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Your Tax Refund Is The Key To Homeownership!

by Amy McLeod Group


According to data released by the Internal Revenue Service (IRS), Americans can expect an estimated average refund of $3,143 this year when filing their taxes. This is down slightly from the average refund of $3,436 last year.

Tax refunds are often thought of as ‘extra money’ that can be used toward larger goals. For anyone looking to buy a home in 2019, this can be a great jump start toward a down payment!

The map below shows the average tax refund Americans received last year by state.

Many first-time buyers believe that a 20% down payment is required to qualify for a mortgage. Programs from the Federal Housing Authority, Freddie Mac, and Fannie Mae all allow for down payments as low as 3%. Veterans Affairs Loans allow many veterans to purchase a home with 0% down.

If you started your down payment savings with your tax refund check this year, how close would you be to a 3% down payment?

The map below shows what percentage of a 3% down payment is covered by the average tax refund by taking into account the median price of homes sold by state.

The darker the blue, the closer your tax refund gets you to homeownership! For those in Oklahoma looking to purchase their first homes, their tax refund could potentially get them 85% closer to that dream!

Bottom Line

Saving for a down payment can seem like a daunting task. But the more you know about what’s required, the more prepared you can be to make the best decision for you and your family! This tax season, your refund could be your key to homeownership!

Contact The McLeod Group Network to find your new home! 971.208.5093 or [email protected] 

By: KCM Crew


As you've no doubt heard, the U.S. tax code got a major overhaul with the new Tax Cuts and Jobs Act. So what does that mean for the return you're filing right about now? It means you may not be able to take some deductions from the old tax code that saved you major bucks in the past. Ouch!

But it's not quite as bad as you might think. Many tax breaks haven't disappeared completely; rather they've just morphed a bit, redefining who qualifies and for how much. To clue you in to these new rules, here's a rundown of five major tax breaks that have changed this filing year, and who still qualifies for them.

 
 
 

1. Home office tax deduction

You may have heard a rumor that the home office tax deduction went the way of the dodo. Yes, the deduction is gone for W-2 employees of companies who work in a home office on the occasional Friday.

"For non-self-employed people, the home office deduction is going away entirely," says Eric Bronnenkant, certified public accountant, certified financial planner, and Betterment's head of tax.

The loophole: If you're self-employed full time, this deduction lives on. Here's more info on how to take a home office tax deduction.

2. Unlimited property tax

One of the biggest changes for homeowners in the new tax bill is the cap on deducting property taxes.

"Before, regardless of the amount, all property taxes were tax-deductible," explains Bronnenkant. Yet this season, "the maximum you can deduct is $10,000, and that includes state and local income tax, property tax, and sales tax."

So if you pay more than $10,000 a year between your state and local income taxes, property tax, and sales tax, anything exceeding that amount is no longer deductible. This is something to keep in mind as homeowners consider tax benefits of their current or future home.

The loophole: "It is worth noting that this limit applies to a taxpayer’s primary, and in some cases secondary, residence," says Bill Abel, tax manager of Sensiba San Filippo in Boulder, CO. "But it may not apply to rental real estate property."

Why? The $10,000 overall tax limit is applied on Schedule A as an itemized deduction, which would have no bearing on the tax deduction for a rental property on Schedule E. So if you're a landlord, your deduction could edge past that $10,000 limit; make sure to max it out!

3. Moving expenses

If you moved in 2017, lucky you: You are the last to take advantage of the ability to deduct your moving expenses.

The loophole: Active members of the armed forces who moved (or move) after 2017 can still take this deduction, according to Patrick Leddy, a tax partner at Farmand, Farmand, and Farmand.

4. Mortgage interest

One major change for homeowners who purchased a house after Dec. 15, 2017, is that they will be allowed to deduct the interest on no more than $750,000 of acquisition debt—that's a loan used to buy, build, or improve a main or secondary home, says Abel. This is in contrast to the $1,000,000 limit on acquisition debt, which still applies to existing loans incurred on or before Dec. 15, 2017.

The loophole: Homeowners who refinance their debt that existed on or before Dec. 15, 2017, are generally allowed to maintain their $1,000,000 limit from the original mortgage.

