Tax Advantages of Homeownership – Popular Tax Incentives

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Have you recently bought a home?  Do you know that you have now entered a world of tax advantages exclusive to only homeowners?  The feeling is great that Uncle Sam rewards those that choose to purchase their homestead and of course as your Realtor, I want to make sure you know all there is to know about what you stand to gain from this exclusive status of homeowner.

Though the best person to offer advice and consultation would be a CPA or a certified tax consultant, the information below will help you to plan and be prepared for what lies ahead during tax season.

Purchase of a New Home

If you have purchased a new home in 2011 – then this year when you file your taxes you can deduct three things; any mortgage points that were paid as part of the purchase, prepaid mortgage interest and pro-rated property taxes.

There are a few conditions on the mortgage point deduction, like the fact that the points must be for the primary residence of the homeowners.  Also, the amount of money spent by the homeowner toward the purchase of the home at closing needs to be greater than the amount that is charged in points.  Since lenders sometimes inflate the loan amount to accommodate the points, it is important to be aware before filing taxes since in that scenario the points amount would not be tax deductible.

Depending on what day you close on your home, you will most likely be charged pre-paid interest on your loan and that amount will be deductible. For example, a home that closes on the tenth day of the month will have twenty days of prepaid interest, all deductible when you file your taxes the following year.

In the same way, the amount of property taxes that make up for the time you will be taking possession of the home might have been covered in the previous property tax payment made by the seller.  If that happened the amount owed by you would have been charged as part of your closing costs – a deductible amount.

Refinancing An Existing Home

Mortgage debt is broken down into two types; home acquisition debt and home equity debt.  As the name suggests, home acquisition debt is the amount you paid to purchase your home.  During a refinance, however, your new loan amount that is utilized to pay off your previous mortgage is considered home acquisition debt with anything above and beyond that amount being qualified as home equity debt.  Interest accrued in both types of mortgage debt is tax deductible, however home equity debt has a tax deduction ceiling of $100,000.

Yearly Tax Breaks for Homeowners

Each year, until you are paying interest on your home mortgage, you will be eligible for a tax deduction on up to $1,000,000 of mortgage debt.  This can be debt you have taken on for the purpose of acquiring a new primary residence, to build or renovate an existing property as well as a second home you may have.

Home Equity Debt Interest Tax Advantage

If you use the debt acquired through your home equity to improve upon your primary residence (no limit) or for any other reason (limit of $100,000) it is possible that the interest on that loan could be tax deductible.  This is an ideal scenario for homeowners with some equity to borrow against that equity and pay off high-interest credit cards or vehicle loans – debt that carries interest that cannot be deducted.

Tax Exclusions on Forgiven Debt or Alternatives to Foreclosure

If you are able to secure a mortgage workout for your primary residence or if you are a homeowner who has received debt forgiveness, you may qualify for federal income tax exclusion on that forgiveness.

Energy Conversation Tax Incentives

With a growing emphasis on green living and energy conservation, there are a number of tax incentives offered to homeowners in exchange for demonstrated energy saving measures taken in the home.
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In terms of buying and selling homes, there is always the opportunity to donate items from your home to charitable organizations – all tax deductible of course.  There are myriad tax advantages of homeownership and after additional research, chances are you may find more nuances that could suit your own situation and maybe even provide a greater benefit than the ones listed here.

Five Priceless Holiday Gifts You Can’t Afford Not to Give This Season

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Well folks, we did it!  We made it through 2011 and we are on our way to bigger, brighter and better things to come, come 2012!  It has been my sincerest of pleasures to have been with you along the way – whether to provide a helping hand in your real estate endeavors, assist you with mortgage and finance planning or just plain be there when you needed me.

To all my friends, colleagues, clients and family – here’s to another wonderful year!

Since the relationships in our lives are among the priceless aspects of our lives – I thought I’d leave you with a list of five priceless holiday gifts this season.  Be generous.  Liberally give of these gifts.  For as they say, what you give will likely come back to you in volumes!

From my family to yours – Wishing You a Very, Merry Christmas and Happy Holiday Season!

The Gift Of Knowledge

There is nothing more precious than providing someone you love or care about with the lifelong ability to get up, stand up and be something.  Education allows us to do anything we can set our minds to do and it is the consistent reasons for many of the world’s great people!

