Your Top Home Ownership Tax Questions Answered

Which tax benefits do home owners miss? Will you get audited if you take the home office deduction? Find out the answers to these questions and more before Tax Day.

There are a lot of home ownership tax benefits (http://www.houselogic.com/home-taxes-financing/taxes-incentives/) - if you don't forget to take them. To make sure you get your due, HouseLogic asked tax expert Abe Schneier, a senior technical manager with the American Institute of CPAs (http://www.aicpa.org), for tax-filing tips.

HouseLogic: What's the most common home-related tax deduction or credit claimed by home owners?

Abe Schneier: The mortgage interest deduction, [which the NATIONAL ASSOCIATION OF REALTORS® estimates amounts to about $3,000 in tax savings for the average itemizing home owner] and [the deduction for] real property taxes (http://www.houselogic.com/home-advice/property-taxes/property-tax-appeal/).

HL: Which tax provision do home owners often overlook?

AS: You can deduct mortgage insurance premiums (http://www.houselogic.com/home-advice/tax-deductions/deducting-private-mortgage-insurance/) [or PMI] if you were required to get PMI as a condition of receiving financing on your home. Some people will overlook that, although it's typically disclosed on the 1099 that you receive from the bank, along with all the deductible information you need.

HL note: The PMI deduction has been extended through 2013 and is retroactive for 2012.

[Another area of tax-filing confusion is] whether you've correctly treated any points you paid if you refinanced. In a new home purchase, the points can be deducted [in the tax year you paid them]. But typically in a refinancing, you have to amortize and deduct any points you paid over the life of the mortgage, and people tend to forget that after a couple of years.

HL: What's the No. 1 mistake home owners make when filing their taxes (http://www.houselogic.com/home-advice/taxes-incentives/common-tax-mistakes/)?

AS: Because you receive a statement from the bank with details [such as] how much mortgage interest (http://www.houselogic.com/home-advice/mortgage-interest-deduction/mortgage-interest-deductions/) you paid over the year, and how much the bank pays on your behalf in real estate taxes, the number of mistakes has dropped.

But if you're in a state where you pay the real estate taxes on your own - the bank doesn't handle it for you - [people] make mistakes because sometimes real estate tax bills include other items besides pure real estate taxes. It could be trash collection fees; it could be snow removal fees that the state or county is assessing on the real estate tax bill. Since the items are included in the same bill, home owners sometimes deduct [those fees] regardless of whether the items are actually taxes.

HL: What's the single most important piece of advice for people filing their taxes as a first-time home owner?

AS: You have to take a look at your closing statement from when you bought the house. It's commonly called the HUD-1 form and you receive it at the closing. Occasionally, there are fees such as prepaid taxes or interest at closing that can be deductible.

HL: What tax advice do you have for someone who's owned their home for 10 or 20 years?

AS: If you've been a longtime home owner and you've been through refinancings, you have to be careful about how much interest you've deducted, especially if you have a home equity loan (http://www.houselogic.com/home-advice/tax-deductions/deduct-mortgage-interest/) or equity line. A lot of people who've refinanced have sizable equity lines. The maximum outstanding home equity debt that's deductible is $100,000; the maximum deductible amount of interest paid on mortgage debt is $1 million.

HL: What home improvement-related records should home owners keep?

AS: Absolutely keep your receipts for couple of reasons:

1. You want to make sure - if there are any warranties attached to the work that was done - that you maintain those records and you have something to go back to the person who did the work in case something doesn't function properly.

2. If you've added value to the home - you've added a deck, you've added a room, you've added something new to house - you'll need to know what the gain is on that capital improvement when you sell the house.

HL note: Tax rules let you add capital improvement expenses to the cost basis of your home, and a higher cost basis lowers the total profit or capital gain you're required to pay taxes on. Of course, most home owners are exempted from taxes on the first $500,000 in profit for joint filers ($250,000 for single filers). So it doesn't apply to too many people.

