Over 50 Housing and Living Options

Trying to get up to speed on all the new over 50 housing options?

The Fissori Real Estate Team are SRES^® designees. We can offer insight on creative new options, such as intentional communities and co-housing environments, as well as more traditional housing choices, including:

Independent Living: Condos, townhouses and single family homes that are smaller and more maintenance free than large family properties are frequently people's first choice, especially if they're healthy and active.

Active Adult Communities: Active adult communities aim to service the interests of active adults over the age of 55. Housing types often include condos, townhouses and single-family properties, and all are designed with an eye toward delivering a maintenance-free lifestyle for residents. Such communities offer a vast array of on-site activities, including exercise, social clubs, art instruction and lecture series.

If you're looking for hands-on care or anticipate needing such care in the future, the Fissori Real Estate Team can make expert referrals and discuss options, including:

Assisted Living Communities: Residents live in their own apartments, but have the benefit of an on-site staff, meal service in communal dining spaces, and planned activities and outings. Some assisted living communities also offer access to nurses and daily living assistance. Others may offer more extensive medical and personal services.

Adult Family Homes: Such properties are licensed to care for up to six residents in a home setting. Services typically include meals and housing maintenance and attending to residents' safety and care. Facilities may specialize in addressing specific health concerns and provide care and an environment tailored to those conditions.

Alzheimer's and Dementia Care: Facilities specialize in caring for patients with dementia and Alzheimer's disease offer programs that address residents' needs and provide an environment where they can live safely. Housing services typically include personal care, such as bathing and dressing and administering medicine, along with dining and housekeeping. In addition, many buildings incorporate over 50 design features, such as safe wandering paths and color coded areas to help with way-finding. Such designs provide comfort and ease residents' anxiety.

Continuing Care Retirement Living Communities: A Continuing Care Retirement Living Community offer progressive levels of assistance, depending on a person's needs. They include independent and assisted living and nursing care.

Weighing the Options

Choosing the appropriate over 50 living arrangement is challenging not only because it entails an emotional dimension, but also because of the complex issues you need to weigh, such as cost, location, services, amenities, activities, and current and future care needs.

The Fissori Real Estate Team can consult with you to make the best over 50 housing choice for you or your loved one. The can also work with you to anticipate care needs as you age to ensure that today's housing choice will serve you well tomorrow.

For more on over 50 housing options, contact us today!

Daylight Savings Time Is Upon Us!

History of Daylight Savings Time

But, why change the clocks at all? Is it really worth having to readjust the body’s internal clock by an hour twice a year? Who came up with this idea anyway, and why?

Benjamin Franklin is often credited with coming up with the idea of what we now call daylight-saving time. It is true that, as an American delegate in Paris in 1784, Mr. Franklin published an essay titled “An Economical Project,” in which he made the simple argument that natural light is cheaper than artificial light.

What many people either forget or never knew, however, is that Mr. Franklin’s essay was written, like much of his work, rather tongue-in-cheek: It was a joke.

In the essay, Mr. Franklin, knowing that Parisians were notorious for sleeping in, wrote that he was awakened by accident at 6 a.m. one morning, only to “discover” that the sun was actually shining at that hour.

This got his scientific brain working, and he calculated that if he had slept until noon, as was usual in Paris, and then stayed awake six hours later in the evening, he would have “wasted” the free daylight and instead would have had to pay for artificial light.

Mr. Franklin went on to offer some “regulations” that might aid in an attempt to save money. These included a tax on every window built with shutters, rationing candles, limiting coaches on the streets after sunset, and ringing church bells and firing cannons at sunrise to wake everyone up.

“Oblige a man to rise at four in the morning, and it is probable he will go willingly to bed at eight in the evening,” he wrote.

Modern times

It was not until the 20th Century that Mr. Franklin’s idea of making better use of the daylight hours — “saving” daylight — was actually put into practice, however.

The practice of setting the clocks ahead one hour in the spring in order to make better use of the daylight hours was first put into action during World War I as in effort to save fuel.

At 11 p.m. on April 30, 1916, Germany and Austria became the first countries to mandate national time changes. Other European countries immediately followed suit, and even Britain admitted it was a good idea and implemented the practice three weeks later.

The United States, however, did not establish daylight-saving time until 1918. An act of Congress established standard time zones throughout the country and set daylight-saving time on March 19, 1918. Clocks remained an hour “ahead” for two straight years.

The act was repealed in 1919, even though President Woodrow Wilson tried to veto it. Daylight-saving time then became optional for states or municipalities, so for awhile, cities such as New York City, Philadelphia, and Chicago stayed on daylight-saving time, while other parts of New York, Pennsylvania, and Illinois reverted to standard time.

Then came World War II. President Franklin D. Roosevelt instituted year-round daylight-saving time, known then as “war time,” from Feb. 2, 1942, until Sept. 30, 1945.

