Things you can write off on your taxes when buying a home

 

Buying a home can be very expensive. First there's the down payment. Then there are closing costs, including fees for an appraisal, inspection, and title search. And once you own it, the expenses continue to add up, with everything from maintenance to taxes and insurance.

There are some tax benefits to owning a home, though. Tax-deductible homeowner costs can reduce the amount of income tax you have to pay.

What is a tax-deductible expense?

A tax-deductible expense is one that you can deduct from your adjustable gross income (AGI) when you file your taxes for the year. Deducting these costs reduces your taxable income, and the lower your taxable income, the less you'll pay in taxes.

When looking at potential homeowner tax deductions, it's crucial to know the differences between standard and itemized deductions.

A standard deduction is a specific dollar amount that reduces the amount of income on which you're taxed, based on your filing status, age, and other variables. Itemized deductions include each individual deduction, such as certain homeowner expenses and charitable donations. When filing your income taxes, you must choose either the standard deduction or itemized deductions, not both.

Here are the standard deductions for the 2021 tax year:

•             Single or married filed separately: $12,550

•             Married filing jointly or eligible widow/widower: $25,100

•             Head of household: $18,800

If itemized deductions would decrease your taxable income by more than the standard deduction, you'll probably want to include the following deductions for homeowners to save even more money.

7 tax deductions for homeowners

1. Mortgage interest

Each month, part of your mortgage payment goes toward the principal (the amount you borrowed), and another portion covers interest. Over the entire life of your loan, you can deduct interest paid on up to $750,000 of your principal balance if you're single or married and filing taxes jointly. If you're married filing separately, you may deduct interest paid on up to $375,000 each.

 

There are some exceptions to this. If you bought your home between Oct. 14, 1987, and Dec. 15, 2017, you can deduct interest paid on up to $1 million over the life of your mortgage. If you bought it before Oct. 14, 1987, you're allowed to deduct all paid interest.

2. Home equity loan interest

A home equity loan is a second mortgage, and you borrow against the equity you have in your home. If your home is worth $350,000 and you still owe $300,000, you have $50,000 of equity.

As with your first mortgage, the interest you pay on your home equity loan may be tax deductible. There are no restrictions on how you can use the cash from a home equity loan, but the interest is only tax-deductible if you use the money on substantial home improvements.

Note: If you've already deducted the maximum allowable amount of interest paid on your mortgage, you won't qualify for additional interest deductions on your home equity loan.

3. Discount points

You have the option to pay a fee, referred to as "discount points," at closing that lowers the interest rate you'll pay on your mortgage. One discount point usually costs 1% of your new mortgage, and it reduces your rate by 0.25%. So if your rate on a $200,000 mortgage is 3.5%, and you pay $4,000 for two discount points, your new interest rate is 3%.

The money you pay for discount points is typically tax deductible over the life of the loan. If you meet a bunch of Internal Revenue Service requirements, your discount points may be fully deductible in the year that you pay them.

Note: Discount points are different from loan origination points, which are fees you'll pay the mortgage lender for processing your mortgage. Loan origination points are not tax deductible.

4. Property taxes

You can deduct up to $10,000 per year in paid property taxes if you're single. You're able to deduct up to $5,000 each if you're married filing separately, or $10,000 if you're married filing jointly. This limit applies to both local and state income and property taxes combined.

5. Mortgage insurance

As of early 2022, mortgage insurance payments through the tax year 2021 will be deductible. It was still undetermined whether mortgage insurance payments for 2022 and beyond will be deductible.

You may deduct private mortgage insurance on conventional mortgages, mortgage insurance on FHA mortgages, the funding fee for VA mortgages, and the guarantee fee for USDA mortgages.

You can deduct all of your insurance premiums if you earn $100,000 or less, or $50,000 if you're married filing separately. If you earn between $100,000 and $109,000, your deduction goes down by 10% for each additional $1,000 you earn.

Your mortgage insurance isn't deductible if you earn $109,000 or more, or $54,500 as a married couple filing separately.

6. Home improvements

Necessary improvements to your home may be tax deductible. For example, you may need to update the home for medical reasons or to make the home accessible for someone with disabilities. These expenses may be deductible if the updates are made to accommodate you, your spouse, or a dependent.

7. Home office costs

You may deduct home office costs if you run a business out of your home and use the space exclusively for business. However, you can't deduct expenses if you work from home for an employer. The amount you can deduct depends on how large your office space is relative to the rest of your home.

What homeowner expenses are not tax deductible?

You can never deduct any of the following expenses from your adjustable gross income:

•             Loan origination points

•             Title insurance

•             Closing costs

•             Down payment

•             Forfeited earnest money

You might be able to deduct some of the following expenses — but only if they are related to your home office deduction in certain circumstances. If you're wondering about any of these costs, it's best to ask a tax specialist.