5. Interest on a home equity loan

A home equity loan is money you borrow using your home as collateral. This "second mortgage" (because it's in addition to your original home loan) often takes the form of a home equity loan or home equity line of credit. Traditionally, the interest on these loans could be deducted up to $100,000 for married joint filers and $50,000 for individuals. And you could use that money to pay for anything—college tuition, a wedding, you name it.

But now, home equity loan interest is deductible only if it's used for one purpose: to "buy, build, or improve" your home, according to the IRS. So if you're dying to update your kitchen or add a half-bath, you'll get a tax break from Uncle Sam. But if you want to tap your home equity to go to grad school, well, that's on you.

More bad news: Unlike the mortgage interest deduction—where loans taken before Dec. 15, 2018, could be grandfathered into the old laws—home equity loans have no such exemption. People with existing HELOC debt take the hit just like homeowners applying for one now.

The loophole: To reclaim this deduction, you could refinance your second mortgage and your first into a new mortgage that lumps together both debts. This essentially turns your HELOC into a regular mortgage, which means that you can deduct that interest. Just remember that refinancing can be costly, and that this new loan will be subject to the new, smaller limits on deducting mortgage interest—$750,000.

Worried about losing all of these deductions? Don't freak out!

Though the new tax plan is drastically changing how most people will file their taxes, it doesn't necessarily mean that you will end up owing more. Deductions may be dropping, but so are the tax rates for most income groups. And the standard deduction grew to $24,000 for a married couple filing jointly. So, it may all balance out.

Contact The McLeod Group Network at 971.208.5093 or [email protected] for all your Real Estate needs! 

By: Realtor.com, Margaret Heidenry 

 

According to data released by the Internal Revenue Service (IRS), Americans can expect an estimated average refund of $2,840 this year when filing their taxes. This is down slightly from the average refund of $2,895, last year.

Tax refunds are often thought of as ‘extra money’ that can be used toward larger goals; for anyone looking to buy a home in 2018, this can be a great jump start toward a down payment!

The map below shows the average tax refund Americans received last year by state. (The refunds received for the 2017 tax year should continue to reflect these numbers as the new tax code will go into effect for 2018 tax filings.)

Many first-time buyers believe that a 20% down payment is required to qualify for a mortgage. Programs from the Federal Housing Authority, Freddie Mac, and Fannie Mae all allow for down payments as low as 3%, with Veterans Affairs Loans allowing many veterans to purchase a home with 0% down.

If you started your down payment savings with your tax refund check this year, how close would you be to a 3% down payment?

The map below shows what percentage of a 3% down payment is covered by the average tax refund by taking into account the median price of homes sold by state.

The darker the blue, the closer your tax refund gets you to homeownership! For those in Alabama looking to purchase their first homes, their tax refund could potentially get them 69% closer to that dream!

Bottom Line

Saving for a down payment can seem like a daunting task. But the more you know about what’s required, the more prepared you can be to make the best decision for you and your family! This tax season, your refund could be your key to homeownership!

Contact The McLeod Group Network to start your home search! 971.208.5093 or [email protected].

By: KCM Crew

What Impact Will the New Tax Code Have on Home Values?

by Amy McLeod Group

Every month, CoreLogic releases its Home Price Insights Report. In that report, they forecast where they believe residential real estate prices will be in twelve months.

Below is a map, broken down by state, reflecting how home values are forecasted to change by the end of 2018 using data from the most recent report.

As we can see, CoreLogic projects an increase in home values in 49 of 50 states, and Washington, DC (there was insufficient data for HI). Nationwide, they see home prices increasing by 4.2%.

How might the new tax code impact these numbers?

Recently, the National Association of Realtors (NAR) conducted their own analysis to determine the impact the new tax code may have on home values. NAR’s analysis:

“…estimated how home prices will change in the upcoming year for each state, considering the impact of the new tax law and the momentum of jobs and housing inventory.”

Here is a map based on NAR’s analysis:

Bottom Line

According to NAR, the new tax code will have an impact on home values across the country. However, the effect will be much less significant than what some originally thought.

Contact The McLeod Group Network for all your real estate needs! 971.208.5093 or [email protected].

