Homeownership is a privilege and a responsibility. Even after decades of owning a home, you may still need some help to handle some of its challenges by focusing on the three "M"s of homeownership: maintenance, minimizing expenses and managing debt and risk. While many people recognize the benefits of annual wellness, financial, vehicle and equipment maintenance visits, an important checkup that you may not have considered is an annual homeowner advisory or real estate review. Why would you treat the investment in your home with less care than you treat your car or your HVAC system? Consider exploring the following: Do you know the current value of your home? (You can, by obtaining a list of comparable sales in your immediate area, as well as what is currently on the market for sale.) Have you compared your assessed value for tax purposes to the fair market value in order to possibly reduce your property taxes? Even if you've refinanced in the last two years, can you … Continue reading...
Why Keep Track of Home Improvements
Homeowners receive a generous exclusion on the gain of their principal residence up to $250,000 for single taxpayers and $500,000 for married taxpayers filing jointly. Most people probably consider the gain or profit in a home to be the difference between the purchase price and the sales price. IRS allows a taxpayer to lower the sales price by the selling expenses before calculating gain. Normal expenses like real estate commission, title policy, attorney fees, and other sales expenses may be included if they are normal and customary. Another significant adjustment is that capital improvements made during the holding period can be added to the cost basis. Normal maintenance like repairs are not considered improvements. IRS says that if the expenditure materially adds value (features) to the property, or appreciably prolongs the useful life of the property, or adapts a portion of the property to a new use, it can be considered a capital improvement. Examples could include … Continue reading...
Why have a mortgage during retirement?
You don't have to watch TV for long before Tom Selleck, Henry Winkler or Robert Wagner will tell you why seniors should consider a reverse mortgage. However, there are a seniors who are resisting the conventional wisdom of having their home paid for and opting for a mortgage with payments on their home. In some cases, seniors will downsize into a smaller home and have a large amount of equity to pay cash for the new home. In other situations, they may have their home paid for and decide to do a cash-out refinance which will require making payments. The logic behind either of these examples could be motivated by the fact that since mortgage rates are so low currently, the owners can reinvest the money at a higher yield and make money on their equity. This will give them more money for their retirement income. A common question that is asked by owners considering such a strategy is whether they'll be able to qualify for the new mortgage since they may no longer be employed. … Continue reading...
Before Buying A Vacation Home
There's a fine difference between a second home and a vacation home. If you are going to primarily use the home for yourself, then, it is probably a second home. If you're going to use it some during the year and rent it out the rest of the time, it is probably a vacation home. There is another possibility. If you use it for 14 days a year or less, the property could be a rental property which means you may have some benefits that are not available to vacation properties. These may seem insignificant, but the tax laws require that they are handled differently. Try to be realistic about what your expectations are for the property. Are you looking for an investment that will earn rental income and go up in value? Are you trying to find a way to lower the costs of vacations by owning the property? How do you feel about strangers using your property when you're not there? Vacation rentals are short-term which may realize higher rents, but they could also have higher than … Continue reading...