10 AWESOME Tax Breaks When You Own a Home

By: Ryan Fitzgerald

This article is for informational purposes only. If you’re seeking tax advice please consult with a tax advisor.

When you decided to own a home as opposed to renting one, you were getting started on the road to creating an investment. To assist homeowners such as yourself with the strain caused by paying high mortgages, the US government has created numerous tax deductions specifically designed to lower the payments you’ll have to make during tax season. Now that you qualify for them, your next step should be to learn as much about them as possible.

We’re sure that up until recently, you’ve probably only been claiming standard deductions on your taxes. Now that you’re a homeowner, you’ll learn to itemize the extra tax write-offs you’ll be claiming. To add some even better news to the mix, all of the donations you make to various charities, along with the taxes you pay to your state, will provide you with even more tax deduction opportunities. Below, we’ve listed 10 tax breaks that you should know about now that you own a home. They are:

  • Mortgage interest
  • Points
  • Property Taxes
  • Mortgage Insurance
  • Tax & Penalty-Free IRA
  • Home improvements
  • Energy credits
  • Home Sale Profits
  • Home equity loans
  • Adjusting your withholding

Mortgage Interest

One of the most common tax breaks available to homeowners is the deduction of interest paid on a mortgage. Huge tax breaks come in the form of deducting mortgage interest for most people. Interest incurred on up to $1 million of debt obtained by acquiring and/or improving a home can be deducted.

Around January, you should receive a form 1098 from your lender that lists all interest paid on your mortgage the prior year. This information will be used on Schedule A as your deduction amount. It’s important to make sure that any and all interest that was paid since the day you purchased the home until the last day of that exact month is listed on a form 1098. The amount should be printed on the settlement sheet. In the event you find that it’s not listed, it can still be deducted. The US government will pay 25% of the interest on your behalf if you’re a part of the 25% tax bracket.

Points

In order to obtain your mortgage when buying a house, lenders may require you to pay what is known as “points”. These “points” are typically a certain percent of the total loan. In order for the points to be considered deductible as interest, there are a few requirements that need to be met:

  1. It’s a secured loan by your home.
  2. The points you are required to pay our common for your area.
  3. The cash amount that was paid as a down payment was equal to the points.

Here’s an example:

For a $300,000 mortgage, you paid a total of 2 points (2%). If you contributed a minimum of $6000 (2% of $300,000 = $6000) towards the deal, the 2 points can be deducted.

*The points can be deducted in your taxes even in the event that the seller actually pays for them as a stipulation in the deal. Remember, this amount should be printed on your 1098 form.

Property Taxes

Local property taxes can be deducted each year also. If you use an escrow account to pay your taxes, this amount may be listed on a form sent to you by your lender. You might find the amount listed in your checkbook registry or in your personal records if you pay your municipality directly. It’s possible that you might’ve reimbursed the seller for prepaid real estate taxes the year you purchased your home from them.

In this case, the amount you reimbursed them for will also be shown on your settlement sheet. You want to make sure to add this amount to get a deduction for real estate taxes. Keep in mind, escrow account payments cannot be deducted as real estate taxes. The deposit you made/make will be applied to future tax payments. Only the amount paid during the actual year can be deducted as real estate tax.

Mortgage Insurance

If a buyer makes a down payment for under 20% of the homes total cost, they usually incur premiums on their mortgage insurance. This is an extra charge used to protect the lender in the event the buyer can’t repay their loan. Buyers can now deduct these mortgage insurance premiums on all mortgages that were issued during or after 2007.

On tax returns listed as “Married – Filing Separate”, the deduction decreases more and more as the adjusted gross income rises above $50,000. The same thing happens on all other tax returns where the adjusted gross income rises above $100,000.

*This doesn’t apply to anyone who’s paying for mortgage insurance prior to 2007.

Tax & Penalty-Free IRA Payouts

There is a penalty of 10% for individuals who make “pre-age” withdrawals from their IRAs. To encourage home buying, this penalty does not apply to first-time homeowners who make withdrawals from their IRAs to use as down payments. However, the penalty is still imposed on individuals who make withdrawals from their 401(k) plans.

You’re allowed to withdraw up to $10,000 from your IRA in order to purchase or build your first home for you and/or any of your loved ones at any age completely penalty free. The only downside is, the $10,000 limit is for your entire lifetime. It is not on an annual basis. Each spouse and a married couple can take advantage of the $10,000 limit for a total of $20,000 together. The only stipulation is that within 120 days after its withdrawal, the money must be used to buy or start construction on your first house.

