Tax write-offs: why owning a home gives you reason to smile at tax time

 

They say there are only two things certain in life: death and taxes.

But what about tax deductions? Well, I’m certain of this too: saving money on taxes is something we can all get behind! 

 

As we learned in last month’s blog, tax deductions can make all the difference in overall costs when you compare renting vs. buying. So it’s definitely in your best interest to max out all the benefits of homeownership each year when you file your taxes. 

 

Important note: these deductions only work for those who itemize their taxes. If your medical, income, property, and charitable deductions run more than the IRS-allowed standard deduction ($12,900 for single filers this year, $25,900 for filing jointly) then you’ll want to itemize and include these deductions. 

 

Here are 5 deductions to check for when filing this year:

Mortgage Interest

If you have a mortgage on your home, you can take advantage of the mortgage interest deduction the year you buy and every year thereafter. The write-off limit is $750,000 for homeowners filing as a single filer or a married couple filing jointly. If you’re married but filing separately, the deduction limit is $375,000 each. And by the way, interest on home equity loans can also be deducted if used for home improvements.

Property Taxes

Homeowners pay property taxes to the state of Louisiana and their local town or municipality. You can deduct up to $10,000 of property taxes as a married couple filing jointly – or $5,000 if you are single or married filing separately. The swankier your neighborhood, the more handsome your tax deduction.

Home Office Expenses

With more people than ever working from home, that gives us one reason to celebrate work: tax write-offs! When you operate a business in your residence, you can deduct some of the expense of maintaining that space. Do your homework! (Get it… home? work?) IRS regulations are strict here and you have to be using your office space for regular and exclusive business to qualify for a deduction. So working on your bed doesn’t count, but if you set up a corner desk in your bedroom and use it exclusively for work, measure the area and deduct it as a percentage of your total square footage. 

Necessary Home Improvements

Yes, we’d all like to think that a new granite counter and mosaic glass backsplash in the kitchen are necessary. But this write-off is reserved for true necessities like adding a wheelchair ramp or safety railings. When in doubt, talk to a tax expert. 

Private Mortgage Insurance

When you buy a home and make a down payment of less than 20% of the value of the home, your lender might require you to purchase private mortgage insurance (PMI) to protect them in the event of a default. If you have PMI, you might be able to deduct the expense. But beware! Only certain levels of adjusted gross income qualify. The rules seem to change constantly on this option and while it was set to expire as a deduction last year, legislation narrowly saved it for the 2021 tax year.  

 

Grab your calculator and get itemizing. Each of these line items on your taxes is a good reminder of why homeownership makes fiscal sense for your overall bottom line!

And speaking of professionalism, when it comes to buying and selling a home, keep Clean Title, LLC, in mind. We’re researching the past to protect your future!

​Don’t miss our popular Title FAQs for tips that will give you the peace of mind only a clean title can. See us on our Facebook page and check out the details of our services on our website. Or call 985-277-5095 to speak to one of our title professionals today!

Tax season: a great time of year to be a homeowner

 

Disclaimer: This blog is not intended as tax advice. Please consult a professional or certified tax software program for details before deducting from your taxes. 

 

When you think about the biggest perks of owning a home – beyond your favorite shady oak tree or the spa bath with steamy rain shower – do tax write-offs top your list?

 

Maybe they should! 

 

After all, one of the biggest differences between owning and renting a home is the deductions you’re allowed when buying a home. And even annually in the years after. Tax deductions can be the difference-maker in overall cost when you compare renting vs. buying.

 

Did you buy a house in the New Orleans area last year? Here are 5 tax deductions you won’t want to forget on your taxes this April! (Next month we’ll cover tax deductions homeowners can consider every year.)

  • Mortgage Interest

If you have a mortgage on your primary residence, you can take advantage of the mortgage interest deduction the year you buy and every year thereafter. There are newer write-off limits but they still add up. Bear in mind that the further into the year you purchase, the lower your interest on your mortgage and the lower your write-off.

  • Prorated Mortgage Interest

Depending on what month you closed on your house, you probably paid pro-rated mortgage interest for that month. This amount can also be written off. The final real estate settlement statement will show just how much you’re due.

