Good Afternoon,
I hope you enjoyed the weekend and the holiday yesterday. I’m sure for some they’re still wishing today was an off day.
On today's call: Markets, Housing, Real Estate & Taxes part 2, Interest Rates
The markets opened lower today but are back towards positive territory as they near session close. Last Friday saw a 10-day win streak for the Dow come to an end but it, along with the other indices, are trading off their lows. But news of out of the small country Cyprus, who laid out a plan to tax bank depositors in order to help fund the European bailout, has investors cautious. The Federal Reserve is scheduled to hold a two-day meeting this week and investors will be looking for any signs that the central bank could start winding down its quantitative easing program. If there are, look for rates to increase.
In housing, homebuilder confidence continues to fall. After eight consecutive months of improvement, the National Homebuilders Association’s Housing Market Index leveled off in January and has been declining ever since. A combination of low appraised values, tight lending standards, and the rising cost of materials and labor have dampened the enthusiasm from 2012. Let’s hope that decreases in inventory and continued low rates will help return some of that enthusiasm as we head into the spring buying season. While Illinois has the third-highest foreclosure rate in the nation, its’ good to note that filings fell in February, down 10% from the prior month. Congress and banks are still discussing ways to change the process for the better. I’m sure by the time they do, filings will be back to pre-2007 levels any way.
Last week, I discussed common mistakes homeowners make in regards to their home and federal taxes. This week, we’ll focus on filling out Schedule A to save money and avoid IRS scrutiny.
· If you bought or sold in 2012, make sure you list the property taxes on line 6 from the time of the transaction as listed on the settlement statement (HUD). Don’t simply look at your tax bill. Property taxes are deductible the year a home changes hands, but that deduction won’t show up on the tax bill.
· Properly deduct “points” on line 10. Remember, you can deduct the full amount of points in one year on a purchase. But for refinances, you deduct over the life of the loan. Making a mistake on this catches the IRS eye every time.
· For home equity lines of credit, you can generally deduct up to $100,000 of debt each year (line 10 as well). If you’re line amount is more than that, make sure you don’t just put in what’s on your 1098 statement…stay below the $100k threshold.
· If you make less than $110,000 and have private mortgage insurance (“PMI”), you can deduct it on line 13.
· On line 20, you can deduct losses caused by theft, vandalism, fire, etc. You can only deduct losses that are greater than 10% of your adjusted gross income (line 38 from the 1040, page 1). If you’re going to do this, make sure you fill out from 4864. If the losses are extensive, it would be wise to consult a tax pro on this.
Interest rates dropped very slightly thanks to Friday’s bond rally. The 30 year, for some scenarios, is close to the 3.5% range again, but still off some for most. Again, we’ll be watching the Fed’s report (and Bernanke’s speech on Wednesday) to see where rates are headed in the near future.
If there are any question, please contact me at any time. And, as usual, if you could pass this on to your networks, I’d appreciate it!
Thanks and have a great week…
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