Tag Archives: real estate taxes

Homeowner Tax Changes

The new tax law that was signed into effect at the end of 2017 will affect all taxpayers. Homeowners should familiarize themselves with the areas that could affect them which may require some planning to maximize the benefits.

Some of the things that will affect most homeowners are the following:

  • Reduces the limit on deductible mortgage debt to $750,000 for loans made after 12/14/17. Existing loans of up to $1 million are grandfathered and are not subject to the new $750,000 cap.40009294-250.jpg
  • Homeowners may refinance mortgage debts existing on 12/14/17 up to $1 million and still deduct the interest, so long as the new loan does not exceed the amount of the existing mortgage being refinanced.
  • Repeals the deduction for interest on home equity debt through 12/31/25 unless the proceeds are used to substantially improve the residence.
  • The standard deduction is now $12,000 for single individuals and $24,000 for joint returns. It is estimated that over 90% of taxpayers will elect to take the standard deduction.
  • Property taxes and other state and local taxes are limited to $10,000 as itemized deductions.
  • Moving expenses are repealed except for members of the Armed Forces.
  • Casualty losses are only allowed provided the loss is attributable to a presidentially-declared disaster.

The capital gains exclusion applying to principal residences remains unchanged. Single taxpayers are entitled to $250,000 and married taxpayers filing jointly up to $500,000 of capital gain for homes that they owned and occupied as principal residences for two out of the previous five years.

Not addressed in the new tax law, the Mortgage Forgiveness Relief Act of 2007 expired on 12/31/16. This temporary law limited exclusion of income for discharged home mortgage debt for principal homeowners who went through foreclosure, short sale or other mortgage forgiveness. Debt forgiven is considered income and even though the taxpayer may not be obligated for the debt, they would have to recognize the forgiven debt as income.

These changes could affect a taxpayers’ position and should be discussed with their tax advisor.

All my best,
Myra Spano, REALTOR®

About the Author:
Myra Spano is a service and results oriented real estate agent with her client’s goals as top priority.  Myra has over 10 years of experience and is recognized as a top producing agent in her office in Virginia Beach and enjoys working with both buyers and those selling their homes.
For information about purchasing a home in Coastal Virginia, visit her website.  This site is focused on homes available for sale in Hampton Roads, Virginia.  Email, call or text to make an appointment begin your home search.
If you are considering selling your home in Virginia Beach or one of the surrounding areas, visit the seller’s website to request a Free Market Analysis of your property.
Myra Spano & Berkshire Hathaway HomeServices Towne Realty is awaiting to provide the real estate guidance you need.  Contact us now to make your home dreams come true!
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Debt Relief May Trigger Tax

The Mortgage Debt Forgiveness Act, originally passed in 2007, was extended three times to protect homeowners from paying income tax on debt that was relieved due to foreclosure, short sales or deed in lieu of foreclosure.  Mortgage Debt Relief example 2017.png

The law expired on December 31, 2016 and unless it is extended again, homeowners with debt relief in 2017 may be subject to tax.

A homeowner might feel a sense of relief without the obligation of a delinquent mortgage but just because the payments are no longer due doesn’t mean that there isn’t another obligation that replaces it. If a lender cancels or forgives debt, a taxpayer must include the cancelled amount in their income for tax purposes depending on the circumstances. The tax significance could be serious.

This previously allowed relief only applied to a taxpayers’ acquisition indebtedness of their principal residence which did not include second homes and investment property. The maximum amount was limited to $2 million of mortgage debt forgiveness or $1 million if filing separately.

Due to the serious consequences involved in short sales and foreclosures, it is advised that homeowners faced with this possibility should seek expert advice from their legal and tax professionals.

All my best,
Myra Spano, REALTOR®

About the Author:
Myra Spano is a service and results oriented real estate agent with her client’s goals as top priority.  Myra has over 10 years of experience and is recognized as a top producing agent in her office in Virginia Beach and enjoys working with both buyers and those selling their homes.
For information about purchasing a home in Coastal Virginia, visit her website.  This site is focused on homes available for sale in Hampton Roads, Virginia.  Email, call or text to make an appointment begin your home search.
If you are considering selling your home in Virginia Beach or one of the surrounding areas, visit the seller’s website to request a Free Market Analysis of your property.
Myra Spano & Berkshire Hathaway HomeServices Towne Realty is awaiting to provide the real estate guidance you need.  Contact us now to make your home dreams come true!

5 Property Tax Questions You Need to Ask

TaxWhat to ask:

1. What is the assessed value of the property? Note that assessed value is generally less than market value. Ask to see a recent copy of the seller’s tax bill to help you determine this information.

2. How often are properties reassessed, and when was the last reassessment done? In general, taxes jump most significantly when a property is reassessed.

