct mortgage interest and real estate taxes on Schedule A.

• Rent your vacation home out for more than 14 days and use it yourself fewer than 15 days (or 10% of total rental days, whichever is greater), and it’s treated like a rental property. Your expenses are deducted on Schedule E.

• Rent your home for part of the year and use it yourself for more than the greater of 14 days or 10% of the days you rent it and you have to keep track of income, expenses, and allocate them based on how often you used and how often you rented the house.

Homebuyer Tax Credit

This isn’t a deduction, but it’s important to keep track of if you claimed it in 2008.

There were federal first-time homebuyer tax credits in 2008, 2009, and 2010.  If you claimed the homebuyer tax credit for a purchase made after April 8, 2008, and before Jan. 1, 2009, you must repay 1/15th of the credit over 15 years, with no interest.

The IRS has a tool you can use to help figure out what you owe each year until it’s paid off. Or if the home stops being your main home, you may need to add the remaining unpaid credit amount to your income tax on your next tax return.
Energy-Efficiency Upgrades

The Nonbusiness Energy Tax Credit lets you claim a credit for installing energy-efficient home systems. Tax credits are especially valuable because they let you offset what you owe the IRS dollar for dollar, in this case, for up to 10% of the amount you spent on certain upgrades. 

The credit carries a lifetime cap of $500 (less for some products), so if you’ve used it in years past, you’ll have to subtract prior tax credits from that $500 limit. Lucky for you, there’s no cap on how much you’ll save on utility bills thanks to your energy-efficiency upgrades.

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; tax laws may vary by jurisdiction.

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As always, if you are looking for insightful and interesting social media content for your outlets, visit the Coldwell Banker Blog for terrific articles which are incredibly simple to re-post.  To be directed to the Coldwell Banker Blog site to review the week’s postings click on the image above. 

A few of this week’s notable postings are below for you.  To view and re-post these articles on your social media outlets, simply click on the article’s corresponding image to be re-directed to its respective web page.

Home Sales Cruise in January

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Bottom Line

If you are ready and willing to buy or sell, contact Liz Sandwick, your Coldwell Banker Burnet Real Estate Professional, to analyze all of the options and opportunities available to you in today’s marketplace. 

Liz Sandwick, Coldwell Banker Burnet REALTOR® helping buyers & sellers in areas like: Apple Valley, Lakeville, Burnsville, Prior Lake, Savage, Farmington, Rosemount & more!

6 Reasons to Reduce Your Home Price

Six Reasons to Reduce Your Home Price

While you'd like to get the best price for your home, consider our six reasons to reduce your home price.

Home not selling? That could happen for a number of reasons you can't control, like a unique home layout or having one of the few homes in the neighborhood without a desired attribute.  There is one factor however you can control: your home price.

These six signs may be telling you it’s time to lower your price.

1. You’re drawing few lookers.

You get the most interest in your home right after you put it on the market because buyers want to catch a great new home before anybody else takes it. If your real estate agent reports there have been fewer buyers calling about and asking to tour your home than there have been for other homes in your area, that may be a sign buyers think it’s overpriced and are waiting for the price to fall before viewing it.

2. You’re drawing lots of lookers but have no offers.

If you’ve had 30 sets of potential buyers come through your home and not a single one has made an offer, something is off. What are other agents telling your agent about your home? An overly high price may be discouraging buyers from making an offer.

3. Your home’s been on the market longer than similar homes.

Ask your real estate agent about the average number of days it takes to sell a home in your market. If the answer is 30 and you’re pushing 45, your price may be affecting buyer interest. When a home sits on the market, buyers can begin to wonder if there’s something wrong with it, which can delay a sale even further. At least consider lowering your asking price.

4. You have a deadline.

If you’ve got to sell soon because of a job transfer or you’ve already purchased another home, it may be necessary to generate buyer interest by dropping your price so your home is a little lower priced than comparable homes in your area. Remember: It’s not how much money you need that determines the sale price of your home, it’s how much money a buyer is willing to spend.

5. You can’t make upgrades.

Maybe you’re plum out of cash and don’t have the funds to put fresh paint on the walls, clean the carpets, and add curb appeal. But the feedback your agent is reporting from buyers is that your home isn’t as well-appointed as similarly priced homes. When your home has been on the market longer than comparable homes in better condition, it’s time to accept that buyers expect to pay less for a home that doesn’t show as well as others.