•             Homeowners insurance

•             Fire insurance

•             Homeowners association fees

•             Utilities

•             Refinancing costs

•             Depreciation of the home

•             Domestic services

Add up your tax deductions in the eight eligible categories to find out if an itemized deduction would save you more money than a standard deduction. If you have questions, reach out to a tax specialist for assistance, or contact Team Beery and we can get you in touch with the best professionals in the business!  office@TeamBeery.com or 602-644-1416

December Market Update 2021

Here's what we're seeing in the market these days: 

With buyers and sellers focused on the holidays, the downward trend we are seeing is very common for this time of year. Although the numbers (in terms of inventory) and sales price are not in favor of buyers, hopefully buyers will see some new and rising inventory just around the corner (January/February). On a positive note for buyers, this is still an amazing time for buyers to take advantage of record low interest rates especially with the Federal Reserve acknowledging that they plan to raise rates (more than once) in the upcoming year.

2022 is forecasted to be a seller’s market, albeit a weaker one than we have seen in 2021. Sellers should continue to avoid overpricing their homes because numbers indicate a direct correlation between overpriced listings to higher concessions to buyers and higher days on the market. Overall, Arizona is still seeing record numbers in the real estate market and experts do not see a “cool off” in the near future.

With over 230 people moving into the metro  Phoenix  area a day. Competition  for homes, condos, townhouses are still around... if you will be in the market to buy or sell a home Team Beery would be happy to help out! Contact us to get the process started! ❤ 602-644-1416  or office@teambeery.com 

Tips to get your home staged to sell- 2021

 In this day and age- with HGTV and all the fuss made about homes it is so important to have your home staged... so here are a few tips from the pros to get the most bang for your buck!  

Maximize Curb Appeal

Getting them through the front door starts at the curb. Manicure the lawn, trim the trees and shrubs. Pull weeds and plant some colorful flowers. Clear the walkways. Fix peeling paint and wind up that hose. Paint the address number on the curb.

Make Repairs to Visible Blemishes
Is there something that’s an eyesore, but an easy fix? If looking at it bothers you, it could bother a potential buyer and reduce the appeal of your home. Replace burnt out light bulbs, fix that loose door handle, make needed paint touch-ups.

Make a Buyer’s Entrance Inviting
Freshly paint the front door with a color that contrasts the house. Add a new welcome mat. Hang a fresh wreath on the door.

Let the Light Shine In
Removing heavy window coverings to let in the natural light we all crave. Add lamps to brighten up darker areas to add more cheer.

Remove the Clutter
This serves two purposes. First, you want your home to have an open and inviting appearance. Removing clutter will make rooms appear larger and more appealing. Second, it helps YOU prepare to move. Going through the clutter and getting rid of what you don’t need will make your move much easier.

Remove Personal Items
It will be much easier for a potential buyer to imagine your home as theirs when they can envision their own items in it.

Highlight Special Features
Use accents and color to draw eyes to special features that you want potential buyers to notice—throw pillows, plants or other eye-catching accessories.

Add Mirrors
Use mirrors to make rooms look larger and lighter. Position opposite windows for best effect.

Clean Out Cabinets and Closets
Buyers are nosy and they WILL open the cabinets. Make sure your contents are orderly and organized.

Eliminate Odors
Clean to remove any odors and do not cook any meals with heavy, lasting smells before a showing.

Add Aromas
You can easily add appeal by quartering an orange and adding it to a pot of water with a cinnamon stick. Simmer on low for an inviting aroma. Or bake a fresh batch of cookies (and leave a plate of them on the counter for visitors).

If you feel you need more help- Team Beery is always here to help!  Just contact us and our team can get you on a plan to get your home ready for sale!  

 

Steps After a Home Inspection- What You Need to Know!

There’s nothing as exciting as finding the perfect home. From the right number of bedrooms to a spacious yard, finding a house that satisfies your standards can have you eager to call it home sweet home.

However, excitement can turn to distress if the home inspection report turns up needed repairs. But don’t fret—you can negotiate. Use the information in this blog to better understand the process and prepare questions for your real estate agent.

The inspection process 

Home inspections are an essential part of the home buying process. They can help you uncover potential problems and address these issues in a timely and efficient way so you can focus on moving into your new home. Most inspections focus on:

Appliances & Mechanical 

Structural aspects & Pool

Electrical & Plumbing 

HVAC system

Drainage & Termites

Roof & attic

All done as a visual inspection, if items are called out then we always recommend getting the correct trade in to verify what issues there are and the cost to repair or replace them.  

Next Steps

Once you have received the report from the home inspector, take some time to review it and then we can go over it together. We have the experience and know-how to guide you and determine what repairs or concessions you should request.

Prioritize repairs

After you go over the report, it can be helpful to prioritize the needed repairs by both cost and severity. If there are any significant issues, like foundation damage or bad wiring, you should prioritize these concerns over cosmetic issues or repairs that may be less expensive. Note any problems that will cause you to walk away from the sale if the seller does not address them.

Request repairs or concessions

Once you have your list of must-have repairs, you will need to negotiate with the seller to find a way to correct these issues by asking them to complete the requested repairs as part of the closing. The seller could offer a concession or credit toward the repairs instead. In that case, you will need to agree on a price to complete the repairs, and the seller can either adjust the home’s purchase price or pay an equivalent amount of your closing costs.