Here’s a great tip that you don’t want to overlook:

To qualify as a “first-time buyer”, it doesn’t have to be your actual first time buying a home. As long as you haven’t owned a home within the span of 2 years, when you do purchase one, you are considered a first-time buyer all over again. Now even though that may sound great, it does still have its drawbacks. You should only use IRA money as an almost last resort because it’ll still be taxed in your tax bracket. What this means is that federal and state taxes could claim up to 40% or more of that $10,000 you needed for a down payment. That’s not good at all.

This makes a Roth IRA a better option when saving to purchase a first home. Any and all contributions made to a can be withdrawn not only penalty-free but tax-free as well anytime you like. The money can be used for any reason you deem necessary. After 5 years of an open Roth IRA account, up to $10,000 of additional earnings can be withdrawn as well penalty and tax-free for a home purchase.

Home Improvements

It’s a good idea to make sure you keep all records along with receipts for any and every improvement made to the home. No matter how minor or major they are, they will come in handy later.

These expenses aren’t deductible at the current moment but will be included in the purchasing price when tax season comes around to determine the value of your home. Even though almost all profits made from home sales are currently tax-free, the IRS can still potentially request part of your profits once the home is sold. Keeping track of your calls basis will help reduce any possible tax bills.

Great Energy Credits

If you make energy-saving home improvements, you may qualify for what is known as “energy tax credit”. The special tax credits can be worth up to $500. Says they actually reduce your tax bill dollar for dollar, these tax credits tend to be more valuable than a typical tax deduction.

Things such as energy-efficient skylights, central air conditioners, furnaces, exterior doors and windows, water heaters, boilers, and even insulation systems can allow you to qualify for energy tax credits up to 10% of their costs.

More expensive and efficient energy equipment such as solar powered generators can qualify you for even better energy tax credits worth up to 30% of their costs. Good news is there is no dollar limit on these credits.

Tax-Free Profit on Sale of Home

The current tax law provides homeowners with another benefit of actually owning a home. In the event that certain requirements are met, a huge amount of profit can potentially be rendered tax-free. For example:

  • Up to $250,000 can be considered tax-free for a person who is single and resided in the house for at least 2 of the 5 previous years before its sale.
  • Up to $500,000 can be considered tax-free profit for individuals who are married and found a joint return. If the home was owned by one or both of the spouses, considered as a primary residence, and lived in for at least 2 of the 5 previous years prior to its sale by both spouses they will qualify for the tax-free profit.

For the most part, profit isn’t usually taxed. In the event, you take a loss on the sale, you can’t write the loss off as a deduction.

This tax exclusion can be used multiple times. As long as you meet all of the requirements and haven’t used the exclusion in the last 2 years on a different property, you’re good to go. Profits exceeding $250,000/$500,000 is reported as a capital gain on Schedule D form.

There are exceptions to the rule where even if you don’t reside in the house for 2 out of the 5 years prior to its sale, you can still qualify for the tax-free profit. If unforeseen circumstances such as having triplets or quadruplets, health conditions, employment situations, divorce, etc. cause you to sell your home early, you may qualify for what’s known as a partial exclusion.

In simple terms, a partial exclusion means that as opposed to you getting the full $250,000/$500,000 exclude her from taxes, only a part of it will be considered tax-free. If you meet one of the exceptions and have resided in the house for at least one of the 5 previous years prior to its sale, 50% of the profit will be tax-free. Partial exclusion for tax-free profit would be $125,000 for the qualifying single individual and $250,000 for the qualifying married couple.

Home Equity Loans

After building up enough equity in your home, you can use it as collateral for borrowing additional money to use as you see fit. You can deduct the interest charged on a home equity debt as mortgage interest up to $100,000 regardless of how you plan to use the money.

A lot of Real Estate Investors will use this strategy as a way to build their portfolio. They use the equity in their own home to purchase another income producing property.

Adjusting Your Withholding At Work

You can collect all of the savings immediately by making adjustments to your federal income tax withholdings at your place of employment. This is highly recommended for individuals who will become itemizers for the 1st time due to the size of their mortgage interest created by their home. The proper form (W–4) can be obtained from your employer and/or by visiting www.irs.gov.

This article is for informational purposes only. It should not be considered tax advice. If you’re seeking tax advice please consult with a tax advisor.