6. The competition has changed.

If weeks go by with no offers, continue to check out the competition. What have comparable homes sold for and what's still on the market? What new listings have been added since you listed your home for sale? If comparable home sales or new listings show your price is too steep, consider a price reduction.

Contact Liz Sandwick, your Coldwell Banker Burnet Real Estate Professional, to analyze all of the options and opportunities available to you in today’s marketplace. 

Liz Sandwick, Coldwell Banker Burnet REALTOR® helping buyers & sellers in areas like: Apple Valley, Lakeville, Burnsville, Prior Lake, Savage, Farmington, Rosemount & more!

Thinking of Buying A Home? What Are You Waiting For?

Thinking of Buying A Home? What Are You Waiting For?

With spring right around the corner, you may be wondering if you should wait to enter the housing market. Here are four great reasons to consider buying a home today instead of waiting.

1. Prices Will Continue to Rise

CoreLogic’s latest Home Price Index reports that home prices have appreciated by 6.3% over the last 12 months. The same report predicts that prices will continue to increase at a rate of 5.4% over the next year. The Home Price Expectation Survey polls a distinguished panel of over 100 economists, investment strategists, and housing market analysts. Their most recent report projects home values to appreciate by more than 3.2% a year for the next 5 years.

The bottom in home prices has come and gone. Home values will continue to appreciate for years.  Waiting no longer makes sense.

2. Mortgage Interest Rates Are Projected to Increase

Freddie Mac’s Primary Mortgage Market Survey shows that interest rates for a 30-year mortgage have remained below 4%. Most experts predict that they will begin to rise over the next 12 months. The Mortgage Bankers Association, Freddie Mac & the National Association of Realtors are in unison projecting that rates will be up almost three-quarters of a percentage point by this time next year.

An increase in rates will impact YOUR monthly mortgage payment. Your housing expense will be more a year from now if a mortgage is necessary to purchase your next home.

3. Either Way You Are Paying a Mortgage

As a paper from the Joint Center for Housing Studies at Harvard University explains:

“Households must consume housing whether they own or rent. Not even accounting for more favorable tax treatment of owning, homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord plus a rate of return. That’s yet another reason owning often does—as Americans intuit—end up making more financial sense than renting.”

4. It’s Time to Move On with Your Life

The ‘cost’ of a home is determined by two major components: the price of the home and the current mortgage rate. It appears that both are on the rise.

But what if they weren’t? Would you wait?

Look at the actual reason you are buying and decide whether it is worth waiting. Whether you want to have a great place for your children to grow up, you want your family to be safer or you just want to have control over renovations, maybe it is time to buy.

If the right thing for you and your family is to purchase a home this year, buying sooner rather than later could lead to substantial savings.

Bottom Line

If you are ready and willing to buy, contact Liz Sandwick, your Coldwell Banker Burnet Real Estate Professional, to analyze all of the options and opportunities available to you in today’s marketplace. 

Liz Sandwick, Coldwell Banker Burnet REALTOR® helping buyers & sellers in areas like: Apple Valley, Lakeville, Burnsville, Prior Lake, Savage, Farmington, Rosemount & more!

10 Interior Design Trends That Turn Off Home Buyers

10 Interior Design Trends That Turn Off Home Buyers

You want your home to look its best, and maybe you’ve been inspired by the interior design trends you’ve seen in magazines, on TV or on design websites.

But following some of the hottest home remodeling and interior design trends can backfire when it comes time to sell your home.  Buyers want to picture themselves in a home, and highly individualistic touches can get in the way of that.

When you’re ready to sell your home, it’s best to put things in pristine, move-in condition and remove all of the individual touches that made your house a home.

After all, your goal is to get potential buyers to picture themselves in the home—and they won’t be able to do that if your decorating style still dominates.

Check out the caveats that go along with these home interior design trends.

1. Boldly Painted Walls

Decorators often tout black or another bold paint color as the perfect backdrop to metallic accessories or appliances in modern home design.  The reality is that people prefer the exterior and interior walls of a home to be neutral. Even though repainting is cheap and relatively easy to do, it’s still a pain and buyers might not want to bother.