  • Prorated Real Estate Taxes

Everyone pays the local tax assessor for real estate taxes before closing. In some cases, the buyer will pay a pro-rated portion of the annual taxes at the closing to cover the amount due to the state of Louisiana and their municipality. Check your total amount paid as well – it’s deductible! If you end up paying your taxes monthly instead, you’ll want to add these up at year’s end as well. In years to come, you can count on writing off these expenses at tax time. 

  • Construction Loan Interest For New Homes

As long as the construction period didn’t last more than 24 months before you claimed your new home as your principal residence, you can write off the interest for a new construction loan. Don’t let this home-buying tax break slip through the cracks.

  • Mortgage Points

When you take out a mortgage, you may have the option to purchase discount points to lower your interest rate on the loan. If you purchased points, you can deduct the cost. Beware: ‘loan origination points’ are not tax deductible as they don’t impact the interest rate of your loan. (And while we’re at it, your down payment, insurance, and utilities are also not deductible. But wouldn’t that be great?)

 

Every year going forward, as a homeowner, you still get annual tax deductions!

This includes writing off your mortgage interest, property taxes, home office deductions, certain home improvements, and more. Stay tuned for more on these items in next month’s blog. 

 

With potentially thousands of dollars in deductions on the table, these are all tax breaks worth further research. Check out details of how property taxes and insurance can impact mortgage payments and talk to your real estate agent and local tax professional for more information.

 

And speaking of professionalism, when it comes to buying and selling a home, keep Clean Title, LLC, in mind. We’re researching the past to protect your future!

​Don’t miss our popular Title FAQs for tips that will give you the peace of mind only a clean title can. See us on our Facebook page and check out the details of our services on our website. Or call 985-277-5095 to speak to one of our title professionals today!

What is an Abstract Title and Do I Need One?

There’s a title and then there’s an abstract of title. The two are definitely related but serve different purposes.

 

If the title on your home is the Cliff’s Notes, the abstract of title is the unabridged chapter book.

 

An abstract of title is a written history of a piece of land and includes all the recorded documents and proceedings related to a specific real estate. It shows the names of all the owners, how long each held title, and what each paid for the property.

 

An abstract of title also includes:

  • Open mortgages, lawsuits, judgments, liens, wills, as well as information reflecting property tax status
  • Accuracy of its physical description and the integrity of its title
  • Refinancing transactions within the last 10 years
  • Assurance that the property is just as the seller represents it
  • Potential original land grant or patent deeds
  • Potential mineral rights

 

While the typical title search only goes back a restricted number of years, an abstract of title can go back to before the house was built, to the earliest available records. It might possibly even include the original grants or deeds from the U.S. government. 

 

Depending on the age and location of your house, an abstract of title could include information on mineral rights. That means if the property is sitting on an oil well, natural gas or silver mine, the profit could all be yours. 

Who creates an Abstract of Title?

An abstractor is the person who researches this title history, summarizes the relevant documents, and certifies your abstract of title binder as true and complete.

 

Even from early American history, the first abstractors were attorneys. In Louisiana, it pays to have a knowledgeable real estate title attorney licensed by the state board to manage these documents as it takes analytical skills and practical experience to filter out false or void records. A real estate title attorney is the most qualified person to pinpoint properties that unlawfully changed hands due to improper handling at sale of the home or death of the owner. 

 

What’s an example of how an Abstract of Title can save my sale?

  • Mortgages and liens. Liens for property taxes, mortgage loans, child support, homeowners’ association dues or any other outstanding expense must be resolved or a clean title is impossible.
  • Wills, deeds, lawsuits, or tax sales. Did Aunt Myrna correctly leave her home to cousin Denny? Or maybe cousin Jimmy sued Cousin Denny believing the house was actually his and the lawsuit never settled? Maybe both cousins owned the home but neither paid the taxes. You have to know these details upfront or be liable for the possible fallout.
  • Surveys. Any encroachments, such as sheds or fences over the property line should appear in the surveyor’s notes and need to be cleared ahead of a sale.
  • Easements. Right of ways or utility access is important to know from the beginning. In fact, you could be restricted from certain areas on your property (or what you believe to be your property) when it actually belongs to the state, the local municipality, or another property owner.  
  • Subdivision restrictions. The buyer needs to know what can and cannot be done with a property.
  • Previous ownership. Not that this will sink your sale, but it’s purely a bonus that the abstract may reveal your property’s connections with significant historical figures. It’s fun to see the research on early names of a property as well as the construction and renovation dates.