3. Will the sale of the property trigger a tax increase? The assessed value of the property may increase based on the amount you pay for the property. And in some areas, such as California, taxes may be frozen until resale.

4. Is the amount of taxes paid comparable to other properties in the area? If not, it might be possible to appeal the tax assessment and lower the rate.

5. Does the current tax bill reflect any special exemptions that I might not qualify for? For example, many tax districts offer reductions to those 65 or over.

All my best,
Myra Spano, REALTOR®
 

About the Author:
 
Myra Spano is a service and results oriented real estate agent with her client’s goals as top priority.  Myra is recognized as a top producing agent in her office in Virginia Beach and enjoys working with both buyers and those selling their homes.
 
For information about purchasing a home in Virginia Beach, visit her website.  This site is focused on homes available for sale in Hampton Roads, Virginia.  Email, call or text to make an appointment begin your home search.
 
If you are considering selling your home in Virginia Beach or one of the surrounding areas, visit the seller’s website to request a Free Market Analysis of your property.
 
Myra Spano & Berkshire Hathaway HomeServices Towne Realty is awaiting to provide the real estate guidance you need.  Contact us now to make your home dreams come true!

Save Interest, Build Equity & Shorten the Term

forced savings.pngIf you invest in a savings account, you’ll make less than 1% and would have to pay income tax on the earnings. On the other hand, contribute something extra to your house payment and you’ll earn at the mortgage interest rate which is certain to be more than you are earning in the bank.

Making additional principal contributions on your mortgage will save interest, build equity and shorten the term. An extra $100 a month in the example shown will save thousands in interest and shorten the term of the mortgage as well.

equity accelerator.png

Reducing your cost of housing is another way to improve the investment in your home. Becoming debt free is a worthy goal that is achieved with discipline and good decisions. Suggestions like this are part of my commitment to help people be better homeowners when they buy, sell and all the years in between.

Check out what would happen if you were to make additional payments on your mortgage.

All my best,
Myra Spano, REALTOR®
 

About the Author:
 
Myra Spano is a service and results oriented real estate agent with her client’s goals as top priority.  Myra is recognized as a top producing agent in her office in Virginia Beach and enjoys working with both buyers and those selling their homes.
 
For information about purchasing a home in Virginia Beach, visit her website.  This site is focused on homes available for sale in Hampton Roads, Virginia.  Email, call or text to make an appointment begin your home search.
 
If you are considering selling your home in Virginia Beach or one of the surrounding areas, visit the seller’s website to request a Free Market Analysis of your property.
 
Myra Spano & Prudential Towne Realty is awaiting to provide the real estate guidance you need.  Contact us now to make your home dreams come true!

Opportunity Costs

iStock_000003622913X200x200.jpgSometimes, there are costs associated with not taking a particular action. If a person left their money in a certificate of deposit earning 2% when they could have made an investment that earned 8%, the difference is the opportunity costs associated to not taking action.

If a couple has a down payment and good credit, locking in a low interest rate mortgage for 30 years could easily provide their lowest cost of housing. If that couple waits three years to purchase a home, the price would probably be higher as would the mortgage rate.

However, assuming the price and interest rate remained constant, look at what the opportunity costs might be compared to doing nothing.

If their money was invested in a certificate of deposit at 2.00%, in two years their $8,750 would have grown to $9,104. They would have earned $354 and had to pay ordinary income tax on the interest.

If their money was invested in the stock market that had increased 7%, in two years they would have a profit of $1,268 which would be subject to long-term capital gains tax.

On the other hand, it the same investment was used to buy a home that increased in value at 3% annually, the equity would be $31,938 or an increase of $23,188. Tax would not be triggered until the home is sold and may not be due then based on their homeowner’s principal residence exclusion.

The home goes up in value due to appreciation and the unpaid balance goes down because of amortization. The dramatic difference in growth in the equity of the home is effected by leverage: the use of borrowed funds controlling the asset.

A home is a place of your own where you can feel safe and secure, to enjoy with your family and friends and in many instances, a very good investment. It is difficult to measure the opportunity costs of intangibles but not necessarily money.

Make your own projections with Your Best Investment.

your best investment.png

All my best,
Myra Spano, REALTOR®
 

About the Author:
 
Myra Spano is a service and results oriented real estate agent with her client’s goals as top priority.  Myra is recognized as a top producing agent in her office in Virginia Beach and enjoys working with both buyers and those selling their homes.
 
For information about purchasing a home in Virginia Beach, visit her website.  This site is focused on homes available for sale in Hampton Roads, Virginia.  Email, call or text to make an appointment begin your home search.
 
If you are considering selling your home in Virginia Beach or one of the surrounding areas, visit the seller’s website to request a Free Market Analysis of your property.
 