By: KCM Crew

Housing and the Senate Tax Plan: What Now?

by Amy McLeod Group

Members of the real estate industry are responding to the passage of the Senate tax plan, which chiefly includes a 20 percent corporate tax rate—down from 35 percent—and reduced rates for families and individuals over the next seven years. The development follows the House passage of its own plan in November.

Both bills challenge homeownership, industry members say. The bills extend the capital gains exclusion eligibility requirement that home sellers reside in the home from two of the last five years to five of the last eight. (The House plan, however, includes an income phaseout provision.) Both also raise the standard deduction, which has the potential to render the mortgage interest deduction (MID) useless.

“If eligibility rules for excluding the sale of a home from capital gains taxes are changed from requiring living in your home for two of the past five years to five of the past eight, selling the median U.S. home after four years of ownership would mean $2,363 in taxes, from $0 currently,” according to Skylar Olsen, senior economist at Zillow. An analysis recently released by Zillow reveals homeowners in high-priced markets would bear the brunt of costs from the lengthened tenure.

The MID itself is addressed in both plans, as well. The House plan caps the MID for new loans at $500,000 (and only for primary residences), whereas the Senate plan retains the current cap of $1 million.

Additionally, both bills cap local and state property tax deductions at $10,000.

According to the National Association of REALTORS® (NAR), the industry’s largest organization, homeownership incentives are jeopardized in the Senate plan.

“The tax incentives to own a home are baked into the overall value of homes in every state and territory across the country,” said NAR President Elizabeth Mendenhall in a statement. “When those incentives are nullified in the way this bill provides, our estimates show that home values stand to fall by an average of more than 10 percent, and even greater in high-cost areas. REALTORS® support tax cuts when done in a fiscally responsible way; while there are some winners in this legislation, millions of middle-class homeowners would see very limited benefits, and many will even see a tax increase. In exchange for that, they’ll also see much or all of their home equity evaporate as $1.5 trillion is added to the national debt and piled onto the backs of their children and grandchildren. That’s a poor foot to put forward, but this isn’t the end of the road. REALTORS® will continue to advocate for homeownership and hope members of the House and Senate will listen to the concerns of America’s 75 million homeowners as the tax reform discussion continues.”

“It’s time for homeowners to pay attention,” concurred Danielle Hale, chief economist of realtor.com®, in a statement. “While the House and Senate still need to agree to a single version of the tax plan, they are already aligned on provisions that take away homeownership incentives for the majority of owners, which we expect to reduce home sales and prices in markets across the country.”

Housing in general—but notably in several states—will suffer, Hale said.

“Homeowners in California, New York, New Jersey, and Maryland will be hit hard by the combination of changes in the proposal, which will lead to lower prices and sales in these housing markets,” said Hale. “High housing costs in California made it the state with the third-highest average mortgage interest deduction, behind Hawaii and the District of Columbia. Meanwhile, the elimination of the state income tax deduction for individuals will affect taxpayers in Maryland, the District of Columbia, Connecticut, New Jersey, Massachusetts, and Virginia, each of which saw 35 percent or more of tax payers take advantage of this provision. Lower-priced housing markets will also eventually be impacted, as these provisions are not indexed by inflation; thus, the few remaining tax benefits for homeownership will be eroded over time.”

The California Association of REALTORS® (C.A.R.) expressed its own concerns about the Senate plan in a statement.

“We are disappointed that the Senate voted to pass a tax hike bill on California homeowners,” said C.A.R. President Steve White. “If the goal of this bill is to help middle-class Americans keep more of their hard-earned money, this proposal fails miserably. We thank California Senators Dianne Feinstein [D-Calif.] and Kamala Harris [D-Calif.] for opposing this legislation that attacks homeownership by significantly reducing incentives for people to buy homes. California already has a severe housing affordability crisis, and this bill will make it that much harder for Californians looking to attain the American Dream.”

The National Association of Home Builders (NAHB) countered that the Senate plan “represents a step in the right direction” in an NAHB Now update. The NAHB opposes the House plan in part because it applies the MID only to primary residences, and imposes an income phaseout on the capital gains exclusion.

The Mortgage Bankers Association (MBA), meanwhile, applauded the Senate for considering mortgage servicing rights (MSRs) in its deliberations.