Fall/Winter Garden Week 18

Tomato and Sage Photo Week 18

I harvested the Sweet Peas and Yellow French Beans. Then tilled the soiled to prep it for a spring garden.

Walla Walla Onions Week 18

Parsnips Week 18

Purple Carrots & Samurai Carrots Week 18

Jack-O-Lantern Pumpkin Week 11

Jack-O-Lantern Pumpkin Week 11. Little Pumpkins are growing!

Tip of the Week:

Earthworms are great for gardens! They digest and leave behind beneficial remains for your garden. Earthworms also tunnel through the soil opening the soil for water and root growth.

Organizing a Catchall Closet

Follow these simple steps for using storage containers to organize your catchall closet.

By: Aimee Lane

Most of us stash too much in our hall closet for lack of a better storage solution. Purchasing clear storage containers and spending a few hours are all it takes to transform a cluttered closet into an organized, multi-functional space.

Step One
. Unload everything to get a good idea of usable space, then draw a diagram of the shelf dimensions so you know what size storage bins work with the space.
Step Two. Go shopping for storage bins. Large bins are necessary, but small bins often allow for better sorting. Use smaller bins to sort gift bags into specific categories, such as Christmas, birthdays, girls and boys. Detailed organization cuts search time.

Step Three.
Purchase bins that:
  • are the same brand so they stack easily.
  • are clear so you can easily see what’s inside.
  • come in a variety of sizes.
Step Four. Storage bins are often a great motivator for purging. Remember your goal is to have a manageable space. Be willing to let go of items that you haven’t used over the last year and donate items that could benefit others.
Step Five. Place like items into the same bins.

10 Steps to a Decluttered Closet

Learn how to make your closet work for you — and your clothes.

By Sarah Welch and Alicia Rockmore

Step 1: Assess Your Big Obstacles

Are your shoes overtaking the space? Try a hanging-shoe rack or over-the-door organizer. Do your clothes overcrowd? Thinner hangers create space so you can find things easier. Feeling rushed each morning?  Dividing shirts, dresses, jeans, etc. bring a sense of order and saves time. Solving your biggest problem will motivate you to create the closet of your dreams.

Step 2: Make it a Family Effort

Getting your hubby and kids involved in organizing can make a difference in your family’s day-to-day life. Everyone should be in charge of his or her own clothes, accessories, and toys. This will cut your cleaning time in half and ensure nothing important is thrown away by mistake.

Step 3: Take An Hour

Scheduling just 60 minutes a week can really make a dent in your overstuffed, cluttered closet. Can’t spare that much? Try two half-hour sessions. If you’re constantly being interrupted by “Hey Mom!” — ask your spouse to take the kids out for the afternoon. Remember to return the favor when it’s his turn to hit the closets

Step 4: Start from Scratch

Take everything (yes, everything) out of your closet. If you don’t remove it all, chances are the same unworn clothes will be moved around the closet. Now it’s time to sort. Throw out old and damaged clothing. Donate what you don’t need or don’t wear.

Step 5: Out with the Odd

Remove items that have no business in your closet. Bank statements, insurance information, or tax documents don’t belong next to your shoes, scarves, and sweaters. Create a Life.doc to organize and store all of your important documents in one accessible place. File the remaining papers in an office cabinet or milk crate.

Step 6: Organize in Sections

Designate a place for everything in your closet. Shoes in one place, sweaters in another, and so on. This will help you keep order and save you time each morning. Make smart use of the space. Installing shelves will double your storage and help sweaters and t-shirts keep their shape better

Photo By: DK – House Works, 2010 Dorling Kindersley Limited

Step 7: Apply the 80/20 Rule

You may not want to admit it, but the majority of clothes you have probably go unworn. It’s said that the average American only wears 10 to 20 percent of their clothes. To cut down on the fluff, remove items you haven’t worn in a year. Drop off the excess at Goodwill or arrange a clotheswap with friends.

Step 8: Put One In; Take One Out

For each new item you buy to put in your closet, donate one item (or pitch it if it’s past its prime). This will keep you from returning to your pack-rat ways.

Step 9: Keep It Going

Dedicate 15 minutes a week to straightening your closet after the “big clean”. Spending this small amount of time will ensure you never have to go through a major de-clutter again.

Step 10: Reward Yourself

Recognize and celebrate what you’ve done. Treat yourself to some new hangers or buy that silk blouse you’ve been eyeing. Now, you actually have room for it!

