With the holidays upon us, you're probably thinking about gifts and relatives. But that's not all you should be thinking about. Take 30 minutes now to plan for next April, and that half hour could save money ($1000 or more) come tax time. Here's how…
Until the Mortgage Debt Forgiveness relief act was created in 2007, a person who short sold his home had to pay the IRS income tax and the mortgage debt forgiven in a short sale or mortgage term work out on his home. Clearly that made short selling and certain modifications impossible for many.
If distressed homeowners had to pay tax on the phantom income from mortgage debt forgiveness, many may have no choice but to go into foreclosure.
The Mortgage Debt Forgiveness act was created so that homeowners and banks and affected communities could utilize alternatives and avoid the negative impact of a foreclosure. But congress allowed the act to expire at the end of 2013…
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Check out our other articles and tips on taxes that affect Long Island NY homeowners by clicking on the Taxes link to your right under Long Island NY Real Estate Categories.
Many Long Island NY homeowners have already filed their taxes for 2013, but a large majority have not. We direct this article to those of us who always seem to procrastinate until the last minute, and are lucky if we get our taxes filed by that dreaded April 15th deadline.
5 Important Tax Tips for Long Island NY Homeowners
Claiming mortgage interest is the biggie, and one of the most common deductions among Long Island NY homeowners when figuring their taxes.
The deduction even covers multiple loans, so those who are Long Island NY homeowners but have a second home elsewhere can claim the interest on both, so long as the total is under the $1.1 million cap.
If you refinanced your loan and decided, "Hey, why don't we take another $50,000 out in equity," but then you don't use that money to, say, build a pool, or add a garage, that's not fully deductible. You have to use the money to improve the house, or you are not allowed a deduction for that.
Private Mortgage Insurance
Don't mistake private mortgage insurance, or PMI, for Long Island NY homeowners insurance that protects against a fire or other loss. PMI comes into play with lower-income Long Island NY homeowners who often can't afford a big down payment, and instead pay a small monthly fee as insurance against default. The idea is to protect the lender against being stuck with a big loan with zero equity in the home, as well as to allow those without huge nest eggs to buy a property with minimal down payments.
If you make a private mortgage insurance payment, in most cases this is deductible.
Cancellation of Debt
While foreclosures are not as common as they were a few years ago, debt forgiveness is still very common. If a lender agreed to forgive some (or all) of your mortgage debt, failing to report that debt forgiveness could result in a big change to your overall tax liability and result in hefty penalties from the IRS.
This also applies if you took out a home equity loan but are now having trouble making payments. Even if it's not the same as a foreclosure or a short-sale, if that second mortgage is written down by a lender then you have to report that when filing your taxes.
When disaster strikes you are able to claim a tax break for any significant losses not covered by your Long Island NY homeowners insurance policy.
The biggest "gotcha" when it comes to deducting losses is to make sure you can prove the loss and the value. Documentation is key when trying to claim casualty losses. And remember, it's out-of-pocket losses, and it has to be more than 10% of your income. So if you made $75,000, you have to pay $7,500 "out-of-pocket" before you can take any deduction.
Selling Your Home
For Long Island NY homeowners who have taken advantage of a resurgent housing market by selling their homes altogether, there are also tax implications.
If you sold your home in the past year, costs including title insurance, advertising and real estate broker fees can be claimed on your taxes.
You can also claim certain repairs to reduce your capital gains on the sale, presuming they were made within 90 days of the sale and clearly for the intent of marketing the property.
And after the sale? If you had to find a new home because of a new job that is located more than 50 miles away from your old home, you may be able to deduct your reasonable moving expenses, too.
So as you can see, Long Island NY homeowners do get some substantial tax breaks. Get more tax tips by clicking the Taxes link to your right under Long Island NY Real Estate Categories.
If you bought a home or refinanced your home in 2013, mortgage points you paid on the new loan are tax deductible. But depending on whether you purchased a home last year, or simply refinanced the one you already had, when you can deduct the mortgage points varies, as explained in this brief video…
Check out our other articles and tips pertaining to Mortgage points and mortgages in general by clicking on the Long Island NY Mortgage Info link to your right under Long Island NY Real Estate Categories.
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Though we’re more than a month into 2014, there are some 2013 tax credits you may still be qualified to take on your taxes when you start preparing for last year.
If you replaced a furnace, air conditioning unit, or water heater, you may be eligible to get tax credits on your 2013 taxes you’ll be filing before April 15th.
2013 was the last year you could claim these energy efficiency saving deductions, but they are a way to get up to 500 dollars back from the government.
Here are the things you need to know to get tax credits if you replaced a furnace, heat pump, air conditioning unit, or a water heater in 2013.
Taxpayers who purchased qualified residential energy-efficient property may be eligible for tax credits.
The credit is equal to the full cost of the equipment up to the following caps:
- Advanced main air circulating fan: $50
- Natural gas, propane, or oil furnace or hot water boiler with an annual fuel utilization rate of 95 or greater: $150
- Electric heat pump water heater with an energy factor of at least 2.0: $300
- Electric heat pump which achieves the highest efficiency tier established by the Consortium for Energy Efficiency: $300
- Central air conditioner which achieves the highest efficiency tier established by the Consortium for Energy Efficiency: $300
- Natural gas, propane, or oil water heater which has either an energy factor of at least 0.82 or a thermal efficiency of at least 90 percent: $300
- Biomass stoves that use “plant-derived fuel available on a renewable or recurring basis, including agricultural crops and trees, wood and wood waste and residues (including wood pellets), plants (including aquatic plants), grasses, residues, and fibers”: $300
Get more information on Taxes by clicking the Taxes link to your right under Long Island NY Real Estate Categories.