Sunrise Homes & Renovations, Inc.

Tax Time 2015: How Buying a New Home Can Impact the Amount of Tax You’ll Pay

by

Tax Time 2015: How Buying a New Home Can Impact the Amount of Tax You'll PayFew people consider the tax implications of buying a home, but there are many. Here are a few ways buying a home can impact the amount of tax you pay.

Mortgage Interest

Most people put down the minimum amount of money needed to buy a home and finance the rest, usually over 30 years. This means that, especially in the early years of the loan, most of what they are paying are the finance charges. The good news is that all that interest is tax-deductible for people who itemize their deductions, which adds up to several thousands of dollars in deductions annually. You also can deduct interest on home equity loans, up to a certain amount.

Property Taxes

Another way that buying a home affects your taxes is property taxes. In most jurisdictions, property taxes are based to some extent on the price you pay for your home, meaning the more you pay, the higher your taxes will be. The positive is that, just as with mortgage interest, those property taxes you pay are deductible if you itemize deductions on your income tax return.

Points

Points are up-front fees you pay to lower the interest rate on your home mortgage. If you paid them when buying your home, you can deduct the entire amount on your tax return. If you paid points on a refinance or home equity loan, you have to deduct them a bit at a time over the entire term of the loan.

Tax-Free Appreciation

One of the reasons many people treat homes as an investment is the favorable tax treatment on profit from a sale. For example, in the United States as long as the home is your principal residence for at least two years out of the five years before you sell, you can exclude up to a $250,000 gain from capital gains taxes, or $500,000 if you are married.

Retirement Accounts

Buying a home for the first time is one of the few situations in which the government allows you take money from retirement accounts early without paying a tax penalty. For example, you can take up to $10,000 out of an individual retirement account without having to pay the early withdrawal penalty, although you still might face income taxes if your contributions were tax-deferred.

If you are considering buying a home, contact a real estate professional to discuss the potential tax and other benefits.

Making the Offer: 4 Ways to Craft an Offer That Will Catch the Seller’s Attention

by

Making the Offer: 4 Ways to Craft an Offer That Will Catch the Seller's AttentionIt can take a time and effort to find the perfect home to purchase. After you have found that home, you need to convince the seller that your offer is the one they want to choose. There may be multiple offers made at the same time, and you may be in a situation where you are competing for the home.

Even if your offer is the only one the seller receives, there is no requirement that they must accept the offer you make. Crafting an effective offer that will catch the seller’s attention is important, and you may be able to accomplish this by following a few tips.

Offer Close To The Asking Price

One of the first things most sellers will look at when they receive an offer is the price you are offering to pay. You may feel as though the seller is asking too much for the home, and your agent may advise you to offer a lower price. On the other hand, there may be multiple offers, and you may feel as though you need to offer a price higher than what is being requested. With your real estate agent’s advice in mind, consider that a seller will be more inclined to accept an offer if it is close to what they are asking. If your offer is too low, they may decline it without looking at the other merits to your offer.

Request A Quick Closing

When you prepare your offer, one of the factors that you will have control over is the requested closing date. Sellers generally want to close quickly, but this is not always the case. Each market is unique, but a general rule of thumb is to offer a closing date that is 21 to 28 days away, contingent on mortgage approval. You may work with your real estate agent and mortgage company to determine when a reasonable closing date is. However, offering a quick closing generally shows that you are a motivated buyer.

Choose A Shorter Option Period

A sales contract has an option period, which allows the buyer to back out of the deal for any reason. This may be a time when you get your third party reports, such as the property inspection, completed. A shorter option period may be preferred by sellers. This is because the buyer is generally locked into the contract contingent on mortgage approval after the option period has expired.

Offer A Higher Non-Refundable Good Faith Amount

When you make an offer, you will also give the seller a good faith or earnest money deposit. The amount of the deposit will be disclosed in the contract, and you will typically hand it off after the offer has been accepted. This is the amount of money that you stand to lose if you do not follow through on the terms of the contract. A higher good faith or earnest money amount shows that you are serious about buying the home.

There are many factors that a seller is thinking about when reviewing an offer. While the entire offer will be reviewed fully, the fact is that these factors are generally given significant weight in most seller decisions. You can work with your real estate agent to structure the best offer possible.