Fall/Winter Garden Week 17

Tomato and Sage photo week 17

Sweet Peas and Yellow French Beans Week 17 – picked most of the veggies only a few that weren’t ripe remain.

Walla walla Onion Week 17

Parsnips Week 17

Purple Carrots and Samurai Carrots Week 17

Inside Jack-O-Lantern Pumpkin Week 10

Pano of Raised Fall/Winter Garden Week 17

Tip of the Week:

Spring Garden Planting Shedule

By: Mel Bartholomew

Keeping Up Home Maintenance

Maintaining a regular home repair schedule will prevent big repair issues and bills.

Photo by: Creatas                         Article: HGTV.com

 

 

Without regular home maintenance, small problems can swell into expensive repairs and leave a home looking prematurely worn. Routine care ensures the beauty and durability of a home and protects the homeowner’s investment for years after the home is built.

A maintenance checklist outlines the systems and components of the home that should be checked on an annual, semi-annual, monthly or weekly basis.

Annual

Check for separated and deteriorated caulk around the exterior of your home, such as between the siding and foundation, and around vents, outlets, pipes and faucets. If you don’t check the caulking and reapply it on a consistent basis, moisture can work its way behind wood trim or siding and cause mildew or rotting.

Have your carpeting cleaned professionally at least once a year to remove deep-down dirt and stubborn stains.

Semi-Annual

Inspect the gutters and downspouts on your home for clogs at the start of spring and during the fall. Make sure the downspouts direct water away from a home’s walls and foundation. Downspouts that pour water toward a home can cause water damage to the siding, the foundation and the basement.

Hire a professional to flush the air conditioning unit primary drain line. When algae or debris blocks this line, water will back up into the drain pan. This pan is very shallow and can overflow, potentially causing water damage to your home.

Monthly

Replace or clean the air conditioner filter monthly for maximum efficiency. Clogged filters can cause the heating and cooling unit to malfunction.

Clean the blades and exit areas of the garbage disposal by depositing several ice cubes into the disposal and running the unit to chop them up.

Weekly

Make sure to vacuum, sweep or dust mop floors once a week or more if needed.

Clean faucets according to the manufacturer’s recommendations, since various types of finishes require different cleaning and maintenance methods. Don’t use industrial, abrasive or tile cleaners to clean faucets. Don’t use any pads or sponges that are unsafe for polished metallic surfaces. Most pads or sponges contain microscopic mineral particles that can scratch a faucet’s finish. Prevent water spotting and mineral buildup by wiping faucets dry after each use.

10 Home Maintenance Tips for Spring

10 Home Maintenance Tips for Spring                By: Dwight Barnett, certified home inspector

After a long, dark winter, spring’s bright sun and warm winds are, well, a breath of fresh air. The only downside? All that sunshine spotlights your leaf-filled gutters, cracked sidewalks and the dead plants in last year’s flower beds. Dwight Barnett, a certified master inspector with the American Society of Home Inspectors, shared this checklist to help you target the areas that need maintenance so you can get your chores done quickly, leaving you time to go outside and play in the sunshine.

  • Check for loose or leaky gutters. Improper drainage can lead to water in the basement or crawl space. Make sure downspouts drain away from the foundation and are clear and free of debris.
  • Low areas in the yard or next to the foundation should be filled with compacted soil. Spring rains can cause yard flooding, which can lead to foundation flooding and damage. Also, when water pools in these low areas in summer, it creates a breeding ground for insects.
  • Use a screwdriver to probe the wood trim around windows, doors, railings and decks. Make repairs now before the spring rains do more damage to the exposed wood.
  • From the ground, examine roof shingles to see if any were lost or damaged during winter. If your home has an older roof covering, you may want to start a budget for replacement. The summer sun can really damage roof shingles. Shingles that are cracked, buckled or loose or are missing granules need to be replaced. Flashing around plumbing vents, skylights and chimneys need to be checked and repaired by a qualified roofer.
  • Examine the exterior of the chimney for signs of damage. Have the flue cleaned and inspected by a certified chimney sweep.
  • Inspect concrete slabs for signs of cracks or movement. All exterior slabs except pool decks should drain away from the home’s foundation. Fill cracks with a concrete crack filler or silicone caulk. When weather permits, power-wash and then seal the concrete.
  • Remove firewood stored near the home. Firewood should be stored at least 18 inches off the ground at least 2 feet from the structure.
  • Check outside hose faucets for freeze damage. Turn the water on and place your thumb or finger over the opening. If you can stop the flow of water, it is likely the pipe inside the home is damaged and will need to be replaced. While you’re at it, check the garden hose for dry rot.
  • Have a qualified heating and cooling contractor clean and service the outside unit of the air conditioning system. Clean coils operate more efficiently, and an annual service call will keep the system working at peak performance levels. Change interior filters on a regular basis.
  • Check your gas- and battery-powered lawn equipment to make sure it is ready for summer use. Clean equipment and sharp cutting blades will make yardwork easier.