Myra Spano & Prudential Towne Realty is awaiting to provide the real estate guidance you need.  Contact us now to make your home dreams come true!

Money Down the Drain

iStock_000012313013Small200.jpgPrivate mortgage insurance is necessary for buyers who don’t have or choose not to put 20% or more down payment when they purchase a home. It is required for high loan-to-value mortgages and it provides an opportunity for many people to get into a home who otherwise would not be able.

The problem is that it is expensive and a homeowner’s goal should be to eliminate it as soon as possible to lower their monthly payment and avoid putting good money down the drain.

FHA loans made after 6/1/13 that have 90% or higher loan-to-value at time of purchase have mortgage insurance premium for the life of the loan. FHA loans made prior to 6/1/13, can have the MIP removed after five years and if the unpaid balance is 78% or less than the original loan-to-value.

VA loans do not require mortgage insurance.

Conventional loans, in most cases, with higher than 80% loan-to-value require mortgage insurance. The cost of that insurance varies but with a $250,000 mortgage, it could easily be between $100 and $200 a month.

Your monthly mortgage statement should itemize what your monthly fee is for the mortgage insurance. Unlike interest that is deductible, most homeowners are not able to deduct mortgage insurance premiums.

If you plan to remain in the home or to stay there for a considerable number of years, the solution may be to refinance the home. If the home has increased since it was purchased, the loan-to-value at its new appraised value may not require PMI. You might even be fortunate enough to obtain a lower rate than you currently have.

All my best,
Myra Spano, REALTOR®
 

About the Author:
 
Myra Spano is a service and results oriented real estate agent with her client’s goals as top priority.  Myra is recognized as a top producing agent in her office in Virginia Beach and enjoys working with both buyers and those selling their homes.
 
For information about purchasing a home in Virginia Beach, visit her website.  This site is focused on homes available for sale in Hampton Roads, Virginia.  Email, call or text to make an appointment begin your home search.
 
If you are considering selling your home in Virginia Beach or one of the surrounding areas, visit the seller’s website to request a Free Market Analysis of your property.
 
Myra Spano & Prudential Towne Realty is awaiting to provide the real estate guidance you need.  Contact us now to make your home dreams come true!

Cash Flow and Equity Build-up

Cash Flow.pngMany years ago, Las Vegas hotels would entice customers with inexpensive rooms, meals and entertainment so they would gamble. It may have worked initially but if you’ve been to Las Vegas recently, the bargains are gone. Hotels expect each division to be a profit center on its own. As a consumer, I might not like the changes but as an investor, I’d have to be pleased with increased profitability.

Years ago, real estate investors used to accept negative cash flow buoyed by tax incentives in hopes of making a big payday due to appreciation when they sold it. Today’s investors are focusing on tangible, current results like cash flow and equity build-up.

Cash flow is the amount of money you have left over after collecting the rent and paying the expenses. Since rents have gone up considerably due to supply and demand in the last few years and mortgage rates are at near record lows, income is up and expenses are down, making the cash flows attractive.

If the cash flow is sufficient, you could have a good investment even if the value of the property never increased. Cash on Cash doesn’t consider appreciation and measures the cash flow before tax advantages by the initial investment. A rental with $3,170 CFBT divided by an initial investment of $29,000 would generate a 10.93% Cash on Cash rate of return.

Low down payments on investor properties are also a thing of the past. Non-owner occupied mortgage money is available but the investor should expect to put down 25-30%. An advantage of having a smaller mortgage is a lower payment.

Most mortgages are amortized loans with both principal and interest due with each payment. The forced savings of the principal contribution builds equity in the property and can be considered a part of the rate of return.

A $100,000 mortgage at 4.5% for 30 years would have $1,613.29 applied to principal in the first year. Divide that by the same $29,000 initial investment and the amortization would generate another 6%.

Without factoring in appreciation or tax advantages, this rental example generates much more than most alternative investments. There certainly are many different aspects that affect the risk and return on rental investments. If you haven’t scrutinized single-family rental opportunities in a while, you should look again.

All my best,
Myra Spano, REALTOR®
 

About the Author:
 
Myra Spano is a service and results oriented real estate agent with her client’s goals as top priority.  Myra is recognized as a top producing agent in her office in Virginia Beach and enjoys working with both buyers and those selling their homes.
 
For information about purchasing a home in Virginia Beach, visit her website.  This site is focused on homes available for sale in Hampton Roads, Virginia.  Email, call or text to make an appointment begin your home search.
 
If you are considering selling your home in Virginia Beach or one of the surrounding areas, visit the seller’s website to request a Free Market Analysis of your property.
 
Myra Spano & Prudential Towne Realty is awaiting to provide the real estate guidance you need.  Contact us now to make your home dreams come true!

Tips, Hints and Insights for Savvy People

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