Category Archives: Homeowners

Reminders For This Tax Season

Have you set up your appointment to have taxes done?

The following are large items that are already set in law that you can count on (literally and figuratively) for this tax season. Don’t forget about income limitations and phase outs.

Child Credits.

For each qualifying child under age 17 knocks up to $1,000 from your tax bill.

College Education.

Two big credits are available. The American Opportunity Credit can reduce your tax bill by up to $2,500 per eligible student or up to $2,000 through the Lifetime Learning Credit.

0% Capital Gains Rate.

This capital gains rate is available to all taxpayers in the 10% and 15% tax brackets. Married taxpayers qualify for the 0% rate if their taxable income is $73,800 or less, for single taxpayers $36,900 or less, and head of household is $49,400. To see the 2015 Tax Brackets.

Tax Free Gains on Home Sales.

Married couples can exclude up to $500,000 from their gain from their income from the sale of their home, for single taxpayers the maximum exclusion is $250,000. Ownership and occupancy rules apply.

Energy Saving Credits.

You can claim a credit for up to 30% of the cost of buying and installing solar panels, solar water heaters, geothermal heat pumps and small wind energy systems.

DID YOU KNOW that your vacation home can be a tax deduction?

Just make sure you don’t use it for client or business entertainment.

The Bradford Tax Institute had a great piece about how you can actually deduct your vacation home – as long as you don’t break the rule. The rule is – it can’t be used for your business client’s (or their family’s) entertainment.

BTI used the scenario – Man owns three-acre beachfront property. While he is there, he met with his investment advisors, current and prospective clients and met with salesmen, trainees and other partners in his business.

The costs associated with these meetings are all legitimate deductions and valid business activities, so where did he go wrong?

He permitted his clients to bring their family to the property, while they were in meetings. The court ruled that since the *family members* did not attend the business meetings – that meant they were entertaining themselves, such as playing on the beach or going out at night and partying.

As a result, the court ruled that the beach home was a NONDEDUCTIBLE ENTERTAINMENT FACILITY. (See http://www.law.cornell.edu/uscode/text/26/274 )

The Bradford Tax Institute used the following example: If you use your vacation home 11 days for business meetings with your employees (or partners, etc.), 14 days for business lodging, and 8 days for personal purposes, that gives you 76% business use and 24% personal use. Formula: 25 business days (M-F) divided by 33 days = 76%. You can deduct 76% of the operating costs and depreciation of your vacation home.

Story source: Bradford Tax Institute Tax Reduction Letter

Interest Rates Remain the Same for the First Quarter of 2014

For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.

Larger IRS

IR-2013-96, Dec. 9, 2013

WASHINGTON ― The Internal Revenue Service today announced that interest rates will remain the same for the calendar quarter beginning Jan. 1, 2014. The rates will be:

three (3) percent for overpayments [two (2) percent in the case of a corporation];
three (3) percent for underpayments;
five (5) percent for large corporate underpayments; and
one-half (0.5) percent for the portion of a corporate overpayment exceeding $10,000.

Under the Internal Revenue Code, the rate of interest is determined on a quarterly basis. For taxpayers other than corporations, the overpayment and underpayment rate is the federal short-term rate plus 3 percentage points.

Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. The rate on the portion of a corporate overpayment of tax exceeding $10,000 for a taxable period is the federal short-term rate plus one-half (0.5) of a percentage point.

The interest rates announced today are computed from the federal short-term rate determined during Oct. 2013 to take effect Nov. 1, 2013, based on daily compounding.

Revenue Ruling 2013-25 announcing the quarterly rates will be published in Internal Revenue Bulletin 2013-52, dated Dec. 23, 2013.

Troubled or Modified Loans?

If you had a loan modified, or lost a property in foreclosure or short sale in 2013, I will need to have all the details. You can’t put behind you until we deal with the tax issues.

For instance, you might have income from cancellation of part of the mortgage. Look for Forms 1099-A and/or 1099-C in the mail. I must see these.

What I also need from you are all the details surrounding what happened. I need the history of all the loans associated with the property. It will help to see mortgage statements. Many times these cases involve more than simply tax law, so please be as thorough as possible.

If you have any questions – don’t hesitate to call. The number is 619-589-8680.