The Gift Of Memories

The hustle and bustle of our lives as they get busier by the minute has slowed down the amount of time we actually spend on the relationships that matter.  Giving the gift of memories is a lasting pleasure that will always be with us and future generations.  Take time to read a book with a child or elderly parent.  Walk through the park, hand in hand, and talk about how things are going.  Share an ice cream cone in the middle of winter.  Anything goes.

The Gift Of Love

We take so much for granted and love is definitely one of those things.  To share and express and declare our love, whether through a simple hug or a monumental form of expression – the gift received of knowing you are loved is absolutely one of the most priceless and timeless gifts ever to be given.

The Gift Of Faith

Sharing your belief in someone, their ability to be who they are and offering the strength of knowing that they are surrounding by support and encouragement is second to none.  Who doesn’t need to know that they are valued and trusted and revered?  And who won’t remember that gift for a lifetime?

The Gift Of Warmth

Unemployment lines, colder winter season, harsher economic times – all are good reasons to be concerned with the warmth of anyone who doesn’t have the peace and comfort of a roof over their head.  How about consider donating to homeless shelters?  Volunteering to assist those who are having a very difficult time keeping warm this season is one of the most selfless and wonderful acts of giving there is.  And you will walk away feeling warm yourself too!

Managing Holiday Finances So Things Stay Within Reason During the Season

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Why is it that ordinary, everyday stuff that we see 11 months of the year and don’t need to have – all of a sudden become THE hot ticket item during the holidays and we now HAVE to have it?  Have you noticed how during the holidays that electronics, new gadgets, fancy toys and big-ticket items just seem to beckon us and persuade us that life can’t go on without them?  You know the items.  Big screen TVs, the latest video game boxes, and smart phones that are smarter than most computers and more.  One of this year’s hot ones is the iPad2 (is it because Steve Jobs passed on and now everyone wants a piece of him? Nope.)  It’s the holidays.

Unfortunately, for many Americans, this impulse can and is very dangerous because they simply cannot afford these items.  Yet they continue to rack up their credit cards, put things on layaway, or spend irresponsibly without considering where the bills will come from the following season.

Here are some tips to help you avoid all that and stay in the black this holiday season.  It’s not as hard as it sounds and can be achieved with some basic acts of self-control.

How To Prevent Going Into the Red In the First Place

The single easiest way to prevent heavy indebtedness at the end of year, is to manage your finances throughout the rest of the year.  Chipping away at a larger expense is far easier if done in installments and before heading toward the next holidays – you need to make sure that the previous holidays (and anything else outstanding) is paid off or begun to be paid off first.

Pay yourself first each month.  After listing all expenses that are unavoidable, including savings, examine if you are left with any room to breathe.  Begin a holiday shopping fund and build it throughout the year, but do not take on any more debt and do not deviate from your plan.

If You Are In the Red, What to Do Next

Don’t overdo the gifts this year.  Bake cookies, wrap them up nicely and write a beautiful hand-written letter telling the person receiving the gift what you appreciate about him or her.  Donate your time to a charity in someone’s honor.  Or give to the poor in their name.  Make a coupon book for each month of the coming year – in which you offer your services and special treats such as “good for one massage” or “get out of cooking dinner today”.

Ways To Get Through the Holidays and Stay in the Red

The big “B” word usually does it for responsible citizens that don’t go underwater during the holiday season.  Budgeting your holiday expenses is a key step in making sure that you don’t overspend.  However, unless you set a specific budget and then stick to it, you may as well forget it.

Remember that the ultimate meaning of your gift(s) is not the material itself but rather the thoughtfulness.  Grandma was right – it’s the thought that counts, not the number of dollar bills you shelled out at the register.

Using creativity to make gifts that involve your own personal touch is far more endearing than any store-bought item.  A handmade item that your loved one will keep close to heart for years will likely cost less money but also shows that your time spent on the gift means you were generous of your own time in the process, something more and more rare these days.

Center the holidays on family, traditions and activities that bring the two together.  Your loved ones should be able to remember the gift you gave them and if you bring out a homemade board game that has personalized touches involving the whole family – then they will surely remember that for years.
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Many Americans tell themselves they won’t overspend past a certain amount, but then when it comes down to the big Black Friday sale or the sales leading up to Christmas or Hanukkah, they break down.  With just a bit of careful planning and a lot of self-control – you can and will get through the holidays without swimming in a sea of debt by the time the New Year rolls around.