#MoneyManagementMonday- May 22, 2017

Tax Advantages of Owning a Home

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Tax Benefits That Come From Owning A Home

Tax Advantages of Owning a HomeIt has long been understood that there are considerable financial benefits to owning a home. You are paying money into an actual investment, instead of into your landlord’s bank account, after all. But beyond this basic financial benefit come some other advantages as well, particularly when it comes to tax time.

When you own a home, you can enjoy some tax advantages that renters just don’t have access to. These tax advantages of owning a home, along with fulfilling the American dream are what causes many to abandon their plans to continue renting for an indefinite period.

With rents around the country skyrocketing the tax benefits of owning a home only become more magnified!

The exact tax benefits that you will get from owning your home will vary based on some factors, but suffice it to say that the average homeowner typically gets thousands of dollars in tax deductions related to ownership. The value of these deductions is considerable, and will be especially notable if you have always rented before.

There are several common tax deductions that homeowners can claim, including:

Capital Gains Exclusion

The capital gains exclusion from selling your home is easily the most substantial tax benefit an owner gets from ownership. When you sell your home – hopefully for more than you bought it for – you get to keep the profits up to $500,000 when you are married and $250,000 if single. When you consider that selling other investments, like stocks or bonds, is often taxed at around 15%, you can see why this is such a great benefit. You have the potential to walk away with up to half a million dollars without paying taxes.

Typically these profits are used to buy another home, which is why the tax system is designed this way. You take your tax-free money and invest it in more real estate – the smart move for you and the economy. The latest version of the capital gains exclusion was a tax advantage that was put into place in 1997. You can read about real estate capital gains taxes in our comprehensive article that explains everything you need to know on the subject. Find out who is eligible and who isn’t. See some other provisions of the law you may not be familiar with including the military tax exclusion, spousal death exclusion and the wealthy tax loophole that was closed.

Mortgage Interest

In all the excitement of purchasing a home, many buyers forget about all of the home buying tax deductions come April in the next calendar year. There are lots of them too including mortgage interest, discount points, property taxes, pro-rated interest, mortgage insurance and a few others.

When you take out a mortgage, you can expect to pay a considerable amount of interest, depending on the price of your home and the rate of the mortgage. Much of this interest is paid up front on the loan, meaning that for the first years of home ownership, your monthly payments will be going towards interest – two-thirds of each payment, in many cases. Even if you get a fantastic rate on your mortgage, you are still borrowing hundreds of thousands of dollars, which results in a sizable interest payment. Fortunately, you can deduct this mortgage expense on your taxes.

The federal government allows you to deduct all of the interest on the mortgage up until you hit $1 million in interest or $500,000 if you are married and filing separately from your spouse. For most home buyers this means you will be able to deduct mortgage interest throughout the life of the loan.

If you were to take out a mortgage for $300,000 and you had a fixed-rate loan at 4% for 30 years, you would be paying around $11,000 over the first year towards interest. If you fall into the 25% tax bracket, you would be able to deduct approximately $2750 off your taxes. Being able to deduct an extra $2750 off of your yearly tax bill is something anyone can appreciate. In fact, that could be a couple of months rent in some areas depending on what type of property you are renting.

Discount Points

Home Tax Deductions When you got your loan for the house, you may have chosen to purchase discount points on the rate of the loan. A point is essentially 1 percent of the loan amount. So using the example of a $300,000 loan one point would equal 1% of $300,000 or $3000. There is a price for each point, but then you get the enjoy the benefit of having a lower interest rate on your home and the lower monthly payments that result from such an interest rate.

Typically you should pay points if you expect to be in a home for an extended period. Some buyers choose to do this, and some do not, but those that do may be able to deduct the cost of those points. A single point purchase could save you $500 or more off of your tax bill the first year after you buy your home.

When trying to decide whether it makes sense to pay points or not, you will want to take the difference in payment between paying points and not paying them. You then need to figure out how long it will take for a payback on that difference. If you are only planning on staying in the home a couple of years, then you would probably opt not to pay points. As the difference in payment would not be enough to offset the cost savings.

Property Taxes

Wherever you buy your home, you can expect to pay some property taxes. The local school district, the county and the town or city itself may all need funds every year to provide services to the community where your home is located. Usually based off of the assessed value of the house, property taxes are an expense that every homeowner needs to plan for. They can be costly, especially in some regions of the country.