When decorating, your best bet is to stick to an appeasing hue for the walls and use accessories to provide pops of color.

2. Wallpaper

Bold, graphic patterns increasingly are being incorporated into interior design, often in the form of wallpaper.  But wallpaper—even if it’s only on one wall—is an extremely personal choice and time-consuming to remove if it doesn’t appeal to the buyer.  Consider replacing wallpaper with a neutral paint for broader appeal.

3. Lavish Light Fixtures

While potential buyers want rooms that seem airy and bright, beware of installing a showpiece light fixture that is too modern or ornate.  Fixtures should enhance your home—not steal the spotlight.

4. Gleaming Gold

Designers may be mixing silver and gold to give homes star quality, but it might be wise to change out fixtures if they have the wrong metallic sheen.  Gold can give a home an outdated, ’80s feel. Switching out the faucet and door handles with a more appealing finish—such as brushed nickel—is relatively inexpensive and can help make your home appear sleek rather than out of style.

5. Converted Garages

People want a covered parking space so that they have a safe place for their car—especially in areas where street parking is at a premium. Additionally, people often use their garage as storage space.  If you convert your garage into a space tailored your specific needs, such as a music practice room, it may not suit your potential buyers.

6. Converted Bedrooms

Like with the garage, people want rooms built for their original purpose.  If you’ve converted an unused bedroom to an office, walk-in closet, or a game room, make sure you can easily convert it back to a bedroom when you’re ready to sell.

7. Carpets

While designers love to play with the texture of shag carpeting as it feels soft underfoot, the majority of home buyers prefer hardwood floors.  People assume carpets trap dirt, germs and odors, and they don’t want to go through the hassle of steam cleaning their home before they can move in. Potential buyers also don’t want to spend time removing carpet to expose hardwood floors.  If someone really loves carpet, it’s much easier for them to add it themselves—after the purchase.

8. Too-Lush Landscaping

The “outdoor living room” is all the rage, and you may be tempted to build out your backyard into a lavish wilderness of flowers.  But potential buyers may be hesitant to buy a home with an overly landscaped property requiring a lot of maintenance.  Focus on creating or maintaining a nice and neat outdoor space that people can enjoy without too much fuss.

9. Pools and Hot Tubs

A pool may seem like a luxurious feature, but it can be a big turnoff for buyers.  Pools are perceived to be expensive to maintain and potential safety hazards, especially for families with children. Above-ground pools are eyesores and can leave a dead spot in the backyard.

These sentiments extend to hot tubs, too. Many people see hot tubs as breeding grounds for bacteria, and they are not a feature easily removed from the deck or back yard.

10. Fancy (or Not) Pet Products

Sales of pet products are expected to increase nearly $3 billion from last year, and there’s an increasing market for luxury pet items.  But even animal lovers don’t want to see another family’s pet paraphernalia in a potential home. Even if your home is immaculate, the presence of pet-related items will give the impression that it’s dirty. 

Be sure to remove all traces of your pet—including toys, food dishes and photos—before listing your home for sale.

Thinking of Selling? Why Now May Be the Time

Thinking of Selling? Why Now May Be The Time

It is common knowledge that a large number of homes sell during the spring-buying season. For that reason, many homeowners hold off on putting their home on the market until then. The question is whether or not that will be a good strategy this year.

The other listings that do come out in the spring will represent increased competition to any seller. Do a greater number of homes actually come to the market in the spring, as compared to the rest of the year? The National Association of Realtors (NAR) recently revealed which months most people listed their home in for 2015.

Here is a graphic showing the results:

The three months in the second quarter of the year (represented in red) are consistently the most popular months for sellers to list their homes on the market. Last year, the number of homes available for sale in January was 1,860,000.

That number spiked to 2,280,000 by May!

What does this mean to you?

With the national job situation improving, and mortgage interest rates projected to rise later in the year, buyers are not waiting until the spring. They are out looking for a home right now. If you are looking to sell this year, waiting until the spring to list your home means you will have the greatest competition for a buyer.

Bottom Line

It may make sense to beat the rush of housing inventory that will enter the market in the spring and list your home today.

Contact Liz Sandwick your Coldwell Banker Burnet Real Estate Professional to analyze all of the options and opportunities available to you in today’s marketplace.