Tag Archive: first time homebuyers

Real Estate Consider This: Home Equity

REAL ESTATE…CONSIDER THIS: HOME EQUITY If you are a homeowner or a potential homeowner, this tip is for you… First a definition of home equity: Home equity is the difference between what you owe on your mortgage and what your home is currently worth. Home equity increases in ...

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TW on SI Real Estate is at Staten Island, N.Y.

1 month ago

Enjoyable Tax Deductions when Selling a Home, IF…There are, in fact, some enjoyable tax deductions or savings when you sell your property--your home…I will address homeowners here, not commercial properties and/or investment properties as those are treated differently, of course😊If your a homeowner, you may very well be considering if it is (or was) a good time to sell…As is the case with so much in life, TIMING IS EVERYTHING😊 And in this case timing comes with possible tax deductions…so, in considering that question to sell or not to sell (now), bear in mind and note the following sweet tax deductions that would be available to you should you sell….1. SELLING COSTSThere is a catch--an IF, to this deduction…Two IF’s actually…-You must have lived in the home at least 2 of the 5 years proceeding the sale-The home MUST be your principal residence and not an investment propertyIF you meet those two criteria, then selling costs are indeed deductible as long as they are directly tied to the sale of your house. So, those deductible expenses could include: -attorney fees and other legal fees -escrow fees -advertising costs -home staging fees (but we don’t see staging done on SI) -survey fees -transfer of taxes -real estate agent commissionsDidn’t know you were looking at a legitimate tax deduction did you? It’s a strange world we live in😊In calculating the sales price of your house, these expenses are subtracted from the sales price, which, of course, lowers your tax bill as taxes are now calculated on an adjusted and subsequently lower sales price.2. HOME IMPROVEMENTS AND REPAIRS made to make the house more marketable--upgrades…If in planning to sell your house, you renovate parts of the house, make upgrades, etc., those expenses can be deducted as selling costs--like those noted above, IF--big IF…but it has to be just before you list the house for sale to show that those improvements were made to make the house more marketable and to get a higher sales price… As noted, timing is everything…Those upgrades might include: -painting the house -replacing the roof -replacing the water heater with a better one -new siding -landscaping -building a new deckBe careful: you would need to file for this deduction within 90 days of the day you close the sale. Also, the IRS does make a distinction between improvements and repairs. Improvements normally are deducted over time--several years. Repairs, on the other hand, are deducted directly within the same tax year as you sell your home.3. PROPERTY TAXESAs with the other deductions, there is a catch: This deduction is capped at a maximum deduction of $10,000 for property taxes (fully paid), but if you are current on your property taxes up to when you sell your house, you can deduct the amount you paid in property taxes last year up to a maximum $10,000.4. MORTGAGE INTEREST EXPENSEAssuming you are current with your mortgage, you may deduct the interest on your mortgage for the potion of the year you owned your home and the mortgage interest deduction applies to multiple loans on a single property. Including home equity loans. However, yes, another IF:Under the Tax Cuts and Jobs Act of 2017, new homeowners--new as of 2018, can deduct the interest on up to only $750,000 of mortgage debt.If you have owned your home since before 2018, then you are entitled to deduct interest expenses on your mortgage debt up to $1 million of mortgage debt.PLEASE NOTE:The mortgage interest expense and property taxes are itemized deductions. What that means is that in order for these to work for you as deductions, all of your itemized deductions need to be greater than the new standard deduction, which the Tax Cuts and Jobs Act of 2017 almost doubled when it took effect.For 2020, the new standard deduction for individuals: $12,400 for heads of household: $18,650 for married couples filing jointly: $24,800Many homeowners have found the new standard deduction works in reducing taxable amount(s) without the need to itemize.5. CAPITAL GAINS TAX FOR WHEN YOU SELLThe rule for capital gains isn’t technically a deduction. It is technically an exclusion but non-technically, it is something you will be glad to employ…, there is an IF here too…The IF is this: You must have lived in your home, as your principal residence, for at least two of the last five years.So, let’s start with the sale of your house…When you sell your home, the profits from selling your home are considered “capital gains” for tax purposes and the IRS will have you add this profit to your income for that year but paying long-term capital gains rates of 15% or 20%--depending on your income, BUT to qualify, you must have owned your home and used it as your main residence for at least two years in the five-year period before you sell it. You also must not have excluded another home from capital gains in the two-year period before the home sale. If you meet those rules, you can exclude up to $250,000 in gains from a home sale if you’re single and up to $500,000 if you’re married filing jointly. (Learn more here about how capital gains on home sales work.)These rates are for long term capital gains--assets held more than one year.Very importantly then how is that “profit” calculated! It is the COST BASIS OF YOUR HOUSE, NOT THE price you paid for the property when you bought it that is used in calculating your capital gains.COST BASIS: The purchase price of your home PLUS the cost of all improvements. Example, you buy your home for $500,000 and you then spend, over the five years you have owned it, you spend another $100,000 for improvements and upgrades for your home. Your cost basis is now $600,000.Be certain you have documentation for those improvements! Paperwork is important! Contractors have been known to give you a better price if you are paying cash but without a good receipt for their services….well, the IRS…So, your profit when selling your house--your capital gains, is whatever cash is left after paying off your expenses, plus any outstanding mortgage debt. And, yes then those profits are taxed as income. However, and here is a nice HOWEVER, YOU MAY EXCLUDE up to $250,000 if you are single $500,000 if marriedIn calculating what the taxable capital gains is--the bottom line.So, there are some potential tax deductions and savings that are possible when selling. From your friendly tax deduction…T.W. ... See MoreSee Less