The law was again repealed when the need to conserve fuel for the war effort no longer existed. From 1945 until 1966, there was no federal law regarding daylight-saving time; it was again the decision of individual states and/or localities, leading to fairly widespread confusion.

For example, in 1961, the Committee for Time Uniformity, a lobbying group organized by the transportation industry, discovered that on a 35-mile stretch of Route 2 between Moundsville, W.Va., and Steubenville, Ohio, motorists had to endure seven time changes.

Uniform Time Act

It was the Interstate Commerce Commission, looking out for the interests of the transportation industry and, to a lesser degree, the broadcasting industry, that ultimately pushed for standardization.

The Uniform Time Act was passed in 1966, creating a national daylight-saving time that would start the last Sunday in April and end the last Sunday in October every year. Any state that wished to exempt itself could do so by passing a state law.

In 1972, the law was revised so those states with more than one time zone could exempt just the parts of the state within one of the zones.

Arizona (with the exception of the Navajo Nation) and Hawaii, and the territories of Puerto Rico, Virgin Islands, Guam, and American Samoa are the only places in the U.S. that do not observe DST, but instead stay on “standard time” all year long.

The federal law was amended once again in 1986 mandating that daylight-saving time start the first Sunday in April, rather than the last.

In 2007, DST was again extended so that it now lasts from the second Sunday in March until the first Sunday in November.

So, most of the nation will try to adjust to “springing ahead” — or, now we can say, “marching ahead” — an hour before going to bed on Saturday night (or scrambling to do it Sunday morning). It will be slightly darker upon awakening in the morning (for a little while, anyway), but it will be lighter later in the day.

It’s not all good news for light-lovers, though: The change does mean an hour less sleep.

All-Cash Offers On The Rise

Multiple Offers Increase as the Market Became More Competitive 
To be competitive in a housing market with tight inventory and a restrictive lending environment, many buyers who wanted to have an edge over other buyers have opted to make an “All Cash” offer for their home purchase.   Since an “All Cash” transaction does not have to go through lengthy lending approval process, the escrow process is faster and is less likely to fall through, making the offer more attractive and more assured.

According to results based on C.A.R.’s 2012 Annual Housing Market Survey, “All Cash” buyers has been on the rise since the mid of 2000’s, increasing from 11 percent in 2005 to 30 percent in 2012.  Almost one-third of all home buyers paid with all cash in 2012, which is more than 3 times what it was in 2001 when “All Cash” buyers were merely 8.8 percent. The share of all cash buyers in 2012 was also nearly double the long-run average of 15.1 percent since 1998.

What You Can and Can't Deduct When You Work From Home

Working from home can offer many advantages including tax deductions. Just take care what you try to write off for your home office on your return.

Passing the IRS litmus test

To meet IRS guidelines, your home office must be your principal place of business, or the place you see clients in the normal course of business. Parts of your home you use to store products or equipment for your business also count. That doesn't mean that all your work has to be done from home. If you're an outside salesperson, you probably spend most of your work time elsewhere. But if you do you billing and return customer calls primarily from your home, your home office should qualify.

You can also qualify for the deduction if your employer requires you to work from home, as long as you don't charge your employer rent. One big catch is that you must maintain the at-home office for your employer’s convenience, not your own, such as to complete reports at night or on weekends. Self-employed workers use IRS Form 8829 to calculate the deduction, which they list on Schedule C.

Measuring your home office

The amount you can deduct for your home office depends on the percentage of your home used for business. Your work space doesn't need to be a separate room—a table in a corner qualifies. But it has to be an area that's used solely for business. The tax break also covers separate structures on your property, like a detached garage you've converted to an office. Unlike an office inside your home, a separate structure doesn't have to be your main place of business to qualify for a deduction. That's because the IRS believes your family is less likely to use a separate structure as a part-time play area or den, says Mark Luscombe, principal analyst for tax and consulting at CCH. 

To calculate what percentage of your house the home office occupies, divide your home office's square footage by the total square footage of your home. If your home is 3,000 square feet and your office is 150 square feet, for example, you'd use 5% to calculate your deductions. Not sure how big your house is? Check the documents you received when you bought your home—there's probably a detailed rendering—or measure the outside of your home and multiply length times width.

What can you deduct?

Once you've figured out what percentage of your home you use for business, you can apply that percentage to different home expenses. These include:

• Mortgage interest

• Real estate taxes

• Utilities (heating, cooling, lights)

• Home repairs and maintenance (painting, cleaning service)

• Home owners insurance premiums

Just take each expense and multiply it by your home office percentage (the 5% mentioned above). That's the amount you can deduct as a business expense. So if you spend $150 a month on electricity, you can deduct $7.50 as a business expense. That adds up to a $90 deduction per tax year.

Save bills or cancelled checks to prove what you spent in case of an IRS audit. Take an hour a week to file them away. Also, only repairs can be expensed; improvements must be depreciated.