Credits or concessions may be the preferred option for many sellers, as making repairs on the home can add another task to an already hectic moving to-do list. Additionally, as the buyer, you have no control over the repairs, and they may not be up to your standards.

If you agree to a concession or credit, make sure you get quotes from a general contractor on how much the repairs will cost—this will help you have a ballpark idea of how much you will need to make these repairs. You can share them with the seller to justify the concession or credit amount.

Other considerations

Before negotiating, make sure you understand the following information:

If a home is listed as-is, it’s unlikely the seller will want to make any repairs or pay to have them fixed. However in some cases, if a home inspection discovers a major problem, you can still request a reduction or credit to help rectify the issue.

If you’re buying a home in a seller’s market, be mindful of how many repairs or concessions you request. A seller is not obligated to make any repairs.

Know when to walk away

If there comes a time when it feels like you’re at an impasse and the seller won’t budge on your repair requests, it may be time to look for a different home. The home inspection contingency clause in your contract allows you to back out of the sale without losing your earnest money deposit if the home inspection results are not up to your satisfaction or you cannot come to an agreement with the seller, within the said amount of time.

Our hope is that you now have a better understanding the negotiating process. Don't worry, we will be with you every step of the way and soon you’ll be ready to move into your dream home. 

As always if you have other questions, we are just a text or phone call away! 

Always use a 'Beery' Good Team

Top Things a Seller Should Consider Before Selling a Home or Condo.

A successful home sale, considered by many owners, is to maximize their proceeds in the shortest time with the least inconveniences.  Just because it is a seller's market doesn't mean that homeowners can shortcut some of the steps that make it happen and they certainly need to avoid commonly made mistakes.

Pricing too high

Low inventory and high demand have contributed to the rising prices of homes.  NAR reports that the median sales price is up 17.8% in the past year and CoreLogic recently released data that July set new record growth of 18% year over year.  This might give sellers a false sense of security about overpricing their home

Pricing a home too high initially can limit activity, attract the wrong buyers and ultimately, cause the home to realize a lower price than optimum.  There is an interesting dynamic that takes place when there is a shortage of homes to show, and a new home hits the market.  Buyers, who have been in the market but not purchased yet, will rush out to see the home.  They are familiar with what homes are selling for and possibly, have even lost bids on one or more.

These savvy buyers expect certain amenities based on the price of the home.  They can tell if a home is priced right or not.

Failure to do Market Preparation

There are people who will buy a home that is not pristine and does not have everything in good working order, but they usually will not pay top dollar for the home.  They recognize the money that needs to be spent and will adjust the price accordingly.

To command the highest price, the home needs to be spotlessly clean with everything working as it should be.  The home needs to be depersonalized to appeal to the broadest group of people.  The clutter needs to be removed so it isn't distracting or give the impression that the rooms, counters, or closets are small.

It is important to evaluate if painting is necessary along with replacing floor covering, appliances and/or light fixtures.

Thinking the agent doesn't matter

Market time is down to 17 days and 89% of homes are sold within a month.  These statistics might be used to rationalize that an agent is not currently playing an important role in the home but that would be a mistake.

Nine out of ten homeowners use an agent, and the four most important reasons were to help sell the home within a specific timeframe, help price the home competitively, help seller market the home to potential buyers and help the seller find ways to fix up home to sell it for more money.

Being present during showings

It may not be convenient, but sellers should try to leave the home when it is being shown.  Buyers like to look at the home freely and ask questions or point out things to their agent.  Sellers may have the best of intentions, but they have not established rapport with the buyer and don't really know what is causing the questions.

Not letting your agent negotiate for you

The role the agent plays as third-party negotiator is one of the most important things an agent does for a seller.  It begins long before buyers even make an offer.  The protocol is for the buyer's agent to go to the listing agent with the question and if necessary, they can ask you and get back to the buyer's agent.

Buyers and sellers have inherently different objectives.  Sellers want the highest price and buyers want to pay the least.  Sellers want the terms of the contract in their favor and the buyers want them to favor them.  Buyers want lots of contingencies to let them out of the contract and sellers want the fewest possible contingencies.  Sellers want the most earnest money and buyers want to put up the least possible.

Agents are skilled at negotiation not only because of training but also experience.  Sellers' experience is usually limited to personal transactions separated by years in frequency.   Agents see multiple transactions in their daily business and can guide people through difficult areas.

Not responding to offers in a timely manner

Normally, an offer can be withdrawn, at any time, up until the point that it is accepted.   The expression a bird in the hand is worth two in the bush reminds us that the offer you have is real and the ones in the bush, may never come to fruition.

A common situation occurs when there is large amount of activity on the home and an offer comes in quickly.  Instead of negotiating on that offer, the sellers wait to see if any better ones are received.  By waiting, the seller runs the risk of the buyer changing their mind.

Alternatively, in the same situation described, the seller may decide to put the home on the market on Saturday morning and let prospective buyers know that they will be deciding on all offers received over the weekend on Sunday evening.

Your agent is a valuable part of selling a home who can offer advice, bring perspective to the transaction, and suggest different ways to help you achieve your goals.  Once you have the right agent, everything else will start to fall into place- that is why Team Beery is here to help! Contact us if you want to get started!!