The Best of All Worlds?

20140309-080351.jpgThe past several years have been anything but ideal with regard to the economy and lifestyle of Americans. We started with a deep recession which included a collapse of home values which were increasing at an unsustainable pace. The way out of the recession was anything but painless. It was slow and tedious at best as the recovery has felt like we were running in slow motion. However, as slow as the recovery has been, it has proceeded over all obstacles and there were plenty of obstacles from natural disasters to political issues and world conflicts. Steadily the recovery plowed ahead.

The two bright spots of the recovery have been stocks and interest rates. We have experienced record low rates for years while the stock market has continued to advance from the depths of the recession. One reason for the success of stocks has been the existence of low rates. For many investors, the returns of leaving money in cash made little sense since there was little or no rate of return with rates so low. Meanwhile, it was assumed that rates, as well as oil prices, would increase as the recovery started “heating up.” Thus far, this has not happened. Rates and oil prices have not risen in 2014 even as we have recovered from our latest natural event — the harsh winter of earlier this year. Continue reading

Vacation Home Rentals

If you rent a home to others, you usually must report the rental income on your tax return. But you may not have to report the income if the rental period is short and you also use the property as your home. In most cases, you can deduct the costs of renting your property. However, your deduction may be limited if you also use the property as your home. Here is some basic tax information that you should know if you rent out a vacation home:

o    Vacation Home.  A vacation home can be a house, apartment, condominium, mobile home, boat or similar property.

o    Schedule E.  You usually report rental income and rental expenses on Schedule E, Supplemental Income and Loss. Your rental income may also be subje ct to Net Investment Income Tax.

o    Used as a Home.  If the property is “used as a home,” your rental expense deduction is limited. This means your deduction for rental expenses can’t be more than the rent you received. For more about these rules, see Publication 527, Residential Rental Property (Including Rental of Vacation Homes).

o    Divide Expenses.  If you personally use your property and also rent it to others, special rules apply. You must divide your expe nses between the rental use and the personal use. To figure how to divide your costs, you must compare the number of days for each type of use with the total days of use.

o    Personal Use.  Personal use may include use by your family. It may also include use by any other property owners or their family. Use by anyone who pays less than a fair rental price is also personal use.

o    Schedule A.  Report deductible expenses for personal use on Schedule A, Itemized Deductions. These may include costs such as mortgage interest, property taxes and casualty losses.

o    Rented Less than 15 Days.  If the property is “used as a home” and you rent it out fewer than 15 days per year, you do not have to report the rental income.

o    Use IRS Free File.  If you still need to file your 2013 tax return, you can use IRS Free File to make filing easier. Free File is available until Oct. 15. If you mak e $58,000 or less, you can use brand-name tax software. If you earn more, you can use Free File Fillable Forms, an electronic version of IRS paper forms. Free File is available only through the IRS.gov website.

Publication 527 is available on IRS.gov. You can also call 800-TAX-FORM (800-829-3676) to get it by mail.

Additional IRS Resources:

o    Tax Topic 415 – Renting Residential and Vacation Property

o    Rental Income and Expenses – Real Estate Tax Tips

     Source:  Internal Revenue Service – IRS Summertime Tax Tip 2014-13

Top Ten Tax Facts if You Sell Your Home

(Realtors:  If you would like a copy of this to pass to your clients or prospects, just let me know)

Do you know that if you sell your home and make a profit, the gain may not be taxable? That’s just one key tax rule that you should know. Here are ten facts to keep in mind if you sell your home this year.

1. If you have a capital gain on the sale of your home, you may be able to exclude your gain from tax. This rule may apply if you owned and used it as your main home for at least two out of the five years before the date of sale.

2. There are exceptions to the ownership and use rules. Some exceptions apply to persons with a disability. Some apply to certain members of the military and certain government and Peace Corps workers. For details see Publication 523, Selling Your Home.

3. The most gain you can exclude is $250,000. This limit is $500,000 for joint returns. The Net Investment Income Tax will not apply to the excluded gain.

4. If the gain is not taxable, you may not need to report the sale to the IRS on your tax return.

5. You must report the sale on your tax return if you can’t exclude all or part of the gain. And you must report the sale if you choose not to claim the exclusion. That’s also true if you get Form 1099-S, Proceeds From Real Estate Transactions. If you report the sale you should review the Questions and Answers on the Net Investment Income Tax on IRS.gov.