Don't forget depreciation

Depreciation is based on the idea that everything—even something like a home—wears out eventually. To figure home office depreciation, start by calculating the tax basis of your home: generally the purchase price plus the cost of improvements, minus the value of the land it sits on. Next, multiply the tax basis by the percentage of your home used for work. This gives you the tax basis for your home office.

Usually, depreciation deductions for a home office are figured over a 39-year period. There are caveats. For a crash course, read IRS Publication 946 or talk to a tax pro.

Keep in mind that depreciation deductions on your home office increase the amount of profit on a home sale that is subject to taxes. There’s an exclusion of $250,000 of profit if you’re a single filer, $500,000 for joint filers. Consult with a qualified tax professional on how depreciation deductions affect your tax liability when you sell.

This article provides general information about tax laws and consequences, but shouldn’t be relied upon as tax or legal advice applicable to particular transactions or circumstances. Consult a tax professional for such advice.

6 Home Deduction Traps and How to Avoid Them

  

Get an “A” on your Schedule A Form: Dodge these tax deduction pitfalls to save time, money, and an IRS investigation.

Trap #1: Line 6 - real estate taxes

Your monthly mortgage payment often includes money for a tax escrow, from which the lender pays your local real estate taxes.

The money you send the bank may be more than what the bank pays for your taxes, says Julian Block, a tax attorney and author of Julian Block’s Home Seller’s Guide to Tax Savings. That will lead you to putting the wrong number on Schedule A.

Example:

• Your monthly payment to the lender: $2,000 for mortgage + $500 escrow for taxes

• Your annual property tax bill: $5,500

Now do the math:

• Your bank received $6,000 for real estate taxes, but only paid $5,500. It may keep the extra $500 to apply to the next tax bill or refund it to you at some point, but meanwhile, you’re making a mistake if you enter $6,000 on Schedule A.

• Instead, take the number from Form 1098—which your bank sends you each year—that shows the actual taxes paid.

Trap #2: Line 6 - tax calculations for recent buyers and sellers

If you bought or sold a home in the middle of 2012, figuring out what to put on line 6 of your Schedule A Form is tricky.

Don’t simply enter the number from your property tax bill on line 6 as you would if you owned the house the whole year. If you bought or sold a house in midyear, you should instead use the property tax amount listed on your HUD-1 closing statement, says Phil Marti, a retired IRS official.

Here’s why: Generally, depending on the local tax cycle, either the seller gives the buyer money to pay the taxes when they come due or, if the seller has already paid taxes, the buyer reimburses the seller at closing. Those taxes are deductible that year, but won’t be reflected on your property tax bill.

Trap #3: Line 10 - properly deducting points

You can deduct points paid on a refinance, but not all at once, says David Sands, a CPA with Buchbinder Tunick & Co LLP. Rather, you deduct them over the life of your loan. So if you paid $1,000 in points for a 10-year refinance, you’re entitled to deduct only $100 per year on your Schedule A Form.

Trap #4: Line 10 - HELOC limits

If you took out a home equity line of credit (HELOC), you can generally deduct the interest on it only up to $100,000 of debt each year, says Matthew Lender, a CPA with EisnerLubin LLP.

For example, if you have a HELOC for $200,000, the bank will send you Form 1098 for interest paid on $200,000. But you can deduct only the interest paid on $100,000. If you just pull the number off Form 1098, you’ll deduct more than you’re entitled to.

Trap #5: line 13 - Private mortgage insurance

You can deduct PMI on your Schedule A Form, as long as you started paying the insurance after Dec. 31, 2006. Congress renewed the PMI deduction for 2012 and 2013 for people making less than $110,000.

Since you're thinking about it, this is also a good time to review your PMI: You might be able to cancel your PMI altogether because you’ve had a change in loan-to-value status.

Trap #6: line 20 - casualty and theft losses

You can deduct part or all of losses caused by theft, vandalism, fire, or similar causes, as well as corrosive drywall, but the process isn’t always obvious or simple:

• Only deduct losses that are greater than 10% of your adjusted gross income (line 38 of Form 1040).

• Fill out Form 4684, which involves complex calculations for the cost basis and fair market value.  This form gives you the number you need for line 20. 

Bottom line on line 20: If you’ve got extensive losses, it’s best to consult a tax pro. “I wouldn’t do it myself, and I’ve been dealing with taxes for 40 years,” says former IRS official Marti.

This article provides general information about tax laws and consequences, but shouldn’t be relied upon as tax or legal advice applicable to particular transactions or circumstances. Consult a tax professional for such advice.

How to Deduct Your Mortgage Interest & Equity Loan Costs

Deducting mortgage interest, as well as interest on home equity loans and HELOCs, can save money on taxes.

Know your loan limits

A good place to check out what you can deduct before you borrow is the chart on page 3 of IRS Publication 936. It'll walk you through the requirements you must meet to deduct all of your home loan interest. It's an hour well spent.