 

An abstract is great peace of mind. If all this seems unnecessary – maybe the home isn’t very old or you know there have only been two other owners – then a more basic title search could be all you need. Either way, title insurance is your best option to save you from any issues that could pop up with previous owners, sales, or liens on the property.

 

Since a title company is your last line of defense when you buy a home, you’ll need one with a solid reputation and proven track record. You want a full-service firm that can handle titles, abstracts, insurance, and more. You want only the best.

Clean Title, LLC, is researching the past to protect your future!

We’re proud of our track record and the recommendations our clients have shared. (Check out some of our reviews on our Facebook page).

With a blend of exemplary service and professionalism, we ensure our clients know exactly what’s happening every step of the way. We want you to feel confident that when you sign on the dotted line, you’ll be turning a house into a home.

Check out our home buyers’ Clean Title FAQs and reach out at 985-277-5095 anytime with questions!

10 Repairs that Kill a Home Sale on Inspection

Thinking of selling your home in 2022?

Before you upgrade your kitchen or paint your walls to get it ready to put it on the market, take an even more important inventory. How are the bones of your home? 

 

Take a hard look at the structure and core systems of your house. And get ready to identify at least a few areas that need work now. Fix them this winter and you’ll be all set to pass your home inspection with flying colors this spring. And for perspective buyers, feel free to use this troubleshooting guide (as well as our 5 ways to protect yourself at closing post) as a checklist!

 

Experts recommend these key areas ship-shape (or at least shored up):

1. Is your roof giving you good coverage?

Even if Hurricane Ida didn’t visibly damage your roof, it’s likely that an inspector will find something as a result. Especially if the last time you got a new roof was after Hurricane Katrina. Major roof repairs can be expensive, and most buyers won’t compromise here. If you didn’t have an inspector take a look after the storm, you might want to now. Just so you know what you’re up against. If they say the roof still has a few years of life left in it, get that in writing.

2. But does it actually wash dishes?  

You might think that just because your appliances are all stainless, you make the cut. But how old are they? Does the ice maker work? Does your stove vent out (instead of back into the house)? Does the dishwasher actually get the plates clean? Appliances are built to last only so long, especially if not regularly maintained. Buyers and inspectors will be looking for the telltale signs. 

3. How cool is your house? (And how hot in winter?)

Heating and cooling systems are so expensive! It’s easy to put off that upgrade, but it’s even easier for a buyer to say no to a home with an ancient, inefficient HVAC. Especially one that’s not well maintained. You’ll thank yourself for taking care of this one right away because –bonus–your utility bills should reflect immediate savings. 

4. How cool/how hot? Part II

Another easy (and much less expensive) way to make a big impact on temperature and efficiency is with an insulation upgrade. Blown-in insulation can usually go right over older fiberglass batt and roll insulation as long as it isn’t wet or damaged. Or add fresh fiberglass and watch your energy costs drop. It’s usually more affordable to have this done in winter because the team won’t need IV hydration after a day in a hot attic. Better time for you, too, if you choose to DIY. 

5. Is there a shockingly simple way to look good on the electric portion of the inspection? 

Yes. Simply by getting your home’s electrical systems up to code. Unless you have the older and considerably less safe knob and tube wiring, your electric issues are probably a quick, affordable fix. Inspectors will always point out the need for grounded outlets near water sources, exposed wiring and switches that don’t work. Especially in older homes. Find an electrician you trust and with just a few hours’ work, you should be able to avoid that dreaded “hazard” label on inspection.

 

6. Can I flush out trouble before it gets worse?

Plumbing is that out-of-sight out-of-mind system we forget about. Until it’s backing up during a dinner party. Or a home showing! If you’re noticing any slow drains, stay on them. And while you love your big, old-growth oak, it could be growing roots into your pipes. Depending on the age and landscape of your home, springing for a video inspection of your pipes could be the ticket to finding out too late that your plumbing system is compromised.

