Home Ownership

Assault on the Mortgage Interest Deduction

Dec 17th, 2012
by edsmith.
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The big news story this month has been  the perceived “Assault on the Mortgage Interest Deduction” …  It is clear that Americans overwhelmingly oppose any action by Congress that would serve to reduce or (God forbid) eliminate the mortgage interest deduction, which has remained sacrosanct since its inception in 1913.  But as Congress and the White House wrestle with looming deficit reduction challenges, nothing seems safe.

Housing was the leading victim as the overall economy began to falter seven years ago, and it therefore only stands to reason that housing can help lead this economy out of the doldrums. Any tax code change that hinders growth in real estate will serve to hinder growth throughout our entire economy.

The elimination of the mortgage interest deduction would unquestionably weaken demand which would in turn result in lower real estate values. That is to say nothing of the negative impact on millions of American taxpayers with home loans today. Consider that even a modest-sized home loan could result in a $10,000 annual tax deduction for the homeowner.  The tax impact of the elimination of the mortgage interest deduction would be devastating.  Email, write or phone Congress to let them know what you think!

Ed Smith is the the president of RE/MAX Coastal Properties. With 25 years in real estate sales, Ed serves as President-Elect of Emerald Coast Association of Realtors and a Director at Florida Realtor. Ed and wife Terri are ranked among the top RE/MAX teams in Florida, year after year.

Amendment 4 – Good for Florida!

Oct 30th, 2012
by edsmith.
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Amendment 4 Can Help!
  Encourages First-Time Homebuyers
  Amendment 4 offers property tax relief for first-time homebuyers, responsibly encouraging Floridians to buy homes, which grows our economy. 
  Protects Against Rising Property Taxes
  Right now, cities and counties can raise your property taxes, even if the value of your home drops. Amendment 4 allows the Legislature to put an end to property tax increases on homeowners if the value of the home does drop. 
  Helps Small Businesses & Creates Jobs
  Amendment 4 helps small businesses by ensuring that property taxes for non-homestead properties can not increase by more than 5% each year,instead of 10% per year.And, according to Florida TaxWatch, a non-partisan research group, Amendment 4 would create over 20,000 new jobs in Florida. 

That’s something Florida just can’t afford to pass up.

 
 

 

On November 6th,

Vote Yes On Amendment 4!

http://www.TaxYourAssetsOff.com

 

 

TAX FREE INCOME?

Apr 30th, 2012
by edsmith.
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Many residents of Augusta, Georgia purchase tickets to the Master’s year after year but have never even attended the famous golf tournament held in their town. That’s because they include the tickets as a bonus to the people who rent their home during this huge annual event.

Each year, owners rent their homes for major premiums during the Masters. Many tax experts believe that this income is tax-free, a rare  benefit from a little known provision in the tax code that does not require taxpayers to recognize the income derived from renting their home for less than 15 days per year. See Rental of property also used as home on IRS.gov.

Large sporting events like golf and tennis tournaments, even championship games and other high attendance events can dramatically increase the demand for temporary rental of private residences. Easter weekend on the Emerald Coast comes to mind. It is that annual combination of hold-over snowbirds, spring breakers, regular vacationers and visitors that really stretch our rental accommodations well beyond overload capacity.

Obviously, there are challenges and pitfalls associated with such usage, such as loss of personal belongings and of course, damage! However, getting a monstrously huge premium rental rate accompanied by a significant damage deposit, coupled with tax free status is simply too sweet for some folks to pass up!

You’ll certainly want to discuss this with your tax professional prior to making this decision. You’ll probably also want to get some help from experienced real estate professionals, like us!

Q: We are considering some remodeling before we put our house on the market. Is adding a sunroom a good investment?

Apr 26th, 2012
by edsmith.
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Light, bright and more square footage are usually positive selling features, but as is the case with many remodeling projects, you will likely get only half your money back in terms of increased value. Bearing in mind that the average sunroom addition will cost around $75,000, it is not reasonable to expect that an added sunroom will raise the value of a $225,000 home all the way up to $300,000.

However, each situation is different. Replacing old windows and interior doors can be a great investment in one home and maybe not in another. Much depends on the predominant size, condition and features of the other homes in your neighborhood. 

Experienced Realtors (like us) may be some of your best allies in terms of helping analyze the cost vs benefit of a particular remodeling project. More tips are available at http://www.DestinFloridaRealEstate.com

 

Apr 9th, 2012
by edsmith.
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A recent U.S. Tax Court ruling clarified the IRS position that the $1.1 million limit for mortgage interest deduction applies per residence and not per taxpayer as some high-priced homeowners were hoping.