The first hurdle you'll run into is the total amount of your loan or loans. In general, individuals and couples filing jointly can deduct the interest on up to $1 million ($500,000 if you're married and filing separately) in combined home loans, as long as the money was used for acquisition costs, that is the cost to buy, build, or substantially improve a home, explains Scott O'Sullivan, a certified public accountant with Margolin, Winer & Evens in Garden City, N.Y. Any interest paid on loan amounts above the $1 million threshold isn't deductible.

The same $1 million limit applies whether you have one home or two. Buying a vacation home doesn't double your loan limits. And two homes is the max; you can't deduct a mortgage for a third home. If you have a mortgage you took out before Oct. 13, 1987, you have fewer restrictions on claiming a full deduction. The calculations for "grandfathered debt" can get complex, so get help from a tax professional or refer to IRS Publication 936.

Whatever you do, don't forget that you can also deduct the points and fees associated with a first or second mortgage when you initially buy your home, says Jeff Rattiner, a CPA with JR Financial Group in Centennial, Colo. If you refinance the same house, you have to deduct those costs over the entire term of the loan. If you refinance again, you can deduct all the costs from the earlier refi in the year you take out the new loan.

Spend loan proceeds wisely

The other limitation on how much you can borrow and still get your deduction comes into play when you take out a home equity loan or HELOC that you don't use to buy, build, or improve your home. In that case, you can deduct the interest you pay only on the first $100,000 ($50,000 if married filing separately). This loan limit also applies in a so-called cash-out refi, in which you refinance and take out part of the equity you've built up as cash, says John R. Lieberman, a CPA with Perelson Weiner in New York City.

That means if you decide to take out a $115,000 home equity loan to buy that Porsche, you can deduct the interest on the first $100,000 but not on the $15,000 that exceeds the limit. Use the same $115,000 to add a new bedroom, however, and the full amount is allowable under the $1 million cap. Keep in mind, though, that the $115,000 gets added into the pot of whatever else you owe on your other home loans. In many cases, points and loan origination costs for HELOCs are deductible.

Consider this simplified scenario: You borrow $250,000 against your home at 8% interest. That means you'll pay $20,000 in interest the first year. Spend the $250,000 on home improvements, and all of the interest is deductible. Spend $150,000 on improvements and $100,000 on your kids' college tuition, and all the interest is still deductible.

But spend $100,000 on improvements and $150,000 on tuition, and the improvement outlays are deductible, though $50,000 of the tuition expense isn't. That'll cost you $4,000 in interest deductions. Preserve the $4,000 deduction by coming up with the extra money for tuition from another source, perhaps a low-interest student loan or by borrowing from a retirement plan. For someone in a 25% bracket, a $4,000 deduction lowers taxes by $1,000, plus applicable state income taxes.

Beware the dreaded AMT

Even if you've followed all the loan limit rules, you can still get stuck paying tax on mortgage interest. How come? It's all thanks to the Alternative Minimum Tax. Congress created the AMT, which limits or eliminates many deductions, as a way to keep the wealthy from dodging their fair share of taxes.

Calculating the AMT can be complex, but if you make more than $75,000 and have several kids or other deductions, you might well be subject to it. Problem is, if you fall into the AMT group, you may not be able to deduct interest on a home equity loan, even if the loan falls within the $1 million/$100,000 limit. If you're subject to the AMT and borrow money against the value of your home, you'll have to use it to buy, build, or improve your place, or you may not have a chance to deduct the interest, says Rattiner, the Colorado CPA.

This article provides general information about tax laws and consequences, but shouldn’t be relied upon as tax or legal advice applicable to particular transactions or circumstances. Consult a tax professional for such advice.

9 Easy Mistakes Home Owners Make on Their Taxes

Don’t rouse the IRS or pay more taxes than necessary — know the score on each home tax deduction and credit.

Sin #1: Deducting the wrong year for property taxes

You take a tax deduction for property taxes in the year you (or the holder of your escrow account) actually paid them. Some taxing authorities work a year behind — that is, you’re not billed for 2013 property taxes until 2014. But that’s irrelevant to the feds.

Enter on your federal forms whatever amount you actually paid in 2013, no matter what the date is on your tax bill. Dave Hampton, CPA, tax manager at the Cincinnati accounting firm of Burke & Schindler, has seen home owners confuse payments for different years and claim the incorrect amount.

Sin #2: Confusing escrow amount for actual taxes paid

If your lender escrows funds to pay your property taxes, don’t just deduct the amount escrowed, says Bob Meighan, CPA and vice president at TurboTax in San Diego. The regular amount you pay into your escrow account each month to cover property taxes is probably a little more or a little less than your property tax bill. Your lender will adjust the amount every year or so to realign the two.

For example, your tax bill might be $1,200, but your lender may have collected $1,100 or $1,300 in escrow over the year. Deduct only $1,200. Your lender will send you an official statement listing the actual taxes paid. Use that. Don’t just add up 12 months of escrow property tax payments.