HL: How do I tell the difference between a capital improvement and a repair?

AS: Typically a repair is [done] to allow an item, like a home furnace or air conditioner, to continue. But if you were to replace the heating unit, that's not a repair.

HL: Does taking any home-related tax benefits, such as the home office deduction, make a taxpayer more likely to be audited?

AS: Only if numbers look out of the ordinary - for instance, if one year you were writing off $20,000 in mortgage interest debt and the next year you're writing off $100,000 in mortgage interest. Taking the home office deduction in and of itself doesn't usually generate an audit. However, if you claim nominal income and significantly higher expenses in an effort to create artificial losses, the IRS will see that there's something else going on there.

HL: Once filing season is over, when should home owners start thinking about next year's taxes?

AS: Well, hopefully, when you visit your CPA to give information about or pick up [this year's] tax return, your CPA has spoken with you about your plans for [next year]:

          •If any major improvements are scheduled

          •If you're planning on moving

          •How to organize any expenditures for fixing up the home before sale

If you're planning to do any of those things, talk with your CPA so that you're prepared with documentation and so that the [tax pro] can help minimize your tax situation.

 

Article From HouseLogic.com

By: Natasha Padgitt
Published: December 31, 2012

 

Home Affordability Reaches Record High in 2012

With 11 months of data in the books, 2012 is shaping up to be a record year for favorable housing conditions and a strong year for buyers, according to the National Associations of Realtors.

As of November, the Housing Affordability Index released by NAR stood at 198.2. This index takes into account the relationship between median home price, median family income and average mortgage interest rate. A higher index indicates a stronger household purchasing power.

When an index hits 100, it is at the point where a median-income family is making enough money to qualify to buy a median-priced single-family home, assuming 20% is put down and a quarter of gross income is devoted to mortgage principal and interest payments.

NAR predicts that once the December numbers are reported, 2012 will hit a record high 194 on the index, up from 186 in 2011, which was the previous record.

“Rising home prices and a gradual uptrend in mortgage interest rates will offset improvements in family income, but 2013 likely will be the third best on record in terms of household buying power,” said Lawrence Yun, chief economist of NAR. “A window of opportunity remains open for buyers who can qualify for a mortgage.”

NAR expects the housing affordability index to average 160 in 2013, meaning a median-income family would need 160% of the income required to purchase a median-priced single-family home

Gary Thomas, president of NAR, believes the minor erosion in affordability conditions in 2013 could be lightened by bank and regulatory policies.

Thomas says banks could be encouraged to use their massive cash holdings to originate loans if the government begins making clearer rules regarding future lawsuits and buybacks of Fannie and Freddie loans.

“A more sensible lending environment that makes it easier for other financially qualified buyers to get a mortgage would allow many more households to enter the market, boosting home sales as much as 10% to 15%,” Thomas said.

Debt Relief Act Extended

The final act by the 112th Congress to avoid the fiscal cliff was a significant victory for homeowners. As a part of the legislation that cleared the U.S. House of Representatives late last night, Congress extended the cancellation of the mortgage debt relief provision for one year, through the end of 2013. What does this mean? If a lender forgives some portion of a homeowner’s mortgage in 2013, either as part of a short sale or foreclosure, or in a loan restructuring that reduces principal, the owner/seller will not be required to count that forgiven amount as income for tax purposes. Why is this important? Homeowners shouldn’t be forced to pay a tax on money they’ve already lost with cash they never received – and will never receive.  More than 20% of current homeowners with a mortgage are in a distressed financial situation and owe more on their homes than the current market value. The housing market, while recovering, is still fragile enough that this tax relief is necessary to provide stability in the coming year.

The 15 Best Housing Markets for the Next Five Years

By Mamta Badkar | Business Insider – Fri, Nov 30, 2012 3:34 PM EST

• 
  Yahoo! Finance/Thinkstock - Santa Barbara, California

National home prices are expected to climb 0.3 percent in the next year, according to the latest home price report by Fiserv Case-Shiller. But over the next five years, home prices are projected to rise 3.3 percent.