One bonus that comes from paying those taxes, though, is that you can deduct them from your yearly tax bill. You could easily wind up deducting $4,000 or $5,000 a year just from property taxes. Again, a deduction that everyone can appreciate. The amount you can deduct should be discussed with your accountant when preparing your yearly taxes.

Mortgage Insurance

For most people, paying a 20% down payment on a new home is just not possible. Unless you make a considerable amount of money from your job, enjoy some inheritance or have help from your family, 20% is often too hefty an amount for most people to come up with. In fact, many people incorrectly assume a small down payment precludes a buyer from purchasing a home. This is certainly not the case. The cost of not having a 20% down payment, however, is that you have to take out mortgage insurance in most circumstances.

Fortunately, you should be able to deduct the cost of your mortgage insurance off of your tax bill, as long as you make less than $100,000 a year. If you make between $100,000 and $109,999, you may also be able to deduct a portion of your mortgage insurance payment. Most people who claim this deduction enjoy a sizable deduction amount, averaging around $1,000.

As of now, the mortgage insurance deduction has not been renewed by Congress for 2015. If it is not renewed, you will not be able to use this deduction. However, Congress typically waits to renew this particular deduction until the end of the year, so there is hope that it will be there when you file.

Home Improvements

Tax Benefits of Owning a HomeIt is prudent that you save the receipts for all work done on your home that is considered an improvement. Things such as replacing old kitchen counter tops with granite, replacing a new heating system, adding new windows, replacing a roof are considered improvements. Keep in mind however that not everything you do to your home is considered an improvement. A repair, for example, is not regarded as an improvement. While in the real sense of the word it is, the IRS does not treat repairs the same as improvements. So fixing a window is not the same as replacing one.

While you cannot deduct these improvements from your current year’s tax bill, when it comes time to sell, they can be added to the purchase price of your home. This will be used to figure the cost basis for tax purposes. As a homeowner it is important to understand what home improvements add valueand which don’t. Many mistakenly believe that all home improvements add value. This is certainly not the case.

Home Equity Loans

One little-known tax break for owning a home is the ability to deduct the interest on a home equity loan. When making some of the home improvements discussed above you can take out an equity loan to do so. The interest generated from the loan can be deducted on your taxes up to $100,000 of mortgage debt.

Home Office Deduction

Another tax benefit of owning a home is the possibility of deducting a home office on your taxes. There are some requirements that you must meet explained in detail in the IRS guidelines including it’s a principal place of your business, or you are regularly using a space in your home for business. This is a deduction you will not want to fool around with as there is a high audit rate from those who claim the home office deduction.

Final Thoughts

There are more than just tax benefits for owning a home. Over the long haul, a home is an investment. While owning a home each month you are building equity in the property every time you make a mortgage payment. Even though we have just come out of one of the toughest times for real estate in decades, historically it is a wealth builder. In fact, from a long-term perspective, it is one of the best investments you can hold.

Lastly, the enjoyment one gets from having something tangible they own can’t be discounted. Many years of memories and happiness are made in the homes we live in. All these things make the American dream of home ownership alive and well.

Additional Helpful Tax-Related Articles

Use these additional resources to understand the tax benefits of home ownership including whether renting or buying makes more sense given your life circumstances.

Credit to: http://www.maxrealestateexposure.com/tax-advantages-of-owning-a-home-2/

No Strings Attached

 

I am always suspicious of an unsolicited phone call announcing that I’ve received something for free. I realize that there is a “catch” to things like that. I have won 3 days and 3 nights at a nice resort only to find out that I had to go to a meeting where they try to sell you a time share in that resort. I’ve also been offered a free 6-month subscription only to find out that they will start billing me automatically after that first 6 months. There are many gimmicks that promise something Free that I am a bit jaded about it. I usually say that something that is free to me always cost someone else something. There is no such thing as a free lunch. After reading in the Word this morning, I realize that there is something that is free. Check this out…

If you confess with your mouth, “Jesus is Lord,” and believe in your heart that God raised him from the dead, you will be saved. 10 One believes with the heart, resulting in righteousness, and one confesses with the mouth, resulting in salvation. 11 For the Scripture says, Everyone who believes on him will not be put to shame, 12 since there is no distinction between Jew and Greek, because the same Lord of all richly blesses all who call on him. 13 For everyone who calls on the name of the Lord will be saved. (Romans 10:9-13 CSB)

I have not done anything to deserve the love from God that I’ve experienced. He doesn’t love me because I love Him. He loved me first. He loves me even when I don’t love Him. I can’t quite wrap my head around that level of love. I have accepted Him as my Lord. I do believe in Him. I don’t deserve His love. I don’t deserve to be saved, but I am profoundly grateful.