“I want to personally thank Majority Leader [Mitch] McConnell, [Senate Finance Committee] Chairman [Orrin] Hatch [R-Utah], Senator [Mike] Rounds [R-S.D.], [Senate Banking Committee] Chairman [Mike] Crapo [R-Idaho], and Senator [David] Perdue [R-Ga.] for working with us and commend them for their efforts on this important issue,” said MBA CEO and President David H. Stevens in a statement. “Because of the Rounds Amendment, this package will protect the ability of most Americans to obtain safe, decent shelter and affordable home mortgage credit without disruption. Had this language not been included, the change in tax accounting for MSRs would have had a devastating impact on the flow of capital that supports a robust and competitive real estate finance market, both single- and commercial/multifamily. We thank the Senate for its leadership on this issue.”

According to the National Low Income Housing Coalition (NLIHC), the affordability crisis will escalate under the Senate plan. Diane Yentel, CEO and president of the NLIHC, issued the following statement:

“The Senate tax plan not only fails to make any new investments to address the nation’s growing scarcity of affordable rental homes for America’s poorest families, but it would lead to deep funding cuts to existing affordable housing programs, threatening to worsen the severity of an affordable housing crisis that impacts every state and community.”

The differences between the House and Senate plans remain to be settled. Lawmakers are aiming to present a reconciled plan to President Trump by Christmas.

By and photo credit: http://rismedia.com/2017/12/04/housing-senate-tax-plan-what-now/

Tax Day is approaching quickly and now is the time to take advantage of every deduction possible. As a homeowner, there may be more deductions than you thought!  Here are some homeowner tax breaks you might not have known about:

  • Mortgage interest deduction - If you’ve taken out a loan to buy a house, you can deduct the interest you pay on a mortgage, with a balance of up to $1 million. To access this deduction, you must itemize rather than take the standard deduction. The savings here can add up in a big way. For example, if you’re in the 25% tax bracket and deduct $10,000 of mortgage interest, you can save $2,500.
  • Private mortgage insurance - Qualified homeowners can deduct payments for private mortgage insurance, or PMI, for a primary home. Sometimes you can take the deduction for a second property as well, if it isn’t a rental unit. However, this only applies if you got your loan in 2007 or later. Also, this deduction only applies if your adjusted gross income is no more than $109,000 if married filing jointly or $54,500 if married filing separately.
  • Property taxes - You can include state and local property taxes as itemized deductions. An interesting note: The amount of the deduction depends on when you pay the tax, not when the tax is due. So, paying property taxes earlier could have a positive impact on your return.
  • Capital gains on a home sale - The dreaded capital gains tax can be avoided when the gain from selling your personal residence is less than $250,000 if you are a single taxpayer or $500,000 if you are a joint filer. To qualify, you must have owned and used the home as a primary residence for at least two years out of the five years leading up to the sale.
  • Medical improvements - If you’ve made improvements to your home to help meet medical needs, such as installing a ramp or a lift, you could deduct the expenses—but only the amount by which the cost of the improvements exceed the increase in your home’s value. (In other words, you can’t deduct the entire cost of the equipment or improvements.) These types of deductions can be tricky, but are worth looking in to. Guidelines for Medical Improvement Tax Deductions
  • Home office - If you have a dedicated space in your home for work and it’s not used for anything else, you could deduct it as a home office expense.
  • Renting your home out on occasion - If you rented out your home for, say, a major sports event like the Super Bowl or the World Series, or a cultural event such as Mardi Gras, the income on the rental could be totally tax free—as long as it was for only 14 days or fewer throughout the course of a year.
  • Discount Points - Discount points which are paid to lower the interest rate on a loan, can be deducted in full for the year in which they were paid. If you’re buying a home and the seller pays the points as an incentive to get you to buy the house, you can deduct those points as well.
  • Energy-efficiency tax credit - You can take advantage of an energy efficiency tax credit of 10% of the amount paid (up to $500) for any “green” improvements, such as storm doors, energy efficient windows and AC and heating systems.

For more tax tips, check out IRS Publication 530 for a list of what homeowners can (and cannot) deduct.

Displaying blog entries 1-6 of 6

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971-208-5093
Fax: 971-599-5229

**Disclaimer: Amy McLeod, and her team, do not initiate, process, or service mortgages.  And provide this information only as a service.  You should confirm information here with your Licensed Mortgage Lender.