 

7-10.  Can local weather sink my sale? 

With proper maintenance, your home will stand up to the ravages of mother nature. But around here, we all know that 

  1. poor drainage
  2. leaky gutters
  3. mold and 
  4. wood rot 

are all big red flags for buyers. Even newer built homes will break down under the elements eventually. 

 

The good news is, most of these items are quickly visible. The bad news is, if left unchecked, it might seem like you could care less about the upkeep of your property and makes buyers look more closely at other potential problems. For every issue you’re unable to take care of now, be prepared to negotiate on it in the final sale price. 

When you do finally land that sale and make an offer on another home, keep Clean Title, LLC, in mind. We’re researching the past to protect your future! Don’t miss our popular Title FAQs for tips that will give you the peace of mind only a clean title can. See us on our Facebook page and check out the details of our services on our website. Or call 985-277-5095 to speak to one of our title professionals today!

How can a first-time buyer survive in a hot real estate market?

 

Experts agree: there’s never been a housing market like this before. 

 

High prices were a problem even before the pandemic. In the U.S. they’re up from around $260,000 median rate to more than $380,000 today. Thanks largely to a lack of supply, list prices are up almost 15% this year alone. Some cities, like Austin and Denver, are seeing meteoric rises of more like 30%. So. With the few, expensive houses that are available, how in the world can a first-time buyer get a home (let alone survive the process)?

 

Don’t panic

In any challenging market, it’s easy to get rushed or frustrated. Your expectations aren’t being met and sometimes it seems to take forever. Don’t let impatience, or worse, that feeling that there just aren’t enough houses so you have to spend more… or you need to settle… get the best of you. In fact, that’s the last thing you need and you’ll likely end up with a home you regret buying later.

 

Here are a few tips for keeping your cool in a hot or tight market:

 

Get pre-approved

Before you even schedule your first viewing, connect with a lender and get preapproved for a mortgage. Not only does this signal to a seller and an agent that you’re a viable buyer who means business, but it’s also one of several ways of knowing how much home you can afford. (Don’t forget to account for taxes, insurance, closing costs, utilities, commute costs, and future needed repairs!)

 

Don’t “guess” on your realtor

Toss out the yellow pages on this one! Ask around, get three or four personal recommendations, interview at least two, and make sure to get an experienced, proven professional agent who can act as a guide through this challenging process. Especially since it’s your first time. She or he not only needs to be knowledgeable but also empathetic of what could indeed turn out to be an up and down process for you and your family. 

 

Keep emotion low and logic high

It’s almost impossible not to get excited (or upset) when shopping for a home. But logic will save you in so many ways. Logic would state that at a certain cost level, you won’t be able to afford the rest of your life. Logic should set the line in the sand, the amount you refuse to go over and write it down to remind you. And when emotion says “maybe for this very special home we could stretch a bit,” logic should point back to the absolutely-not-one-penny-higher price on paper and just say no. 

 

Wants vs. needs: be flexible

If you find yourself adjusting your expectations multiple times along the way–good. It’s a great survival tactic. Keep your list of non-negotiable “must-haves” as short as you can and it opens up more possibilities. Maybe you thought there was no way you could live in a condo? And yet by downgrading your size needs, you might find a great first-time home option that will help you build some equity so that you can swap up when the time is right. Maybe you watch too much HGTV and expect a subway tile backsplash and brushed nickel fixtures. It’s amazing what a fresh coat of paint and some affordable DIY finishing touches can do to upgrade a room.

 

It’s a marathon, not a sprint

You’ve decided you want a new home and you want it now. But especially in a difficult market, that’s not how it works. Instead, you have even more research to do and need even more patience to do it. You’ll probably look at dozens if not hundreds of homes and you may lose out on multiple offers. Steady and grounded wins the home-buying race. Don’t be afraid to take a break. When you come back, the market might even be more in your favor!

 

When you do finally land that sale, keep Clean Title, LLC, in mind. We’re researching the past to protect your future!

​Don’t miss our popular Title FAQs for tips that will give you the peace of mind only a clean title can.  See us on our Facebook page and check out details of our services on our website. Or call 985-277-5095 to speak to one of our title professionals today!

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