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Don’t Panic! 3 Money-Saving, Last-Minute Tax Tips for Homeowners

July 2, 2020

last minute tax tips for home owners

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It’s heeeere: tax time.

Granted, this year, the coronavirus pandemic prompted the Internal Revenue Service to extend the usual April 15 deadline to July 15. That might have seemed like plenty of time—and yet here we are, with a mere two weeks to go and a filing window that’s closing fast.

We get it. Maybe you’re a procrastinator. Or maybe you’re a homeowner who, rather than taking the easy-peasy standard deduction, generally tries to save a bundle by itemizing your deductions instead.

Whatever your reason, if you’ve put off filing your taxes until now, don’t panic! You still have options.

Here are three last-minute tax tips for homeowners that could save you plenty of money, headaches, and more.

Tip No. 1: Grab Form 1098

Form 1098, or the Mortgage Interest Statement, is sort of like your home’s W-2: a one-stop shop for your possibly two biggest tax breaks.

  • Mortgage interest: “The biggest real estate tax deduction for most people will be the interest on their home loan,” according to Patrick O’Connor of O’Connor and Associates. Single people can deduct the full interest up to $500,000; for married couples filing jointly, the limit is $1 million if you purchased a house before Dec. 15, 2017. If you bought a home after that date, you will be allowed to deduct the interest on no more than $750,000 of acquisition debt—that’s a loan used to buy, build, or improve a main or secondary home. (Here’s more on how your mortgage interest deduction can help you save on taxes.)
  • Property taxes: This is the second-biggest deduction for most homeowners. Just remember the total amount you can deduct is $10,000, even if you pay way more—and that includes state and local income tax, property tax, and sales tax. (Here’s how to calculate your property taxes.)

You might be eligible for other real estate–related deductions and tax credits, but these are the biggies for most people. If you’re down to the wire on filing, you might just deduct these two and call it a day.

Just remember to make it worth your while. These numbers need to add up to more than the current standard deduction, which jumped to $12,200 for individuals, $18,350 for heads of household, and $24,400 for married couples filing jointly.

Tip No. 2: File an extension

If you still need more time to get your taxes together, it’s totally simple and penalty-free to file for an extension until Oct. 15. But don’t get too excited; the IRS still requires you to pay your estimated tax bill by July 15, or else you’ll pay interest on what you owe down the road.

The IRS makes it easy to file for an extension, either online or by mail. On the form, just estimate how much tax you owe. If you’re filing an extension because you need more time to figure out your itemized deductions, one easy shortcut is to just take the standard deduction now—or the same amount you claimed last year. All in all, it’s better to overestimate what you owe, because then you won’t pay any interest. Once you file for real, anything you’ve overpaid will come back to you.

But what if you need an extension because you can’t pay your tax bill? It’s still better to file for an extension with fuzzy numbers than to not file at all.

The IRS has payment plans that can help if you are short on cash. Just file something—blowing the deadline entirely will open you up to penalties as well as interest on your bill. And maybe an audit, too.

Tip No. 3: Hire some help

If you make less than $69,000 a year, you qualify to use free tax prep software from the IRS. Even if you make more than that, there are lots of free or low-cost online tax prep options that should work for anyone with relatively straightforward taxes.

Of course, another option is to find yourself a good accountant.

If paying for a tax preparer sounds extravagant, keep in mind that, according to the U.S. Tax Center, the average cost of getting your taxes done is only $225. This, generally speaking, is money well-spent.

A good accountant can actually save you money by spotting deductions you might not have found on your own, and helping you plan to minimize the next year’s taxes. All in all, that may add up to the best few hundred bucks you’ve ever spent!

Another timesaver: Rather than snail-mailing your accountant your tax forms, snap pictures of them on your smartphone; some apps like CamScanner can do so with scanner-style quality. Accountants don’t need the originals to file.

For next year, remember to prepare

OK, so this year you waited too long and stressed yourself out. If you don’t want a repeat ordeal next year, now is also the time to mend your ways and start tax prep early. Nobody wants to be thinking about taxes all year, of course. But as a homeowner, you can do some things to be better prepared.

So before you do any home maintenance, upgrades, or renovations, research whether there are any tax deductions you could be eligible for.

Start now, and you’ll be sitting pretty to collect on all the various tax perks that come with owning a home rather than pulling out your hair at the last minute.

The post Don’t Panic! 3 Money-Saving, Last-Minute Tax Tips for Homeowners appeared first on Real Estate News & Insights | realtor.com®.

