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Housing Tax Deductions in 2013

by Allyson Hoffman

With political drama over the "Fiscal Cliff" over for now, home owners should know that several key tax provisions have been left in place. Mortgage interest deductions and mortgage debt forgiveness provisions remain in effect. In addition, you can continue to deduct the amount you pay for private mortgage insurance and take the energy efficiency tax deduction. These could have a big impact on any decision you make to buy or sell this year. Let's take a look at some specifics.

 

  • The mortgage interest tax deduction has long been a signficant reason for people to buy instead of rent. Although there had been some talk about the mortgage interest tax deduction, it was never seriously in trouble.
  • Homeowners in trouble and considering a short-sale will still be able to tax advantage of the won't have to pay taxes on the difference between the principal they owe and the amount the lender accepts. That makes short-sales much more attractive to owners.
  • The Washington deal also reinstated a deduction that lapsed a year ago for people who pay for personal mortgage insurance, which is often required for borrowers who make less than a 20% down payment. The result of the tax credit will save some borrowers hundreds of dollars.
  • The non-business energy property tax credit offers up to $500 off your taxes if you make energy-efficient improvements. Retroactive to January 1st, 2012, it means you can use it on projects you do this year or did last year. There are a variety of restrictions and caveats, which you can read about in this article.

 

Taken all together, Real Estate experts expect the provisions will help the growing housing market continue to improve in 2013. That's good news if you're in the market. Call me at 847-310-5300 and we can work together to get you the best deal possible in the coming year.

This blog is maintained by Michael of Kim Hughes & Company.

Tax Deductions For Homeowners

by Allyson Hoffman

Tax time is here, but homeowners have an advantage with many tax breaks. Make sure you’re not missing out on important home-related tax deductions. Everyone has a different situation and you may actually qualify for other deductions you were not aware of, so always check with your tax advisor to find out which deductions apply to you. Below are some of the common deductions.

Deducting Real Estate Taxes. Real estate taxes are deductible in the year paid. They are generally reported on Form 1098, Mortgage Interest Statement, the annual statement from the financial institution holding your mortgage, or on your county real estate tax assessment statement. You should also deduct any prorated taxes collected from you at closing. These amounts are not always included on Form 1098, but may be itemized on your real estate closing statement.

Deducting Loan Points Paid on a Purchase or Refinance
The points you pay on a loan for a
home purchase are tax-deductible for the year you made the purchase. You can deduct the points you paid as well as those a seller paid on your behalf if you meet the following criteria:

  •   The loan is secured by your primary residence
  •   The loan was used to buy, improve or build the home
  •   Paying points is a common practice in your geographic area
  •   The points are calculated as a percentage of the loan principal

First-time home buyer credit.  A $7,500 tax credit is available to eligible taxpayers must have bought, buy, or enter into a binding contract to buy, a principal residence on or before April 30, 2010 and close on the home by June 30, 2010. For qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 return. and before July 1, 2009.  You are considered a first-time home buyer as long as you did not own a home during the three years leading up to the purchase of your new home.

Residential Energy Efficient Property Credit.  For 2009 and 2010, homeowners can take a tax credit up to $1,500 for energy efficient home improvements. If you purchase an energy-efficient product or renewable energy system for your home, you may be eligible for a federal tax credit. Click here for more information

Health-Related Improvements - Any home improvements for medical purposes can be deducted entirely from your taxes as long as the improvements do not add to the overall value of the home and have been made for a chronically ill or disabled person.

Moving expenses. If a move is connected with taking a new job that is at least 50 miles farther from your old home than your old job was, you can deduct travel and lodging expenses for you and your family and the cost of moving your household goods. 

Image courtesy of http://401kcalculator.org/Flickr.com

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Homebuyers Receive Extended Tax Credit

by Allyson Hoffman

A bill signed into law Friday by President Obama extends the homebuyer tax credit, originally scheduled to expire Nov. 30. This new law will give buyers until April 30, 2010 to sign purchase contracts and another 60 days to close. And it will no longer be just for first-time buyers. Homeowners who have lived in their current home for five of the last eight years can claim $6,500, under the new law, which would only apply to houses purchased after the current tax credit expires Nov. 30. Income limits will be more generous: $125,000 a year for individuals, $225,000 a year for married couple.

Since both first time as well as existing homebuyers can benefit from this credit extension, below are some clarification for the benefits.

First-time home buyers. A  "first-time home buyer" is defined as someone who hasn't owned a home in the three years before the purchase. If your spouse owned a home in that time frame, you're not eligible. So, those eligible can claim a tax credit for 10% of the purchase price, up to a maximum credit of $8,000. The credit is refundable, which means that if you owe less than $8,000 in taxes, you'll receive a refund for the difference. The credit is not available for home purchases that exceed $800,000.

You can claim the credit if you sign a sales contract before May 1, 2010, and close before July 1. Members of the military who serve extended duty outside the USA have until July 1, 2011, to claim the credit, as long as they sign a contract before May 1, 2011.

Existing homeowners. Home buyers who have lived in their current home for five out of the last eight years qualify for a tax credit of up to $6,500. The deadlines are the same as for first-time home buyers.

The income requirements for existing homeowners are also the same as those for first-time home buyers. Likewise, existing homeowners can't claim the credit if they purchase a home for more than $800,000.

Taxpayers can claim the credit on their federal income tax returns. If the credit exceeds their tax bill, the government will issue a payment. Taxpayers who want immediate refunds can amend their tax returns for 2008 to claim the credit.

Image courtesy of http://401kcalculator.org/Flickr.com

 

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Allyson Hoffman
RE/MAX Villager
1245 Waukegan Road
Glenview IL 60025
847-310-5300
Fax: 847-400-0881

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1245 Waukegan Road
Glenview, IL, 60025

(847) 310-5300
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