We drew on Fiserv Case-Shiller data to identify the best housing markets for the next five years. The top 15 cities are ranked by the projected annualized change in home prices between Q2 2012 and Q2 2017. We also included the median home price, median household income, unemployment rate, and the change in home prices since their peak to offer a broader view of the local economy and housing market.

Note: The median family income is for Q1 2012, home price data is for Q2 2012. Unemployment data is as of August 2012, and population data is for 2011.

Glens Falls, New York

Google MapsAnnualized expected growth from 2012 - 2017: 7.7 percent

Home prices have declined 7.8 percent in Glen Falls since they peaked in Q4 2008. The median home price is $159,000 which is lower than the national median of $181,000.

Glen Falls has a population of 128,996, an unemployment rate of 9.1 percent, and a median family income of $64,300.


Yuma, Arizona

Google MapsAnnualized expected growth from 2012 - 2017: 7.7 percent

Home prices have fallen 37.1 percent in Yuma since their Q4 2006 peak.

It has a population of 200,870, an unemployment rate of 25.8 percent, and a median family income of $45,400, lower than the national median of $62,900.



Eugene-Springfield, Oregon

Wikimedia CommonsAnnualized expected growth from 2012 - 2017: 7.7 percent

Eugene-Springfield home prices have decreased 22.9 percent since their Q2 2007 peak. The metro has a population of 353,416, an unemployment rate of 8.8 percent, and a median family income of $53,200.




Yakima, Washington

Wikimedia CommonsAnnualized expected growth from 2012 - 2017: 7.8 percent

Home prices in Yakima are down 8.1 percent since their Q1 2009 peak. It has a median home price of $168,800.

Yakima also has a population of 247,141, an unemployment rate of 10.2 percent, and a median family income of $47,800.



Brunswick, Georgia

Wikimedia CommonsAnnualized expected growth from 2012 - 2017: 7.9 percent

Home prices in Brunswick have tumbled 32.3 percent since their Q4 2007 peak.

It has a population of 112,923, an unemployment rate of 10.4 percent, and a median family income of $50,500, that is below the national median.


Tucson, Arizona

Byways.orgAnnualized expected growth from 2012 - 2017: 7.9 percent

Tucson's home prices have plunged 42.6 percent since their Q1 2006 peak, and it has median home price of $153,000.

It also has a population of 989,569, a median family income of $57,400, and an unemployment rate of 7.5 percent.



Gulfport-Biloxi, Mississippi

Ed Schipul / FlickrAnnualized expected growth from 2012 - 2017: 8.0 percent

Home prices in the Gulfport-Biloxi metro area have slipped 20.4 percent since their Q4 2007 peak, and the metro has a median home price of $101,000.

It has a population of 253,511, an unemployment rate of 8.4 percent and a median household income of $52,700.


Napa, California

Google MapsAnnualized expected growth from 2012 - 2017: 8.0 percent

Home prices in Napa have plunged 50.1 percent since they peaked in Q1 2006, and the city has a median home price of $342,000.

Napa has a population of 138,088, an unemployment rate of 8.1 percent, and a median family income of $77,700 above the national median.

Ocala, Florida

Annualized expected growth from 2012 - 2017: 8.0 percent

Home prices in Ocala are down 49.1 percent from their Q3 2006 peak.

But Ocala has a high unemployment rate of 10.1 percent, a median family income of $44,600, well below the national median of $62,900, and a median home price of $105,000.


Santa Barbara-Santa Maria-Goleta, California

Wikimedia CommonsAnnualized expected growth from 2012 - 2017: 8.4 percent

The Santa Barbara-Santa Maria-Goleta metro area has a population of 426,878, a median family income of $69,000, and an unemployment rate of 8.1 percent.

Home prices are down 52 percent from their Q3 2006 peak, and the metro has a median home price of $290,000.