Sin #3: Deducting points paid to refinance

Deduct points you paid your lender to secure your mortgage in full for the year you bought your home. However, when you refinance, says Meighan, you must deduct points over the life of your new loan. If you paid $2,000 in points to refinance into a 15-year mortgage, your tax deduction is $133 per year.

Sin #4: Misjudging the home office tax deduction

This deduction may not be as good as it seems. It's complicated, often doesn’t amount to much of a deduction, has to be recaptured if you turn a profit when you sell your home, and can pique the IRS’s interest in your return. Hampton’s advice: Claim it only if it’s worth those drawbacks. If so, here's what to  know about what you can write off.

Sin #5: Failing to repay the first-time home buyer tax credit

If you used the original home buyer tax credit in 2008, you must repay 1/15th of the credit over 15 years. If you used the tax credit in 2009, 2010, or 2011 and then sold your house or stopped using it as your primary residence, within 36 months of the purchase date, you also have to pay back the credit.

The IRS has a tool you can use to help figure out what you owe.

Sin #6: Failing to track home-related expenses

If the IRS comes a-knockin’, don’t be scrambling to compile your records. Many people forget to track home office and home maintenance and repair expenses, says Meighan. File away documents as you go. For example, save each manufacturer's certification statement for energy tax credits and lender or government statements to confirm property taxes paid.

Sin #7: Forgetting to keep track of capital gains

If you sold your main home last year, don’t forget to pay capital gains taxes on any profit. You can exclude $250,000 (or $500,000 if you’re a married couple) of any profits from taxes. So if you bought a home for $100,000 and sold it for $400,000, your capital gains are $300,000. If you’re single, you owe taxes on $50,000 of gains. However, there are minimum time limits for holding property to take advantage of the exclusions, and other details. Consult IRS Publication 523.

Sin #8: Filing incorrectly for energy tax credits

If you made any eligible improvements in 2012 -- or will in 2013 -- such as installing energy-efficient windows and doors, you may be able to take a 10% tax credit (up to $500). But keep in mind, it's a lifetime credit. If you claimed the credit in any recent years, you're done. Fill out Form 5695.

Part II of the form, which covers systems eligible for a larger tax credit through 2016, such as geothermal heat pumps, can be incredibly complex and involves crosschecking with half a dozen other IRS forms. Read the instructions carefully.

Sin #9: Claiming too much for the mortgage interest tax deduction

You can deduct mortgage interest only up to $1 million of mortgage debt, says Meighan. If you have $1.2 million in mortgage debt, for example, deduct only the mortgage interest attributable to the first $1 million.

This article was original published in Jan. 2011.

This article provides general information about tax laws and consequences, but shouldn't be relied upon as tax or legal advice applicable to particular transactions or circumstances. Consult a tax professional for such advice.

Don't-Miss Home Tax Breaks

             

From the mortgage interest deduction to energy tax credits, here are the tax tips you need to get a jump on your returns.

Mortgage interest deduction
Private mortgage insurance deduction
Prepaid interest deduction
Energy tax credits
Vacation or second home tax deductions
Home buyer tax credit repayment
Property tax deduction

Mortgage interest deduction

One of the neatest deductions itemizing home owners can take advantage of is themortgage interest deduction, which you claim on Schedule A. To get the mortgage interest deduction, your mortgage must be secured by your home — and your home can even be a house trailer or boat, as long as you can sleep in it, cook in it, and it has a toilet.

Interest you pay on a mortgage of up to $1 million — or $500,000 if you’re married filing separately — is deductible when you use the loan to buy, build, or improve your home.

If you take on another mortgage (including a second mortgage, home equity loan, or home equity line of credit) to improve your home or to buy or build a second home, that counts towards the $1 million limit.

If you use loans secured by your home for other things — like sending your kid to college — you can still deduct the interest on loans up $100,000 ($50,000 for married filing separately) because your home secures the loan.

PMI and FHA mortgage insurance premiums

Helpfully, the government extended the mortgage insurance premium deduction through 2013. You can deduct the cost of private mortgage insurance as mortgage interest onSchedule A — meaning you must itemize your return. The change only applies to loans taken out in 2007 or later.

What’s PMI? If you have a mortgage but didn’t put down a fairly good-sized down payment (usually 20%), the lender requires the mortgage be insured. The premium on that insurance can be deducted, so long as your income is less than $100,000 (or $50,000 for married filing separately).

If your adjusted gross income is more than $100,000, your deduction is reduced by 10% for each $1,000 ($500 in the case of a married individual filing a separate return) that your adjusted gross income exceeds $100,000 ($50,000 in the case of a married individual filing a separate return). So, if you make $110,000 or more, you lose 100% of this deduction (10% x 10 = 100%).