Your new home: you put a ring on it, now you need to maintain it

Your new home: you put a ring on it, now you need to maintain it, written by: Erika Bentley Realtor, Las Vegas

Your new home: you put a ring on it, now you need to maintain it

Don’t you find it odd that so many people take better care of their cars than they do their homes? While maintaining your automobile is important, your home is far more valuable and an investment equally worth protecting.

Sadly, most problems in a home didn’t happen overnight but started out small and, neglected over time, reached the point where the price to repair them became quite costly. These are homes that suffer from what real estate experts call “deferred maintenance,” and they sell for far less than well-maintained homes.

Not only does deferred maintenance drag down the value of a home (by up to 10 percent, according to the folks at House Logic), but it may cause health and safety issues as well. So, even if you aren’t planning on selling the home for years, it’s important to get on a maintenance schedule and stick to it.

It’s mainly about water

“Water causes more damage to homes than any other single deferred maintenance issue,” according to Handyman Hub in Denver. As evidence, they explain how repairing a leaky wax ring around a toilet, if caught early, costs less than $100.

Allow the repair to wait, however, and the cost of repair can balloon to thousands, and may include pulling up the toilet and possibly the vanity, the floorcovering and then replacing the subfloor, all the while crossing your fingers that the joists aren’t water damaged as well.

Frank Lesh, former president of the American Society of Home Inspectors tells House Logic how cracked caulk around a window, which costs less than $4 to repair, can quckly blossom into a $5,000 repair bill if moisture seeps into the sheathing causing rot and mold in your new home.

The moral of these stories? If anything on or in the home can be damaged by water, inspect it as often as possible in your new home.

Make a schedule

Most home maintenance experts agree that regularly inspecting the home is the key to finding small problems before they swell into huge ones. Once your inspections become habit you won’t need to worry about remembering to do them. Until then, make a schedule and stick to it. The U.S. Department of Housing and Urban Development (HUD) offers an excellent schedule on its website.

The most important home systems to maintain are the ones that cost the most to replace or repair. For example, roofing contractors suggest that you perform a routine roof inspection twice a year: at the beginning of spring and again in early fall. This may seem like a lot of time spent on just one aspect of the home, but when you consider that a new roof may cost you up to $15,000 it’s worth it to take the time to inspect it.

While you’re up there, clean out the gutters and downspout to make sure that water is directed away from your your new home. This multi-tasking on home maintenance chores will save you time as well as money.

Then there are tasks that need to be performed more often at your new home , such as changing the HVAC filter and dropping a few ice cubes into the garbage disposer to clean the blades (monthly).

Annual projects your new home, include checking sealants and caulking (important to prevent water damage) and checking the water heater for leaks. Again, HUD’s home maintenance schedule is a good resource.

While some repairs required to keep the home maintained require the services of a professional, the DIY enthusiast will be pleased to know that lots of them are easy and inexpensive DIY projects for your new home.

Fall/Winter Garden Week 16

Tomato and Sage photo week 16

Sweet Pea and Yellow French Beans Week 16

Walla Walla Onions Week 16.                             I’ve been cutting the tips off and using them in meals for green onions.

 

Parsnips Week 16

Purple Carrots and Samurai Carrots Week 16

Jack-O-Lantern Pumpkin Week 9

Tom Thomb Lettuce Picked Week 16

Tip of the Week: Taco-n-Chips Meal

Poblano chile from my garden. Mild not spicy.

Poblano chile hopped into pieces

Simple Taco-n- Chips meal. Brown lean ground beef with , garlic, poblano chiles, & onion. Add Chili powder, cumin, and Mexican oregano to taste (I used about 1 tbsp chili powder, 1/2 tbsp cumin, and large pinch oregano crushed with my fingers). Add 1/8 C. stock and 1/2 C. favorite salsa(I like Mango and peach from Costco). Serve over Corn chips with cheese, sour cream, re-fried beans, & lettuce.