Real Estate

­

Deduct Home Sale Gains from Income Tax

Selling your home? You may be able to deduct home sale gains from income tax.http://www.dreamstime.com/stock-photography-happy-family-near-new-house-real-estate-concept-image31414402

For U.S. federal income tax purposes, you may be able to exclude from income any gain up to $250,000 for a single taxpayer and $500,000 for a married couple filing a joint return. Generally, to exclude the gain, you must have owned and lived in the property as your main home for two of the five years prior to the date of the sale. If you lose money on a sale, the loss is not tax deductible.

Adjusted Basis

A dollar amount known as your adjusted basis determines whether you experience a gain or a loss. If you purchased or built your home, your initial cost basis typically is the cost to you at the time of purchase. If you inherit a home, the cost basis is the fair market value on the date of the decedent’s death or on a later valuation date selected by a representative of the estate.

The formula for determining your gain or loss is as follows:

selling price – selling expenses = amount realized

amount realized – adjusted basis = gain or loss

The cost basis may be adjusted over time due to a number of conditions. For example:

  • Additions and other improvements that have a useful life of more than one year and that add to the value of your home (e.g., swimming pool, heating and air conditioning systems, interior improvements). Repairs that keep your house in good condition do not apply.
  • Money spent to restore damaged property.
  • Payments for granting an easement or right-or-way.
  • Depreciation if the home was used for business or rental purposes.

 

By |December 2nd, 2015|Real Estate, Taxes|

Paying Off Your Mortgage Early

paying off your mortgage earlyIs it a good idea to pay off your mortgage early? There is no right or wrong answer that applies to everyone. There are many benefits and some potential drawbacks to be considered.

The following 3-minute video highlights some of the things you may want to keep in mind when paying off your mortgage early.

Select photos in video courtesy of vorakorn, nipitphand, antpkr, Krishnan, M-pics, moggar12 and vitolef at freedigitalphotos.net

Thinking About a Reverse Mortgage?

Image courtesy of Kittisak/FreeDigitalPhotos.net

It’s important that you understand how a reverse mortgage works and to explore all your options and needs before signing any papers. For example, do you plan to live in your home for a long time? A reverse mortgage usually makes more sense the longer you live in your home. If a health issue or other event may cause you to move out soon, a reverse mortgage is an expensive way to cover short-term cash needs.

There may be better, less expensive choices available to you, such as mortgage refinancing, securing a different type of home equity loan, or reducing your living expenses in other areas. You are required to go to housing counseling before signing up for a federally-insured reverse mortgage; however, consultation with a trusted financial advisor before any decision involving your home is a good idea.

For more details about reverse mortgages and questions to ask, read this informational PDF document from the Consumer Financial Protection Bureau.

By |January 14th, 2014|Financial Planning, Real Estate, Retirement|

Operating a Home Business: Can It Work for You?

Estimates by the U.S. Bureau of Labor Statistics in 2010 show that more than 18 million businesses are run primarily out of a home. Given recent advances in mobile and wireless technology, as well as the cost-cutting realities of a low-growth economy, that number may be even higher. If you’re considering running a home business, there are a number of things you’ll want to consider.

Operating a Home Business

First, make sure your home business meets zoning regulations and that any required licenses or permits are obtained. Many municipalities and condominiums restrict home business activities. If customers will come to your home, you may need to consider parking, disability access and display of advertising. You may also need to amend your homeowner’s insurance policy to cover commercial activities.

The IRS may allow you to deduct certain expenses — such as phone, internet hookup, a portion of your rent or mortgage — based on the percentage of space in your home that the office occupies. To qualify, the home office must be used exclusively for business; a guest room or other shared space will not qualify. The key to claiming any of these deductions is to prove that they are necessary for and confined to business use.

Finally, you should also consider how the arrangement will impact your family. Will there be tension if you’re home all day? Will your work presence cramp your family’s daily activities? How will they interact with clients or employees? Make sure to give this issue serious thought and discuss it with your family.