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TW on SI Real Estate

2 months ago

Welcome to New Dorp and Welcome O2!New Dorp is one of my favorite neighborhoods in all of Richmond County, which is also known as Staten Island, which since 1898 is also a borough and part of New York City…Niewe Dorp, as the Dutch called it for “new town”, was one of the first permanent European settlements on Staten Island. Officially established in 1671 after the Oude Dorp or “Old Town” was destroyed in the Peach War of 1655. I will do another vlog on New Dorp neighborhood and explain the Peach War then, but meanwhile…This is a wonderful neighborhood with very nice main shopping streets to stroll--New Dorp Lane and New Dorp Plaza, which offer nice window shopping (again thank goodness). Parking is relatively easy. You will find lots of small businesses, unique shops, lots of dining establishments--dining-in, or dining-outside, and/or having your food delivered; and there is everything from tacos to sushi, hamburgers to pizzas, Indian to Chinese, Italian to Mexican, and one of the best bakeries and dessert shops on the Island, Piece of Cake and the Cookie Jar (next door). In addition, this lovely little neighborhood has a Staten Island Railway station--the New Dorp station (and they are installing elevators now at that station); and you will find lots of banks. New Dorp is also home to the only medical cannabis and CBD pharmacy or dispensary, BE, on Staten Island. The DiTommaso Real Estate office is in New Dorp!So, is O2 Beauty Spa…in fact O2 is the newest small business to open in New Dorp neighborhood--having just opened.We were involved in bringing O2 to New Dorp as we were realtors for the landlady and we then assisted Darren Wang, one of the owners of O2, in security the commercial space and getting started here.It was a pleasure for us as the owner and Darren were both a pleasure to work with and it resulted in a lovely new Spa in New Dorp! O2 has just recently celebrated its grand opening. During this time, 20% discount is being offered to customers and clients, so come and give O2 a try and enjoy New Dorp while you are here! ... See MoreSee Less

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TW on SI Real Estate is at Staten Island, N.Y.

3 months ago

PMI: PRIVATE MORTGAGE INSURANCE (PMI)For the first time home buyer or property buyer…it’s important to know and understand PMI…IF you were to put less than 20% down for a down payment to purchase a property, your mortgage lender is going to want--nay, will insist on, PMI. So, What is PMI? and, Why the 20% figure?PMI — private mortgage insurance — is a type of insurance policy that protects mortgage lenders in case borrowers default on their loans. Mortgage lenders believe that if they have at least 20% of the sales price of the property as down payment, even in the case of a default, they are not likely to lose money--the 20% will cover their exposure. However, if you put down less than 20%, the lender is likely to lose money in the event of a foreclosure. So, mortgage lenders then require someone not putting down at least 20% of the price of the property, to buy PMI so that in case of default, they will get 20%.That’s why mortgage lenders charge insurance on conventional loans with less than 20% down. Mortgage insurance covers that extra loss margin for the lender. If you ever default on your loan, it’s the lender that will receive a mortgage insurance check to cover its losses. PMI covers your mortgage lender, it does not cover or reward you in any way and yet, you are the one paying for it.While PMI isn’t cheap and it would indeed be an additional monthly expense along with your mortgage (and property insurance), it does give potential homeowners an opportunity to buy their first house with less than 20% down. Without mortgage insurance, many people would have to wait years to save up for a bigger down payment before buying a house. Those are years they could have spent investing in their home and building equity — rather than paying rent to a landlord each month.How much is mortgage insurance? Mortgage insurance costs vary by loan program. But in general, mortgage insurance is about 0.5-1.5% of the loan amount per year. So for a $500,000 loan, mortgage insurance would cost around $2,500-$7,500 annually — or $210-625 per month.Usually the annual premium is paid monthly as part and parcel of your mortgage payment. Cost of Mortgage Insurance by Loan Type Each loan type has a different mortgage insurance rate. So even for the exact same loan size, mortgage insurance costs could be very different depending on whether you got a conventional mortgage, FHA, VA, or USDA mortgage. Mortgage insurance is calculated as a percentage of the mortgage loan amount — not the home’s value or purchase price. Since annual mortgage insurance is re-calculated each year--as you are paying down your mortgage with your monthly payments, your PMI cost will go down every year as you pay off the loan. For FHA, VA, and USDA loans, the mortgage insurance rate is pre-set. It’s the same for every customer.Conventional PMI mortgage insurance is calculated based on your down payment amount and credit score. ... See MoreSee Less

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