A married homeowner filing jointly can have fullly deductible interest on a mortgage of up to $1,000,000 of acquisition debt and up to an additional $100,000 of home equity debt. If the married couple files separately, each party is limited to deducting the interest on half of those maximum amounts.

The court case came about when two unmarried individuals who owned a home together as joint tenants felt that they were entitled to deduct the interest on $1.1 million of debt each. IRS did not agree with their understanding and neither did the Tax Court. The Court ruled that the limits apply per residence, not per taxpayer even if a home is co-owned by unmarried taxpayers.

The result for the taxpayers in this case was that their deduction was cut in half resulting in much more income tax due. While this situation only affects a few taxpayers, homeowners in this position should have a discussion with their tax professional.

Mortgage Interest Deduction Takes a Hit

Mar 9th, 2012
by edsmith.
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Celebrity psychiatrist Charles Sophy and his S.O. lost in U.S. Tax Court last week. The judge ruled that deductible interest on the two homes that the couple own together be limited to $1.1 million. At issue was whether or not the limits applied per person or per residence. This limit applies even if the co-owners are unmarried and file separate tax returns.  This is the first court ruling on the matter since the IRS issued a memo on the subject in 2009. The court ruling affirms the IRS memo.

Fix it Anyway

Feb 27th, 2012
by edsmith.
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“If it isn’t broke, don’t fix it” is popular advice, but if you’ve ever had a serious plumbing leak, you probably wished you could have headed up the problem in advance. 

Washing machines, like all appliances, are supposed to work without giving them a thought, and when they don’t, it’s time to have them fixed or replaced. However, there is a critical connection from your water supply that may even be older than your washing machine itself.

Ask someone whose hose broke while they were asleep or out of town and you’ll hear stories of how quickly the water can damage walls, flooring and furniture. Almost anyone can replace the hoses with a pair of pliers for under $30.00 to avoid this potential catastrophe.

As you’re shopping for the replacement hoses, consider the braided stainless steel connectors. The advantage is that the stainless steel offers additional protection should a soft spot develop in the hose beneath. They’ll cost a little more but offer considerably more protection for a nominal difference in price.

Are loan fees going up on Fannie Mae mortgages next year?

Dec 20th, 2011
by edsmith.
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Yes. Maybe. Our elected Mensas in the U.S.  Senate, in an effort to aid and assist an ailing real estate industry (ha!),  voted to increase mortgage fees on newly originated Fannie Mae, Freddie Mac and FHA loans. This increase will equate to $180 per year on a $200,000 mortgage, and will last for the life of the loan.  This new tax is said to be necessary to extend the much publicized “payroll tax cut” for an additional two months.  Okay, then what? And besides, who ever said that intelligent life exists in Washington?

 

Congress may very well choose to reject this latest Senate proposal, in which case the payroll tax cut may be allowed to expire. If so, expect a cut in your take-home pay come January 1st.

What is the “due on sale clause” in my mortgage?”

Mar 30th, 2011
by edsmith.
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The due on sale clause in today’s mortgages basically states that if you sell or transfer all or any part of your interest in the property without your lender’s prior written consent, the lender (at lender’s option) may declare you in default and require immediate payment in full of your entire mortgage balance. Even a lease option is considered transfer of interest and would trigger the due on sale or acceleration clause. 

 
There have been recent cases in which property owners have sold their homes to a “holding company” for some paltry, insignificant sum (perhaps $10 or so) in which the holding company agrees to be responsible for the future mortgage payments. The holding company charges the owner a fee of several thousand dollars for the privilege and then fails to make the payments.
 
As there are few (if any) mortgages today that are freely assumable, owners in such situations are almost certainly in violation of their mortgage agreements and will face foreclosure.

I was told that I don’t need a survey if I’m paying cash for a home in a platted subdivision. True?

Aug 9th, 2010
by edsmith.
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No. If you purchase a property for cash that has an existing encroachment (or two) you could have real problems when you try to resell in the future. Yard buildings, driveways, fences, easements, swimming pools and even roof overhangs can all be sources of frustrating encroachments. 
 
We once saw a case in which the house itself was built 15 feet over the neighbor’s property line. Had the buyer elected to pay cash without the benefit of a survey, they could have ended up with a lot of cash tied up in a property that they could neither sell nor even borrow against. Their equity would be frozen indefinitley.
 
One other option. Many title insurers wil accept a prior survey. That is, so long as the seller is willing to sign a sworn affadavit at closing stating that nothing has changed to affect the boundaries since that prior survey was drawn. 
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