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What is the Mortgage Credit Certificate program?
Are taxes on second homes deductible?
What home-buying costs are deductible?
How do you choose between buying and renting?
There also are a number of economic considerations. Unlike renters, home owners who secure a fixed-rate loan can lock in their monthly housing costs and make prudent investment plans knowing these expenses will not increase substantially.
Home ownership is a highly leveraged investment that can yield substantial profit on a nominal front-end investment. However, such returns depend on home-price appreciation.
“For some people, owning a home is a great feeling,” writes Mitchell A. Levy in his book, “Home Ownership: The American Myth,” Myth Breakers Press, Cupertino, Calif.; 1993.
“It does, however, have a price. Besides the maintenance headache, the amount of after-tax money paid to the lender is usually greater than the amount of money otherwise paid in rent,” Levy concludes.
As for evaluating the risk associated with home ownership, David T. Schumacher and Erik Page Bucy write in their book “The Buy & Hold Real Estate Strategy,” John Wiley & Sons, New York; 1992, that “good property located in growth areas should be regarded as an investment as opposed to a speculation or gamble.”
The authors recommend that prospective buyers spend a few months investigating a community. Many people make the mistake of buying in the wrong area.
“Just because certain properties are high-priced doesn’t necessarily mean they have some inherent advantage,” the authors write. “One property may cost more than another today, but will it still be worth more down the line?”
Explain the home mortgage deduction?
Another point to remember is that the amount of interest on your loan goes down each year you pay on your mortgage (all standard home-loan formulas pay off interest first before significantly paying into principal). That’s why paying extra on your principal every year can help you pay off your loan early.
Should I buy a vacation home?
Some people buy a vacation home with the idea of turning it into a permanent retirement home down the road, which puts them ahead on their payments. Another benefit is that the interest and property taxes are tax deductible, which helps to offset the cost of paying for a second home. A vacation home also can be depreciated if you live in it less than 14 days a year.
Are there tax credits for first-time home buyers?
Requirements vary from program to program. People wanting to apply should contact their local housing or community development office.
Here is a list of four general requirements to keep in mind: * Some credit may be claimed only on your owner-occupied principal residence. *There are maximum income limits, which vary by locality and family size. * You must be a first-time home buyer, which means you must not have had any kind of ownership interest in a principal residence during the past three years. This restriction may be waived, however, if you are buying property within certain target areas. * Allocations must be available. A local MCC program may have to decline new applications when it runs out of funds.
Are seller-paid points deductible?
How do I save on taxes?
* Mortgage interest on loans up to $1 million is completely deductible for the year in which you pay it to buy, build or improve your principal residence plus a second home. * Points, or loan origination fees, also are deductible no matter who pays them, the buyer or the seller. * Most homeowners, except the wealthy and those living in high-priced markets, no longer need to worry about capital gains taxes. The exemption has been raised to $500,000 for married couples and $250,000 for single owners. It can be taken every two years. Homeowners should always keep all receipts of permanent home improvements and of mortgage closing costs. If you do have to pay capital gains taxes, these costs can be added to your adjusted cost basis. Consult your tax adviser for more information.
Resources: * “Tax Information for First-Time Homeowners,” IRS Publication 530, and “Selling Your Home,” IRS Publication 523. Call (800) TAX-FORM to order.
Why buy a house?
* You need a tax break. The mortgage interest deduction can make home ownership very appealing. * You are not counting on price appreciation in the short term. * You can afford the monthly payments. * You plan to stay in the house long enough for the appreciation to cover your transaction costs. The costs of buying and selling a home include real estate commissions, lender fees and closing costs that can amount to more than 10 percent of the sales price. * You prefer to be an owner rather than a renter. * You can handle the maintenance expenses and headaches. * You are not greatly concerned by dips in home values.
What are the rules for mortgage credit certificates?
A limited number of cities have authorized the MCC program. Contact your municipal housing department for more information.
Are points deductible?
Where do I get information on IRS publications?
How do I reach the IRS?
How are fees and assessments figured in a homeowners association?
To find out more about how the IRS views condo association fees, look to IRS Publication 17, “Your Federal Income Tax,” which includes a section on condos. Order a free copy by calling (800) TAX-FORM.
Copyright 1999 Inman News FeaturesFebruary 10, 2012 | No Comments