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Tax

Get Ahead of Your 2013 Taxes

Save Money on Taxes

Regardless of your opinion about taxes, we can all agree that nobody should overpay their taxes. Here are six sound ideas that you may want to consider this month that may provide some tax savings to your household.

Pay Bills Ahead of Time

If you itemize, paying some bills early may minimize your deductions. For example, if you pay your January 2014 mortgage payment and your 2014 property taxes in December 2013, you can itemize those. If you are a joint filer and don’t have $12,200 in qualifying expenses ($6100 for single filers) to make itemizing deductions worthwhile, don’t prepay your expenses. Save your payments until 2014 when you may be able to take those deductions. The IRS has an Alternative Minimum Tax (AMT) Assistant Calculator to test if you are subject to AMT.

Make Home Energy-Efficiency Improvements

There are Federal Tax Credits for home energy-efficiency upgrades to your home that you may take advantage of before December 31st. These include improvements to your heating and ventilation or Air Conditioning systems, home insulation, Roofs, Water heaters, Windows and doors. The tax credit is 10% of the cost up to $500 or a specific amount from $50 to $300. Solar Energy systems allow for a 30% tax credit with no upper limit.

Recycle When You Remodel

It may be too late for this one this year, but keep this tax saving tip in mind. When you remodel, do it in a way that keeps intact the fixtures and house parts that you remove including cabinets, bathtubs, wood floors, windows and doors. Donate them to a salvage store like Habitat for Humanity’s Restore to earn a tax deduction. If you happen to be cleaning out your closets this winter, be sure t

o donate those to a local charity too.

Spend FSA Funds on Home Improvements

If you set up a Flexible Spending Account (FSA), you can spend any leftover allocation to make medically necessary home improvements like a handrail in your bathroom, or replacement air filters for your HVAC. Get a letter from your doctor supporting your medical need for the improvements. Many employers have adopted grace periods giving you until March 15th, 2014 to spend your FSA funds.

Deduct Property Taxes Paid At Closing

If you purchased your home in 2013, check you HUD-! settlement statement (Lines 106 and 107) to see if you reimbursed the sellers for property taxes they paid. You won’t get a 1098 from your lender showing those taxes because you paid them at settlement not from your escrow account.

Home Office Deduction

If you have a home office, but haven’t taken the home office deduction because it’s too complicated or you’re worried it would cause you to be audited, go ahead and take it on your 2013 taxes. Starting this year, you can take a new Home office standard deduction of $5 per square foot up to 300 square feet if you itemize deductions. You won’t have a home depreciation deduction or later recapture of depreciation for the years you use this simplified option.

California Foreclosure Reform Update

California ForeclosureFrom Housing Wire

By Jon Prior

• April 18, 2012 • 12:34pm

Seven bills reforming some foreclosure rules passed committees in the California state legislature this week.

The bills were introduced in February. One set of bills extends protections to tenants, giving them 90 days before eviction after the foreclosure sale of the property. Another increases penalties to banks that fail to maintain blighted homes.

Servicers would be required to provide documentation to the borrower establishing its right to foreclose before the filing first step in the process, under other passed bills. Evidence of ownership and chain of title must also be shown to the borrower.

Two other bills charge servicers a $25 fee for every notice of default recording. The money will fund investigations for California AG Kamala Harris. Another piece of legislation passed by committee allows Harris to convene a grand jury to investigate financial crimes in different jurisdictions.

“All Californians have been impacted by the toll the mortgage and foreclosure process has taken on our neighborhoods,” Harris said. “Our California Homeowner Bill of Rights will provide relief for homeowners, tenants and communities. I thank the authors and supporters of these important bills.”

The BIlls

The Foreclosure Reduction Act

This bill was introduced by Assemblymen Mike Eng and Mike Feuer; Sens. Mark Leno, Fran Pavley and Senate President Pro Tem Darrell Steinberg.

Under this bill, servicers would be required to provide documentation to the borrower establishing its right to foreclose before the filing first step in the process — the default notice. Evidence of ownership and chain of title must also be shown to the borrower.

The bill prohibits servicers from dual-track foreclosures, or completing the process if the borrower is being considered for a modification. Notices of foreclosure sales must also be personally served.

Enhancement of AG Enforcement

The bill from Assemblyman Mike Davis imposes a $25 fee to a servicer when a default notice is recorded. The fees would fund investigations from the California AG and the national task force led by New York Attorney General Eric Schneiderman.

Servicers filed more than 67,000 default notices in the fourth quarter, according to RealtyTrac.

Attorney General Special Grand Jury

Another bill from Davis and Sen. Lori Hancock would authorize the AG to form a special grand jury to investigate and indict financial crimes against the state in different jurisdictions.

Due Process Reform Legislation

Assemblywoman Holly Mitchell and Sens. Mark DeSaulnier and Fran Pavley introduced the bill, which would increase fines to owners of dilapidated property to $5,000 per day from $1,000.

Enforcement actions would not be taken for the first 60 days against someone who acquired the distressed property. The investor or purchaser must show he or she is making repairs to the property.

The bill also requires banks to inform local code enforcement agencies when liens are released on foreclosures. This would clear the way for demolition to proceed.

Tenant Protection

The bill, written by Assemblywoman Nancy Skinner and Sen. Loni Hancock, would require buyers of foreclosed homes to honor the terms of existing leases for any tenants and give at least 90 days notice before eviction.

jprior@housingwire.com

@JonAPrior

Home Buyer Tax Credit Information

  • IRS Tool Calculates What You Owe on First-Time Home Buyer Tax Credit

    A new online tool helps home owners who used the 2008 first-time home buyer tax credit calculate how much they now have to pay back. 

    If you bought a home in 2008 and took advantage of the original first-time home buyer tax credit in 2008, you have to pay it back. The credit was a no-interest loan, and you repay it in equal installments over 15 years through your tax return.

    If you claimed the tax credit in 2009, 2010, or 2011 and then sold your house within 36 months, you’ll also have to pay back the credit when you next pay your federal taxes. Also, anyone who sold their home, or stopped using it as their main home, may have to repay the entire credit whether their home was purchased in 2008, 2009, or 2010. If you took advantage of a later version of the tax credit and stayed put, you don’t have to repay it.

    To make it easier to calculate how much you have to pay back, the Internal Revenue Service developed an online tool, which tells you:

    • The original amount of the tax credit you got
    • How much of the tax credit you’ve already paid back
    • How much you still owe
    • How much you’re going to owe in future years (your annual installment repayment amount)

    All you need to use the tool is your Social Security number, date of birth, your street address, and Zip code.

    Enter the information you get from the online tool into line 59b of Form 1040 or line 58b of Form 1040NR. You don’t need to attach Form 5405, the First-Time Homebuyer Credit and Repayment of the Credit, to your return unless you’re repaying the credit because the home stopped being your main home.

     

    First-time home buyer tax credit complications

    In some cases, calculating your tax credit repayment is complicated — say your property has a separate building that you use for a business, your spouse dies, you converted your home to a rental property, or your home is destroyed or condemned — so check the rules on your repayment situation. You may also need to consult an earlier version of the form

     

Visit houselogic.com for more articles like this.

Copyright 2012 NATIONAL ASSOCIATION OF REALTORS®

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