How to Get a Mortgage Without Financially Freaking Out

October 31, 2018

Wondering how to get a mortgage, but scared to death you’ll mess things up? To be sure, buying a house is exciting, but there’s a fine line between excitement and pure, unadulterated fear.

This emotional roller coaster can be partly explained by the fact that “money represents so much more than just currency,” according to Emily Stroud, a certified financial adviser and author of “Faithful Finance: 10 Secrets to Move from Fearful Insecurity to Confident Control.

Consciously or not, you may equate money with power or safety. As such, funneling a large portion of your dough toward a home can be nerve-rattling.

“People put a tremendous amount of stress on themselves to not mess up,” says Nick Holeman, a certified financial planner at Betterment, an independent online financial adviser.

So in case you find yourself freaking out, here are the Jedi-like mind tricks that can help you navigate the scarier parts of the mortgage and home-buying process—and keep your cool.

Educate yourself on how to get a mortgage

“The level of financial literacy in America is dismal,” says Holeman. “Money is often too taboo to be spoken about in the home, and isn’t well-taught in school either.”

That doesn’t absolve you of fiscal responsibility. It means you’re going to have to work harder to understand the info that you need when it comes time to buy a home.

Take baby steps—like checking out a home affordability calculator that crunches the numbers instantly on your income and debts and estimates what price house you can afford.

Once you can do that without hyperventilating, you can research the more nuanced idea of debt-to-income ratio (how much you owe versus how much you make) and making sure yours is no more than 36%. (Higher than that and you may not comfortably buy a house and keep your shirt.)

Too soon? Hands feeling a little clammy? Then ease off the money talk and…

Learn from other home buyers

“Friends or family members who’ve purchased a property likely felt the same anxiety you’re feeling,” points out Chris Taylor, a broker and investment property specialist with Advantage Real Estate in Boston. “They can be extremely helpful by sharing their own experience and answering any questions you may have.”

You know your Uncle Fred who managed to buy a great home after bankruptcy? Your worrywart friend who’s already on her third home? Now’s a good time to ask them to share their secret sauce.

Understand the basics of a mortgage

Before you make open houses a hobby, study up on the basics of applying for a mortgage, making a payment, and some of the costs associated with being a homeowner. Ever heard of private mortgage insurance? Know about closing costs?

“Don’t go nuts,” cautions Taylor, “but get familiar with some of the key terms and major steps.” Consider it exposure therapy. Check out our stress-free guide to getting a mortgage for more info.

Talk to a mortgage lender

Before you ever set foot in a house, you should meet with a mortgage lender. This pro can walk you through the steps you need to take to get ready for the home-buying process IRL. For one, he can tell you exactly how much money you’d be pre-approved for, so you can shop for houses you know you can afford.

After you have your financial affairs in order, “you’ll be able to enjoy the process of purchasing a new home without fear and anxiety,” says Stroud. (Well, maybe not “enjoy.” Let’s say “tolerate.”)

Just don’t forget to…

Find professionals you trust

Sometimes it’s hard to entrust your financial information to strangers, even if they’re the ones willing to loan you the money you need to buy a place! As such, it’s essential that you shop around for a mortgage—not only to find a professional you click with, but also to ensure you get the very best interest rate, which can vary from lender to lender. The difference of even a quarter of a percentage point could save you thousands throughout the life of your loan. And remember, although you’re borrowing money from them, they’re still working for you.

As such, all home buyers should meet with at least three lenders and compare what they have to offer, or meet with a mortgage broker who can survey all the options on your behalf. Same goes with finding a trustworthy real estate agent who can help you find a home that suits your needs.

Stay focused on the numbers that count

“Getting a mortgage is about more than buying a house—it’s having access to a home, a place to live, a place to raise your family or retire, a place that will bring memories for years,” says Ray Rodriguez, regional mortgage sales manager at TD Bank. (No pressure!)

Of course, seeing the amount of your entire mortgage on paper may give you sticker shock. You wouldn’t be the first (and you won’t be the last) prospective buyer to panic, to wonder “How am I ever going to pay that back?”

Breathe. And choose a more accurate number to fixate on: your monthly payment.

“As long as you’re comfortable with that, the [home-buying process] will be easier to visualize,” assures Rodriguez.

And trust that, in general, the money you pour into that mortgage every month helps increase your home equity, which means that over time, this home becomes officially yours with no lender lording over. In other words, you have nothing to fear.

The post How to Get a Mortgage Without Financially Freaking Out appeared first on Real Estate News & Insights | realtor.com®.