6. Generally, you can exclude the gain from the sale of your main home only once every two years.

7. If you own more than one home, you may only exclude the gain on the sale of your main home. Your main home usually is the home that you live in most of the time.

8. If you claimed the first-time homebuyer credit when you bought the home, special rules apply to the sale. For more on those rules see Publication 523.

9. If you sell your main home at a loss, you can’t deduct it.

10. After you sell your home and move, be sure to give your new address to the IRS. You can send the IRS a completed Form 8822, Change of Address, t o do this.

For more on the sale of a home see Publication 523 on IRS.gov. You can call 800-TAX-FORM (800-829-3676) to get it by mail.

Source:  Internal Revenue Service – IRS Summertime Tax Tip 2014-08

Oil and Rates

20140309-080351.jpgThere is an old saying which revolves around the fact that oil and water do not mix. But how about oil and interest rates — do they mix? The truth is that oil prices and rates have gone lower in tandem this summer. There was a time when the economy could be stopped or started with a change in either energy prices or rates. However, today the effects are not as clear. For example, changes in gas prices don’t seem to affect the consumer as much as they did decades ago. There are several reasons for this, but one important factor is the increase in energy efficiencies.

On the other hand, the magnitude of the effect of interest rates does not seem to have lessened, but it is hard to tell with rates remaining so low for the past several years. For example, last year when interest rates started to rise, the real estate market responded by eventually slowing down. Again, the direct effect is not as clear as it always has been. For example, so many in America refinanced at record low rates in the past few years, the rise in rates not only slowed down the pace of refinancing, but also made homeowners more reticent to put their homes on the market. Why leave a home which has such a low mortgage payment? This phenomenon has contributed to a shortage of listings which has in turn contributed to the slowing down of the real estate recovery. Continue reading

How to Interview a Mover

Are you planning to move in the next few years? Even if moving is not in the near future, here’s a list of great questions to ask a mover—regardless of whether you hire a local mover that will move you across town, or you are planning to move to another city or state.

Oh, and if you have any friends who are planning to move, please pass these questions on to them! Continue reading

How to Correct Mortgage Servicing Issues

Have you ever wondered if the extra principal payment you made was properly applied to your mortgage loan balance? How about your escrow account – how was that dollar amount figured? Or do you think you were erroneously charged a late fee?

The Consumer Finance Protection Bureau has recently issued rules requiring the company where you made your mortgage payment to respond to your inquiry within a certain amount of time.

But they also suggest certain things you should do if you have questions about your current mortgage. Regardless if you phone or send a letter, here is the information the servicing company will need from you before they are required to respond:

  • Exact names that appear on your mortgage documents
  • Address and loan number
  • Try to provide exact details of when you believe the error occurred (like on July 1, I sent in a check to pay my mortgage payment, the check was cashed on July 7, but I was charged a late charge…)
  • Do not write a note on your payment coupon. The coupon usually gets thrown away right after the payment has been recorded.

Here’s what to expect from the servicing company when you make an inquiry:

  • Servicing company must “acknowledge” your complaint within 5 business days (either email or letter)
  • If you are paying off your mortgage, they must respond within 7 days
  • If the company asks you for additional information, they have an additional 15 days to respond
  • For all other “general” inquiries, (late charges, payments to principal balance, escrow accounts) they have 30 days to respond
  • They cannot charge you a fee for research or responding to an inquiry
  • They must confirm if the error has been corrected
  • If there is no error, they must explain why they are not going to make an correction.

If your loan has been transferred to another mortgage servicing company, you have a time limit of 12 months to inquire about errors. After the one-year time period, they are not required to investigate your inquiry.

For more information about mortgage servicing rules, visit ConsumerFinance.GOV.

Realtor Appraiser Summit – Save the Date

Do you want your appraisal questions answered?  Then save September 17th for an appraiser summit sponsored by Fairway Independent Mortgage.  Remember, Fairway powers the Jeff Baxter Mortgage Team.

Save the Date - Appraisal Summit

We are holding sessions in New Castle County (AM from 9-11) and Sussex County (PM from 3-5) on the 17th.   The locations are TBD – stay tuned for more information and remember this summit is free.

Please email, call or message me if you would like to attend.