Sebastian-Vero Beach, Florida

Google MapsAnnualized expected growth from 2012 - 2017: 8.7 percent

Sebastian-Vero Beach home prices have fallen 50.9 percent since their Q4 2005 peak.

The metro has an unemployment rate of 10.6 percent, and a median family income of $58,600, while the median cost of a home is $150,000.


Madera-Chowchilla, California

Google MapsAnnualized expected growth from 2012 - 2017: 8.8 percent

Home prices in the Madera-Chowchilla metro area have fallen 54 percent since their peak in the third quarter of 2006.

At 14.2 percent, the unemployment rate is much higher than the national average of 8.1. The metro has a population of 152,925 and a low median family income of $52,700.


Santa Fe, New Mexico

Wikimedia CommonsAnnualized expected growth from 2012 - 2017: 8.9 percent

Santa Fe's home prices have fallen 21.7 percent from their Q4 2007 peak. The city has a population of 145,648, an unemployment rate of 5.4 percent below the national average, and a median household income of $59,600, below the national median of $62,900.



Panama City-Lynn Haven-Panama City Beach, Florida

Wikimedia CommonsAnnualized expected growth from 2012 - 2017: 9.5 percent

Home prices in the Panama City-Lynn Haven-Panama City Beach metro area have fallen 45.3 percent since their Q1 2006 peak. It now has a median home price of $137,000.

The metro has a population of 169,856, an unemployment rate of 8.8 percent, and a median family income of $56,300.


Medford, Oregon

Bailey Weaver / FlickrAnnualized expected growth from 2012 - 2017: 11.2 percent

Medford's home prices have fallen 39.8 percent since their peak in Q2 2006. The metro has a population of 204,822 and median family income of $49,600.

At 10.8 percent Medford's unemployment rate is higher than the national average.

Measure 79

As you may have heard Measure 79 is on the ballot for the November 6^thelection. This measure was created to preemptively block any future tax on the transfer of any interest in real property in Oregon. As a REALTOR® and advocate for private property rights, I fully support this measure. Homes are the most significant asset that people invest in and a transfer tax wouldn’t just impact the sale of a home, it would affect ANY transfer of a title on any real property. So it would potentially impact refinancing, transferring an inheritance, deeding land, etc. Any transfer tax will place an additional burden on property owners and will ultimately diminish the equity that they have worked so hard to build, if they even have any equity after the past 4 years of economic struggle. As our economy starts to show slow signs of recovery, an additional tax now would undo the progress that has been made.

As a real estate expert I want to pass onto you the importance of Measure 79 and how it will protect the equity you have in your property as well as reducing the cost of purchasing a home or passing your asset to a loved one in the future. Please help me in passing on the message that ‘Yes on 79’ helps today’s as well as tomorrow’s property owner. Please visit www.yesonmeasure79.com for more information.

A "Yes" vote on Measure 79 will stop state and local governments from imposing a new tax on real estate in Oregon.

  

 

 

 

Home prices jump 2.2% in May

NEW YORK (CNNMoney) -- In a sign that the U.S. housing market is recovering, home prices rose for the second straight month in May, according to an industry report issued Tuesday.  Home prices climbed 2.2% compared with a month earlier, according to the S&P/Case-Shiller 20-city home price index. Prices are still off 0.7% compared with May 2011, but that's the lowest year-over-year decline in 18 months, according to David Blitzer, a spokesman for S&P.   The report gave support for industry experts who have been saying that the long-awaited housing market recovery is underway. But Blitzer sounded a note of caution.  "We need to remember that spring and early summer are seasonally strong buying months so this trend must continue throughout the summer and into the fall," he said.  Adjusted for seasonal effect, the price gain shrank to 0.9%, but that's still a strong increase.  The roller coaster ride for home prices took them up 106.5% between January 2000 and their high of July 2006. After they peaked, prices lost more than 34% of their value. The gains of the last two months have pared that loss to 33%. 