I used to think going to church made me a Christian.

I used to think that not cursing made me a Christian.

I used to think that obeying my parents made me a Christian.

That could be a long list of what I used to think. I understand now that I go to church; guard my tongue, honor my parents BECAUSE I’m a Christ follower NOT to become a Christ follower. I am a Christian because I have surrendered my heart to the Lord. I believe in God. I believe He is the ONLY ONE Who can save me.

Nothing I can do contributes to my being saved. He did it all. I honor Him BECAUSE He has saved me and promised me a future. My life has been different since I figured this out. I can’t do enough or not do enough to be saved. He has that handled. There are no strings attached to my salvation. I see life different since He’s saved my soul. I want to live for Him. I want to live in honor of Him. I want to trust Him in obedience. I want my surrender to Him to continue today not out of fear, but in faith that He will continue to walk with me through this life.

He saved me with no strings attached.

Pressing On!

Dwayne

The Rock

 

stone isolated white background natural rock granite solid bouldWhen I think of the word rock, I think of something solid. A rock is hard to break. A rock makes a great foundation – we manufacture a rock like substance called concrete. The Lord refers to the Rock often as our faith foundation. There is a song that says: “On Christ, the Solid Rock I stand; all other ground is sinking sand”. I have also been known to trip over a rock. If the rock is big enough I can stand on it or go around it.

Paul makes it clear that even those that are not of Jewish decent have access to the foundation of Jesus Christ which produces in us righteousness. Check this out…

30 What should we say then? Gentiles, who did not pursue righteousness, have obtained righteousness—namely the righteousness that comes from faith. 31 But Israel, pursuing the law of righteousness, has not achieved the righteousness of the law. 32 Why is that? Because they did not pursue it by faith, but as if it were by works. They stumbled over the stumbling stone. 33 As it is written,

Look, I am putting a stone in Zion to stumble over
and a rock to trip over,
and the one who believes on him
will not be put to shame. (Romans 9:30-33 CSB)

I am putting my faith in Creator God. I believe He created the earth, the universe in all its expanse and intricate detail. He is the One in Whom I trust to lead me through whatever I face in this life. My journey here for what feels like a short span prepares me for eternity which is unmeasurable time.

I love David’s prayer – seeking God as a refuge. Check this out…

Be a rock of refuge for me, where I can always go. Give the command to save me, for you are my rock and fortress. (Psalm 71:3 CSB)

I stand on the Rock Eternal because He gives me strength.

I stand on the Rock Eternal because He picks me up when I stumble.

I stand on the Rock Eternal because He saved me.

I stand on the Rock Eternal because He loves me.

Pressing On!

Dwayne

#Buy/SellSaturday- May 20, 2017

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The final walk-through is your chance to ensure all negotiation requirements have been met, and that nothing is out of sorts before closing on escrow. Here’s the best way to approach it!

What to Check on a Final Walk Through

Living Room

First you will want to inspect ceilings, walls, and floors. They may look different now that they’re barren from when they were staged to look enticing. Turn on and off all the light switches to make sure they’re not stuck and do, in fact, connect to something. Even though it may be time consuming, test the heating and air conditioning, as those will be of dire importance to you soon enough.

Kitchen

In the kitchen, you’ll first want to check that all of the appliances are in working order. Also try out the garbage disposal and any exhaust fans, such as the one above the stove.

Bedrooms

Throughout the house, check that the doors don’t squeak or wiggle off their hinges. Test all the outlets with a simple power cord or charger of some kind. Open and close all the windows.

Bathroom

What to keep an eye out for in the bathroom is pretty obvious. Inspect around all visible piping for leaks, cracks, puddles, etc. Also run the sink and tub water to make sure everything is running smoothly, no funny smells, etc. And don’t forget to flush the toilet!

Other Tips

People often forget to test the garage door opener. You’ll need that!

Check for things you though would be included. This could include appliances, lights, chandeliers, and so on.

Make sure the previous owners didn’t leave any trash, debris, stains, etc.