Besides private mortgage insurance, there's government insurance from FHA, VA, and the Rural Housing Service. Some of those premiums are paid at closing and deducting them is complicated. A tax adviser or tax software program can help you calculate this deduction. Also, the rules vary between the agencies.

Prepaid interest deduction

Prepaid interest (or points) you paid when you took out your mortgage is 100% deductible in the year you paid them along with other mortgage interest.

If you refinance your mortgage and use that money for home improvements, any points you pay are also deductible in the same year.

But if you refinance to get a better rate and term or to use the money for something other than home improvements, such as college tuition, you’ll need to deduct the points over the term of the loan. Say you refi for a 10-year term and pay $3,000 in points. You can deduct $300 per year for 10 years.

So what happens if you refi again down the road?

Example: Three years after your first refi, you refinance again. Using the $3,000 in points scenario above, you’ll have deducted $900 ($300 x 3 years) so far. That leaves $2,400, which you can deduct in full the year you complete your second refi. If you paid points for the new loan, the process starts again; you can deduct the points over the term of the loan. 

Home mortgage interest and points are reported on IRS Form 1098. You enter the combined amount on line 10 of Schedule A. If your 1098 form doesn’t indicate the points you paid, you should be able to confirm the amount by consulting your HUD-1 settement sheet. Then you record that amount on line 12 of Schedule A.

Energy tax credits

The energy tax credit of up to a lifetime $500 had expired in 2011. But the Feds extended it for 2012 and 2013. If you upgraded one of the following systems this year, it’s an opportunity for a dollar-for-dollar reduction in your tax liability: If you get the $500 credit, you pay $500 less in taxes.

• Biomass stoves

• Heating, ventilation, air conditioning

• Insulation

• Roofs (metal and asphalt)

• Water heaters (non-solar)

• Windows, doors, and skylights

• Storm windows and doors

Varying maximums

Some of the eligible products and systems are capped even lower than $500. New windows are capped at $200 — and not per window, but overall. Read about the fine print in order to claim your energy tax credit.

• Determine if the system is eligible. Go to Energy Star’s website for detailed descriptions of what’s covered. And talk to your vendor.

• The product or system must have been installed, not just contracted for, in the tax year you'll be claiming it.

• Save system receipts and manufacturer certifications. You’ll need them if the IRS asks for proof.

• File IRS Form 5695 with the rest of your tax forms.

Vacation home tax deductions

The rules on tax deductions for vacation homes are complicated. Do yourself a favor and keep good records about how and when you use your vacation home.

• If you’re the only one using your vacation home (you don’t rent it out for more than 14 days a year), you can deduct mortgage interest and real estate taxes on Schedule A.

• Rent your vacation home out for more than 14 days and use it yourself fewer than 15 days (or 10% of total rental days, whichever is greater), and it’s treated like a rental property. Those expenses get deducted using Schedule E.

• Rent your home for part of the year and use it yourself for more than 14 days and you have to keep track of income, expenses, and divide them proportionate to how often you used and how often you rented the house.

Home buyer tax credit

There were federal first-time home buyer tax credits in 2008, 2009, and 2010.

• If you claimed the home buyer tax credit for a purchase made after April 8, 2008, and before Jan. 1, 2009, you must repay 1/15th of the credit over 15 years, with no interest.

• If you used the tax credit in 2009 or 2010 and then sold your house or stopped using it as your primary residence, within 36 months of the purchase date, you also have to pay back the credit. Example: If you bought a home in 2010 and sold in 2012, you pay it back with your 2012 taxes.

• That repayment rules are less rigorous for uniformed service members, Foreign Service workers, and intelligence community workers who get sent on extended duty at least 50 miles from their principal residence.

Members of the armed forces who served overseas got an extra year to use the first-time home buyer tax credit. If you were abroad for at least 90 days between Jan. 1, 2009, and April 30, 2010, and you bought your home by April 30, 2011, and closed the deal by June 30, 2011, you can claim your first-time home buyer tax credit.

The IRS has a tool you can use to help figure out what you owe.

Property tax deduction

You can deduct on Schedule A the real estate property taxes you pay. If you have a mortgage with an escrow account, the amount of real estate property taxes you paid shows up on your annual escrow statement.

If you bought a house in 2012, check your HUD-1 Settlement statement to see if you paid any property taxes when you closed the purchase of your house. Those taxes are deductible on Schedule A, too.

This article provides general information about tax laws and consequences, but shouldn’t be relied upon as tax or legal advice applicable to particular transactions or circumstances. Consult a tax professional for such advice; tax laws may vary by jurisdiction.

Another Year to Short Sale your Home

YouWalkAway.com, a foreclosure agency, conducted a survey of its clients and revealed 78 percent of those who responded said they were walking away from their primary residence. In addition, at least 74 percent of all respondents would be eligible for tax relief through the Mortgage Debt Relief Act of 2007.

