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YEAR END TAX SERIES: CREDITS AND DEDUCTIONS FOR HOMEOWNERS SET TO EXPIRE

by Frank Taglienti

YEAR END TAX SERIES: CREDITS AND DEDUCTIONS FOR HOMEOWNERS SET TO EXPIRE
First in a series of special year-end tax tips for homeowners.

The end of the year will put an end to some great tax benefits for homeowners, including:


 

  • A tax credit for installing energy efficiency upgrades.
  • The deduction for mortgage insurance (MI) payments.
  • A temporary reprieve to a tax rule that makes homeowners pay taxes on mortgage debt their lender forgives during a foreclosure or short sale.


Energy-Efficiency Tax Credit

Some homeowners who install energy-efficient insulation, windows, doors, furnaces, water heaters or roofing materials will be able to take a tax credit equal to of 10 percent of the cost of those improvements.

There's a $500 overall cap on the tax credit, caps on certain projects (the tax credit for windows is capped at $200, for example) and not all energy-efficiency improvements qualify.

The rules are complicated and how much you can claim depends on whether you've taken the tax credit in prior years and which upgrades you install.

You can read the fine print at the IRS website or the federal government's ENERGY STAR website.

Mortgage Insurance Deduction

The mortgage insurance (MI) and debt forgiveness tax deductions will end Dec. 31, 2013 unless Congress votes to renew them.

This isn't the first time these homeowner tax benefits have been threatened. In 2012 they expired on Dec. 31 and it took Congress until January 2013 to renew them. Homeowners were left in the lurch waiting to hear if those important tax provisions would be renewed.

The MI deduction allows you to deduct the cost of mortgage insurance, but there are restrictions. For example, it phases out after you earn more than $109,000 and it matters when you got your mortgage.

The IRS' Mortgage Related Expenses app will tell you if your mortgage insurance is deductible.


Mortgage Debt Forgiveness

Mortgage debt forgiveness can happen when you lose your home to foreclosure or you sell it in a short sale. In both cases, the lender generally isn't repaid the full amount you owed on your mortgage.

The difference between what you owed and what the lender actually got from the foreclosure or short sale is "forgiven debt." And the IRS says forgiven debt is taxable income. So if you have debt forgiven, you owe tax on that "income."

During the housing crisis, Congress decided taxing financially troubled homeowners on income they didn't actually receive wasn't fair, so it set aside the IRS forgiven income rule until the end of 2013.

For that exemption to continue, Congress has to extend it. Otherwise, starting Jan. 1, 2014, you'll owe income tax on the amount of debt your lender forgives in a short sale, foreclosure, deed-in-lieu or other foreclosure alternatives that don't result in your mortgage being completely repaid.

SHOULD YOU MAKE THAT HOMEOWNER'S INSURANCE CLAIM?

by Frank Taglienti


Should You Make That Homeowner's Insurance Claim?

In some states, making a single homeowner's insurance claim can raise your annual insurance premium by more than 20%, according to data collected by InsuranceQuotes.

Nationally, making a homeowner's insurance claim leads to an average annual premium increase of 9%.

The states with the highest post-claim increases include:

 

  • Minnesota 21.2%
  • Connecticut 20.6%
  • Maryland 19.3%
  • California 18%
  • Oregon 17%
  • Arizona 17%
  • Alaska 17%

The states with the lowest post-claim increases include:

  • Texas (insurers are not allowed to boost premiums after the first claim)
  • New York 1.1%
  • Florida 1.8%
  • Vermont 2%
  • Massachusetts 2%

If you're in a state where rates rise a lot after a claim is filed, think before you file a relatively small claim. An example show's why. Suppose:

  • Your insurance is $500 a year.
  • You have a $500 deductible.
  • Your premium will rise 20% after your first claim.

If you file a $600 claim, you'd receive $100 from your insurance company ($600 claim minus $500 deductible = $100), but your premium would rise $100 because you filed the claim. You'd break even the first year, but you'd be paying $100 more for insurance every year after that.

By contrast, if you file a $6,000 claim, you'd receive $5,500 from your insurance company and your premium would still rise only $100.

 

UPDATED CREDIT REPORT RESOURCES - GET IT, CHECK IT, FIX IT, GET IT AGAIN!
Topic Summary: For years now consumers have been given the option to obtain their credit report for free from the big three credit reporting agencies.  Recent reports indicate that up to 79% of reports have errors.

1)      Get free reports 

2)       How to fix errors the right way

3)      Where to go when not satisfied

4)      A fantastic site to go to for free tools

We all know that our credit reports are a very important financial tool that credit grantors and employers have to assess an individual's credit-worthiness. The government for years has given consumers a free way to see what is in your credit reports, and now they provide a resource called the Consumer Financial Protection Board to help you if you can't get satisfaction when errors are found.

First up you can get your free credit reports from the three national agencies, Equifax, Experian and TransUnion once every 12 months. The site to get the free reports is www.annualcreditreport.com . Be careful if typing in the web address as here are many sites that look like that address but will try to sell you credit monitoring and other services.

Once you have your reports, dig into every line item and see if all makes sense! Each report tells you what to do to when you think there is an error. The Fair Credit Reporting Act says the agencies have to get back to you in a certain time-frame or the item in question must be deleted


 CONSUMER TIP: DO NOT FILL OUT THE DISPUTE FORM ONLINE (see these 7 tips on how to work disputes)


If you are still not satisfied, call in "Big Brother"

The Consumer Financial Protection Board was set up a few years ago to be the watchdog for consumers when they engage in the financial services sector. This organization takes on big financial services companies and enforces regulations and administers fines when there are anti-consumer practices. On This Page Here,you can start the formal dispute of a contested item on your credit report. You will be given a case number and progress on the complaint. 

A Get It All Done Site We Recommend! www.CreditKarma.com

This site is getting rave reviews for being easy to use and free. There are some ads that come with the service but generally they are not intrusive. Once you register, CreditKarma goes to work monitoring your balances, payments and any warnings are given to you by email.

 

Highlights

Get Your Free Credit Score

Credit Karma believes that every consumer has a right to access their scores. You'll get four credit scores along with free credit tools to help you better understand what a good credit score is. Even better, you'll receive your free credit score without a credit card.

Get Your Free Credit Report Card

The totally free Credit Report Card is an easy-to-understand summary of your credit report details. Use the Credit Report Card to gain a better understanding of your credit history and how it impacts your credit health.

Enroll in Free Credit Monitoring

Credit monitoring can help prevent identity theft and inaccurate information from appearing on your credit report. You'll receive an email when something important changes in your credit report.

Gain Insight into Your Credit Report

Along with your free score, you'll see important details of your credit report for free. In addition to your free Credit Report Card, you can view the details on your individual credit cards, mortgages, auto loans and personal loans. You can use this section to spot any fraudulent or mistaken accounts on your credit report, maintain a record of your reported balance history, keep tabs on your credit card utilization rate, and receive recommendations for new loans and credit cards.

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Contact Information

Photo of Frank Taglienti Real Estate
Frank Taglienti
Berkshire Hathaway PenFed REALTORS®
565 Benfield Road, Suite 100
Severna Park MD 21146
410-440-0824

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