 All 20 cities in the index posted positive returns, led by Chicago, where prices rose a whopping 4.5% month-over-month. In Atlanta, where prices dropped 17% over the 12 months ended in April, turned that around in May with an increase of 4%.   Other big winners were San Francisco, up 3.9%, and Minneapolis, where prices rose 3%. The smallest gain was recorded by Detroit, where prices inched up 0.4%. Phoenix posted the best annual return by far, up 11.5%.   "Investor money has come in to some of the hard-hit markets like Phoenix and Florida cities," said Mike Larson, a real estate analyst with Weiss Research.   That has helped stabilize housing by shrinking inventory.   

An ongoing change in the mix of homes sold may be contributing to improving prices, according to Stan Humphries, chief economist for real estate website Zillow. Fewer homes are going as foreclosures, which banks discount heavily to move quickly.  Short sales are claiming a bigger market share, according to David Crowe, chief economist for the National Association of Home Builders. They're often in better condition than foreclosures and the selling process plays out more like conventional sales. Prices, as a result, are higher for short sales.  The strength of the gains was unexpected. A panel of experts put together by Briefing.com had projected a year-over-year decline of 1.8% but the big jump in May prices led to the more modest 0.7% dip.   Larson pointed out that Case-Shiller is a lagging housing market indicator. It is a three-month rolling average through the end of May, so some of the data is almost five months old. Back then, the overall economy seemed to be on the upswing and unemployment was dropping.   Those improvements have flattened out. The unemployment rate actually ticked up in May to 8.2% and stayed at that level in June.  "Momentum will fade as we enter the summer months," said Larson. "The broad economy can't seem to generate much growth."  Crowe said that there has also been a fundamental change in market confidence. Buyers are beginning to believe the market has hit bottom and that the time to buy is now, especially with mortgage rates at historic lows.  Humphries said there could be ups and downs during the next six months, but buyers should not be overly concerned about that.  "This will be a function of seasonality in the share of sales that are foreclosures, which will rise as overall sales decline in the fall and winter," he said. "Overall, we remain cautiously optimistic that home values are at a bottom nationally even while our expectations for price appreciation in the next couple of years are muted. "

U.S. Fixed Rate Mortgages Hit New Record-Breaking Lows

According to Freddie Mac's latest Primary Mortgage Market Survey (PMMS), average fixed mortgage rates continuing to find new all-time record lows amid recent data showing less consumer spending and a contraction in the manufacturing industry. The average 30-year fixed-rate mortgage has matched or hit a new record low in 10 of the last 11 weeks. The 1-year ARM also averaged a new record low this week.

Frank Nothaft, vice president and chief economist of Freddie Mac said, "Recent economic data releases of less consumer spending and a contraction in the manufacturing industry drove long-term Treasury bond yields lower over the week and allowed fixed mortgage rates to hit new all-time record lows. Growth in personal expenditures was revised downward to an annualized rate of 2.5 percent in the final GDP estimates for the first quarter of the year. In addition, monthly consumer spending in April was revised from a 0.3 percent gain to 0.1 percent and was unchanged in May. Finally, the Institute for Supply Management reported that manufacturing shrank in June, the first decline since July 2009."

30-year fixed-rate mortgage (FRM) averaged 3.62 percent with an average 0.8 point for the week ending July 5, 2012, down from last week when it averaged 3.66 percent. Last year at this time, the 30-year FRM averaged 4.60 percent.

15-year FRM this week averaged 2.89 percent with an average 0.7 point, down from last week when it averaged 2.94 percent. A year ago at this time, the 15-year FRM averaged 3.75 percent.

5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.79 percent this week, with an average 0.6 point, the same as last week. A year ago, the 5-year ARM averaged 3.30 percent.

1-year Treasury-indexed ARM averaged 2.68 percent this week with an average 0.5 point, down from last week when it averaged 2.74 percent. At this time last year, the 1-year ARM averaged 3.01 percent.