The Mortgage Debt Relief Act allows forgiven debt through a short sale, loan modification, or foreclosure to be excluded as taxable income.
The act faced expiration December 31, 2012, but Congress extended the act for another year on January 2.

“This extension hasn’t been well publicized but it is important to homeowners and realtors nationwide. Had this law not been extended, it could have brought a drastic halt to short sales and had a devastating effect on underwater homeowners,” said Chad Ruyle, YouWalkAway.com co-founder.
In a report, the foreclosure agency explained the one-year extension is not likely to encourage a new wave of mortgage defaults in early 2013.
While it could be argued that extending the act could encourage underwater homeowners to strategically default, YouWalkAway.com does not expect to see new defaults. Strategic default occurs when borrowers decide to stop making payments on a mortgage they could afford. Oftentimes, strategic defaulters are underwater.
Instead, YouWalkAway.com expects the one-year extension to provide tax forgiveness for just the homeowners currently in the foreclosure process since new defaulters would have just a year to receive tax forgiveness, which is not enough in certain states with lengthy foreclosure timelines that exceed a one-year period.
On average, 85 percent of YouWalkAway.com clients have not made a monthly mortgage payment in 14 months. Thus, the agency concludes, a 12-month extension is not encourage new strategic defaulters.
Instead, the 12-month extension will motivate homeowners to seek options outside of the lengthy foreclosure process and seek alternatives such as a short sale, deed-in-lieu, or a modification, the agency explained.

Search current properties in Pismo Beach.

http://www.dsnews.com/articles/mortgage-debt-relief-acts-extension-to-lead-more-short-sales-report-2013-01-08

Reprieve for those Wronged in Foreclosure Process

Ten Banks Reach $8.5B Deal with Regulators in Foreclosure Settlement

01/07/2013 By: Esther Cho

Ten major mortgage servicers reached an agreement with federal regulators to pay more than $8.5 billion over alleged foreclosure abuses, the Federal Reserve announced in a release Monday.

Of the $8.5 billion, $3.3 billion will go toward direct payments to eligible borrowers, and $5.2 billion will be used to assist borrowers in other ways, such as through loan modifications.
The servicers involved in the agreement include Aurora, Bank of America, Citibank, JPMorgan Chase, MetLife Bank, PNC, Sovereign, SunTrust, U.S. Bank, and Wells Fargo.
In April 2011, the Office of the Comptroller of the Currency, the Fed, and the Office of Thrift Supervision (OTS) first announced enforcement actions after investigations led to allegations of abusive foreclosure practices.
As part of the consent orders, the servicers were required to hire third-party consultants to conduct a free Independent Foreclosure Review for borrowers who believed they incurred financial harm due to faulty foreclosure practices. The reviews were for foreclosure actions that occurred in 2009 and 2010.
The agreement with the 10 servicers replaces the Independent Foreclosure Review process with a new framework allowing eligible borrowers to receive compensation more quickly.

Under the settlement, eligible borrowers will receive compensation even if they did not request a foreclosure review. Eligible borrowers should receive anywhere from hundreds of dollars to $125,000, depending on the individual’s situation.
According to the release, the OCC and the Fed “accepted this agreement because it provides the greatest benefit to consumers subject to unsafe and unsound mortgage servicing and foreclosure practices during the relevant period in a more timely manner than would have occurred under the review process.”
“We have learned a great deal from the reviews that have been conducted to date. However, it has become clear that carrying the process through to its conclusion would divert money away from the impacted homeowners and also needlessly delay the dispensation of compensation to affected borrowers. Our new course of action will get more money to more people more quickly, and it will speed recovery in the nation’s housing markets,” said Comptroller of the Currency Thomas J. Curry in a statement.
The enforcement actions in 2011 included 14 servicers. Since all 14 servicers were not part of this agreement, the Fed announced it is working toward a similar agreement with the other servicers who were subject to the enforcement actions.
In response to the settlement, several banks issued statements, including Citi, which said, “We are pleased to have the matter resolved and believe this agreement is a positive development that will provide benefits for homeowners.”
In U.S. Bancorp’s response, the bank said it “has long been committed to sound modification and foreclosure practices. We have always regarded foreclosure as a last resort, and have helped thousands of borrowers over the past several years to stay in their homes through a variety of modification programs.”
Mike Heid, president of Wells Fargo Home Mortgage, stated, “This agreement allows us to move forward and continue our focus on doing all we can do to provide relief to our customers and restore stability to housing markets across the country.”

http://www.dsnews.com/articles/ten-banks-reach-85m-deal-with-regulators-in-foreclosure-settlement-2013-01-07

"Fiscal Cliff" Cliff Notes for Real Estate

Real Estate Provisions in “Fiscal Cliff” Bill

On Jan. 1 both the Senate and House passed H.R. 8 legislation to avert the “fiscal cliff.” The bill was signed into law by President Barack Obama on Jan. 2.
Below is a summary of real estate related provisions in the bill:

