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January 2019

Home Buying in 2019

Buy in 2019? 7 Must-Do’s Before Homeownership

 1000 500 Sam Radbil
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Buying your first home can be an exhilarating but exhausting experience. Before you even worry about the ins and outs of finding a great plumber, you not only have to find the place you want, but you must get your financial life in order in a hurry if you haven’t done that already. Here are seven important things to do before you purchase your first home:

Get A Realtor to Represent You

buying your first home

Important technical point #1: Sellers pay all real estate commissions, including those of a buyer’s agent. You should find the best and most knowledgeable real estate professional in your area and sign them up to represent you. They will flood your inbox with listings, they will help you negotiate, and they will draft purchase offers. And you won’t have to pay a penny, so there is no reason to purchase a home without the help of a buyer’s agent.

Look at Your Budget

Understand what you can afford and what you can’t. Principal and interest aren’t the only components of a monthly payment. You have to add real estate taxes, property insurance and maybe even private mortgage insurance (PMI) to the equation. You can’t start the process of buying your first home without understanding exactly where to draw the affordability line as there is no sense in wasting time looking at properties you can’t afford.

Credit score

Buying Your First Home: Get Your Credit Score

A few years ago, you had to pay for your credit score, but not anymore. Today, there are many vendors and credit card companies that will provide your score in seconds. If you have a low score, research what you can do to improve it, as your credit score is the first thing lenders look at.

Seek Pre-approval

While pre-approval from a lender does not necessarily guarantee that you will get a loan, it does give sellers assurance that you are creditworthy. When a seller accepts your offer, they are tying up their property until the deal closes, and if you are not a good risk, sellers will look at other offers.

Gather Your Down Payment Resources

Down Payment Resources

Substantial down payments can work magic because:

  • They lower your monthly payment amount.
  • They show the lender you are committed and serious.
  • They show the seller that you have resources.

Yes, you can but a home with no down payment—a VA loan is one example—but your financing options may be limited, and your interest rate could be higher.

Don’t Fear the Inspection

When buying your first home, you will want to have the property inspected by an impartial third party after your offer is accepted. Many persons worry that the inspector will find something bad and the deal will die. Some deals need to be killed, however, especially if an inspector finds glaring defects and problems. Your dream home can quickly become your nightmare if you don’t have it properly inspected while you still can void your purchase contract.

Have a Contingency Plan

If a deal falls through, or if you are turned down for a mortgage, it’s not the end of the world. There are other homes out there and other financing methods available. MN contract for deed is a great way for those with some credit issues to participate in home ownership. Be sure to contact us if you need an alternative to traditional financing.

20 Tax Deductions Every Realtor Needs to Know

 1000 500 Sam Radbil
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Your clients continuously ask you about the tax benefits of buying a home, but are you aware of all of the realtor tax deductions available for your own business?

Realtor Tax Deductions

You need to be aware of the Realtor tax deductions available to you; if not, you are wasting your hard-earned commissions by giving a present to the government. Remember, when we speak of listing Realtor tax deductions, we are talking about money that you can deduct from your income, and if you have substantial 1099 income, you know how important these amounts are.

Mileage

You can deduct the miles you drive in the course of doing business. Be sure to keep a log of these just in case. For 2018, you can deduct 58 cents per mile, so if you drove 10,000 miles for business last year, you could deduct $580.

New Car

Car lease payments are another great Realtor tax deduction. You will need to reimburse your business for any personal use of the business vehicle, however.

Home Office

You can charge your business rent for a home office, utilities, Internet and cable, as long as you can show that your business used the percentage you are deducting.

Real Estate Software

Contact management, open house, and lots of other software applications work great for Realtor tax deductions.

Cell Phones

On your phone all day? Let your business pay for it.

Office Stuff

Papers, pens, ink and even paper clips are all valid Realtor tax deductions.

Phone Answering Service

If you outsource your phones when you are not in, an answering service is deductible along with any other virtual services you use like virtual bookkeepers and assistants.

Office Rent

If you rent an office away from your home, the rent is 100 percent deductible.