Perhaps most importantly, don’t do your final walk through right before it goes to escrow. Give yourself a night to sleep on it. This is about to be the biggest investment of your life! It’s okay to take your time!

Credit to: https://www.househunt.com/news-realestate/what-to-check-on-a-final-walk-through/

 

Adopted

 

LucasFullSizeRenderIt was 7 years ago next month that I first met a young boy from Nicaragua named Lucas. He still remembers meeting me for the first time, even the clothes I was wearing. There were four families in our church seeking to adopt 5 siblings from Nicaragua and bring them back to Carroll County, Georgia. I can’t begin to put into words the events that happened from June 2010 to February 2011, but we landed in Atlanta with all five kids legally adopted! There were some heroes involved and some amazing miracles from the Lord that helped us pull that off. Today my son Lucas graduates from high school and we are so excited with him.

I must say that I’ve learned more about my Heavenly Father since becoming a Dad. Luke was my 5th child so I had some experience being Dad. I still can’t describe the fulfillment of being a Dad and how much love I have for them. When Luke came along, that same love started coming out. He was nearly 12 years old, but the love that the Lord had for me really helped me love Luke even deeper. We had missed so much of Luke’s childhood. It hasn’t always been easy over the past 6.5 years, but God has shown us even more how to love deeply like He loves. Check this out…

14 For all those led by God’s Spirit are God’s sons. 15 You did not receive a spirit of slavery to fall back into fear. Instead, you received the Spirit of adoption, by whom we cry out, “Abba, Father!” 16 The Spirit himself testifies together with our spirit that we are God’s children, 17 and if children, also heirs—heirs of God and coheirs with Christ—if indeed we suffer with him so that we may also be glorified with him. (Romans 8:14-17 CSB)

I am an adopted son of God. He made me an heir to all the promises and the future that He’s prepared.  I am so humbled to think about the Lord adopting me into His family. I am certainly not perfect and I’m sure I hurt Him at times and embarrass Him, but He just keeps loving me.

Today as Luke graduates, there is a sense of accomplishment for him. Tina and I also feel a sense of accomplishment as he gets ready to enter the work force and build a life of his own. It’s exciting to look back on the journey when growth and progress happen. It’s hard in the middle of it because we can’t always measure the progress.

My walk with the Lord sometimes feels stale and slow but I just keep plugging along. He honors my faithful “plugging along”. He speaks to me. He sustains me. He encourages me. I am His son. I am adopted into His family with an incredible future. I am so thankful to know the Lord and the promise and purpose that He gives for my life and the hopeful future that is ahead.

Pressing On!

Dwayne

The Fight Within

 

devil angelI remember the cartoons when I was a kid that depicted the devil with a red body and a pitch-forked tail sitting on one shoulder whispering in my ear. He’s coaching me to do bad stuff. Then, on the other shoulder is an angel trying to coach me to do the right thing. I remember thinking this was “cute” when I was young. As I aged and grew in wisdom, I can see some truth in that. The enemy has never relaxed at pushing me. He is constantly pulling and trying to coach me into areas of weakness of my flesh. As I read God’s Word and lean into Him for wisdom and strength to live out my faith, the fight within keeps going. In Romans 7, Paul, the Apostle addressed this very battle and in fact, he verifies the inward fight. Check this out…

18 For I know that nothing good lives in me, that is, in my flesh. For the desire to do what is good is with me, but there is no ability to do it. 19 For I do not do the good that I want to do, but I practice the evil that I do not want to do. 20 Now if I do what I do not want, I am no longer the one that does it, but it is the sin that lives in me. (Romans 7:18-20 CSB)

There is always a fight with my flesh brewing somewhere in my life. My fight can be traced back to pride. I must constantly beat down pride so that The Lord can do some good work inside my soul. Pride is like the fuel that fuels my fleshly desires of lust, greed and notoriety. When the Spirit can win the battle for my heart, I become humble, grateful and generous. I have been approaching the Word of God differently because I believe The Word is a huge help in putting pride in its place and allowing the Spirit of God to shine through me. I want the Spirit of God to direct my flesh in proper choices and ideas. I want the Spirit of God to win today’s battles. I’ve read the end of the book and I know Who wins in the end. I want to finish my life strong with the Spirit of God clearly keeping my flesh in check.

Pressing On!

Dwayne