Real Estate Tax Extenders

• Mortgage Cancellation Relief is extended for one year to Jan. 1, 2014
• Deduction for Mortgage Insurance Premiums for filers making below $110,000 is extended through 2013 and made retroactive to cover 2012
• 15-year straight-line cost recovery for qualified leasehold improvements on commercial properties is extended through 2013 and made retroactive to cover 2012
• 10 percent tax credit (up to $500) for homeowners for energy improvements to existing homes is extended through 2013 and made retroactive to cover 2012

Permanent Repeal of Pease Limitations for 99% of Taxpayers

Under the agreement so called “Pease Limitations” that reduce the value of itemized deductions are permanently repealed for most taxpayers but will be reinstituted for high income filers.  These limitations will only apply to individuals earning more than $250,000 and joint filers earning above $300,000.  These thresholds have been increased and are indexed for inflation and will rise over time.  Under the formula, the amount of adjusted gross income above the threshold is multiplied by three percent.  That amount is then used to reduce the total value of the filer’s itemized deductions.  The total amount of reduction cannot exceed 80 percent of the filer’s itemized deductions.
These limits were first enacted in 1990 (named for the Ohio Congressman Don Pease who came up with the idea) and continued throughout the Clinton years.  They were gradually phased out as a result of the 2001 tax cuts and were completely eliminated in 2010-2012.  Had we gone over the fiscal cliff, Pease limitations would have been reinstituted on all filers starting at $174,450 of adjusted gross income.

Capital Gains

Capital Gains rate stays at 15 percent for those in the top rate of $400,000 (individual) and $450,000 (joint) return.  After that, any gains above those amounts will be taxed at 20 percent.  The $250,000/$500,000 exclusion for sale of principal residence remains in place.

Estate Tax

The first $5 million dollars in individual estates and $10 million for family estates are now exempted from the estate tax.  After that the rate will be 40 percent, up from 35 percent.  The exemption amounts are indexed for inflation.

http://www.realtor.org/articles/real-estate-provisions-in-fiscal-cliff-bill?om_rid=AAKj0R&om_mid=_BQ5jQiB8v$B8GF&om_ntype=NARWeekly

If you've been looking to invest, now is the time before the inventory continues to decrease!

The residential shadow inventory of distressed homes continues to shrink according CoreLogic's monthly report for October.   The improvement is across all metrics; number of units, months supply, dollar volume and transition rates.
The inventory as of October was 2.29 million units or a 7.2 month supply at the current absorption rate.  The number of units in the inventory represented a 12.3 percent decrease from October 2011 when the inventory consisted of 2.62 million units, an 8.6 month supply.  The volume of the inventory in October was $376 billion, down from $3.99 billion a year earlier.  In September the inventory stood at 2.31 million units or a 7.7 month supply.

The shadow inventory represents the number of properties that are seriously delinquent, in foreclosure, or in bank inventories (REO) but not listed on Multiple Listing Services. CoreLogic uses the rates of transition of properties from delinquency to foreclosure and foreclosure to REO to identify the currently distressed unlisted properties most likely to become REO properties. Properties that are not yet delinquent but may become delinquent in the future are not included in the estimate of the current shadow inventory.
Of the 2.3 million properties currently in the shadow inventory 1.04 million units are seriously delinquent (3.3 months' supply), 903,000 are in some stage of foreclosure (2.8 months' supply) and 354,000 are already in REO (1.1 months' supply).

Roll rates from current to 90 days delinquent have decreased from 0.50 percent in October 2011 to 0.46 percent in October 2012.  Rates from 90+ days to foreclosure are down from 6.74 percent to 6.17 percent but rates for transitions from foreclosure to current increased slightly from 0.81 percent to 0.83 percent.

"The size of the shadow inventory continues to shrink from peak levels in terms of numbers of units and the dollars they represent," said Anand Nallathambi, president and CEO of CoreLogic. "We expect a gradual and progressive contraction in the shadow inventory in 2013 as investors continue to snap up foreclosed and REO properties and the broader recovery in housing market fundamentals takes hold."
"Almost half of the properties in the shadow are delinquent and not yet foreclosed," said Mark Fleming, chief economist for CoreLogic. "Given the long foreclosure timelines in many states, the current shadow inventory stock represents little immediate threat to a significant swing in housing market supply. Investor demand will help to absorb the already foreclosed and REO properties in the shadow inventory in 2013."
Forty-five percent of the inventory in held in five states, Florida, California, Illinois, New York and New Jersey down from 51.3 percent one year earlier.  Over the three months ending in October 2012, serious delinquencies, which are the main driver of the shadow inventory, declined the most in Arizona (13.3 percent), California (9.7 percent), Michigan (6.8 percent), Colorado (6.8 percent) and Wyoming (5.9 percent).

http://www.mortgagenewsdaily.com/01022013_foreclosures_shadow_inventory.asp