Office Equipment

Desks, printers/scanners/fax machines, computers and servers are all legitimate business expenses.

Internet/Phone

Of course Internet service is deductible and so are landline and mobile phone services.

Advertising

Your monthly newsletter and email marketing are business expenses and therefore deductible. Marketing tools like business cards and signs are deductible, and so are the fees you pay to an outsourced social media marketing company.

Entertainment and Travel

A portion of these costs can be deducted, but be sure to check with your CPA about the correct deductible percentages.

Conferences and Conventions

Realtor tax deductions can include registration fees for conferences and conventions.

Ride-sharing

Take an UBER or a Taxi? Be sure to save your receipts.

Client Meals and Entertainment

50 percent of what you spend on these can be deducted from your 1099 income. Saving receipts is very important here.

Gifts for Clients

Spend what you want, but only $25 per gift per client is deductible for 2018.

IRA Contributions

These will work as Realtor tax deductions up top certain amounts, so connect with a professional to find out what the limits are.

Shared Workspace

Just like office rent, this is a deductible expense.

Continuing Education

Have to take a class to learn about current market trends? Be sure to deduct the tuition cost.

Dues and Memberships

Your Realtor association fees and other business group memberships are great Realtor tax deductions.

Organization is the key to getting the most tax value from your business activities, so make sure you keep track of expenses and document everything. Be sure to consult with your tax professional if you have any questions.

The Major Tax Benefits of Homeownership in 2019

 1000 500 Sam Radbil
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Home ownership is still a great deal, and you can save substantial tax dollars because of it. In 2019, however, some of the benefits of home ownership have been curtailed, and those interested in exactly what a homeownership tax credit does should read on.

What is a Tax Deduction?

There is a difference between tax deductions and tax credits. A tax deduction is an amount that you can subtract from your gross income. In previous years, the IRS allowed what they call the standard deduction; that was $12,000 per year per married couple.

That meant if you earned $60,000 in 2018, and were filing jointly, you would be about to immediately deduct $12,000 from your income and pay taxes only on the remaining $48,000.

homeownership tax credit and deductions

An image of a Five Most Common Tax Deductions Chart.

For the tax year 2018, the standard deduction has been increased to $24,000. That means that on a combined income of $60,000, you and your spouse could deduct $24,000 and pay taxes only on $36,000.

The caveat here is that you can either take the standard deduction, or you can itemize expenses, add those up, and use that amount as your deduction. The purpose of doubling the standard deduction was to keep people from having to itemize and save receipts.

What Is a Tax Credit?

A tax credit is something that would actually reduce the amount of taxes that you owe, like the American Opportunity tax credit that applies to attending college.

Capital Gains Tax

There is not a national homeownership tax credit per se. Yes, you can deduct a certain amount of mortgage interest and property taxes, but it may be more advantageous to just take the new higher standard deduction. The mortgage deduction amount for the year 2019 has been capped, and so has the property tax deduction amount.

IRA Considerations

If you are considering the use of your IRA to fund a down payment, tax laws do allow you to forego paying IRA withdrawal taxes up to a certain amount. Be sure to check with your CPA regarding this.

Home Equity Interest Loan Deduction

Again, this is not a homeownership tax credit, but you can deduct a certain amount of home equity loan interest if you have taken out a home equity loan.

Capital Gains Exclusion

Capital Gains Exclusion

Our friends at NOLO tell us:

“Married taxpayers who file jointly get to keep, tax free, up to $500,000 in profit on the sale of a home used as a principal residence for two of the prior five years. Single folks (including home co-owners if they separately qualify) and married taxpayers who file separately get to keep up to $250,000 each, tax free.”

The Comparison

Remember, if you are renting, there are no possibilities for mortgage or property tax interest deductions, and you can’t take out a home equity loan so that deduction will be unavailable also. There are certain states that offer a homeownership tax credit, and renters from Bloomington, Indiana to Eugene, Oregon are out of luck here also.

As you can see, home ownership still provides a lot of tax incentives, and states provide worthwhile homeownership tax credit. If you are unable to get traditional financing, these tax breaks can still be yours through the use of MN contract for deed.