28 Feb 2016

🏠 Monthly Wrapup of Expert Real Estate Advice from Neil Gortler, Licensed Real Estate Salesperson

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5 Good Reasons to Amend Your Tax Return — and How

Your home is a great source of tax savings if you know what qualifies and don’t forget to claim deductions and credits. If you missed any of these five, you can go back in time — roughly two to three years — by amending your tax return. (Read more nitpicky details in How to Amend Your Tax Return.)

1. Home Office Deduction If your home is your principal place of business, you can take a standard deduction or deduct a percentage of eligible home expenses like:

  • Utilities
  • Mortgage interest for the proportion of the house used as your office
  • Home repairs and maintenance

Forms you’ll need to file an amendment:

  • Form 8829 and Schedule A (if you’re employed by someone else) for the year you’re amending
  • Schedule C (if you’re self-employed) for the year you’re amending

2. Energy Tax Credit If you installed energy-efficiency improvements (like HVAC systems, insulation, a roof, windows) in 2012 and 2013 and didn’t take a tax credit for those upgrades, you may have missed out on up to $500. My husband and I didn’t claim the energy tax credit for insulation we installed one year because we thought we’d get a better deal if we claimed the credit the next year when we planned to replace windows. But we never got around to replacing the windows. So we amended our return to claim the tax credit for the insulation and got a $500 tax credit. If you want to amend your 2012 return, you have until 2015. Forms you need:

  • 1040X

Note: Unless Congress extends it, the $500 lifetime residential energy tax credit ended in 2014. 3. Home Improvement Sales Tax Deduction If your state and local town doesn’t tax income, you can amend Schedule A to deduct state and local sales tax you paid. Say you added new siding for $10,000 and your state charged 6% in sales tax. That’s potentially a $600 deduction. Use the IRS’s online sales tax calculator to figure out the total sales tax you can deduct. Have the receipts to prove you paid the sales taxes. Forms you need:

  • 1040x
  • Schedule A for the year you’re amending

4. Property Tax Deduction Get a copy of your tax bill payment from the local tax office that collects the bill. Make sure you deduct the property tax expense on your amended return for the year you paid it, which could be different than the year it was due. Forms you need:

  • 1040x
  • Schedule A for the year you’re amending

5. Home Repair Deduction Red alert: You can’t claim deductions for any old home repair. There are only two narrow, possible ways to claim home repairs, and it’s always best to check with a tax pro for your particular situation: If part of your home is used for business and you aren’t taking the standard deduction for your home office. You can only claim repairs made to your home office or claim a percentage of the repairs you make to the house as a whole, like repainting or patching a roof leak. If 10% of your home is office, you can deduct 10% of the repainting or patching. If the repair is to the office itself only, then the percentage generally does not apply. Forms you need:

  • 1040X
  • Form 8829 and Schedule A (if you’re employed by someone else) for the year you’re amending
  • Schedule C (if you’re self-employed) for the year you’re amending

For casualty losses. Calculating and deducting casualty losses (disaster, damages, robbery) is complex. Everything from your income level to how you value your property can affect overlooked deductions. Besides placing a value on your personal property, you have to subtract a number of things from that, including insurance reimbursement and a percentage of your adjusted gross income. Read IRS Publication 547 and consult a tax adviser. Note that you can claim losses from federally declared disasters either in the year they occur or, if it’s more favorable, on the preceding year’s taxes. Forms you need:

  • 1040X
  • Form 4684 for casualty and theft for the year you’re amending
  • Schedule A for the year you’re amending

This article provides general information about tax laws and consequences, but shouldn’t be relied upon as tax or legal advice applicable to particular transactions or circumstances. Consult a tax professional for such advice.

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Why I Love This Bathroom-in-a-Box

Published: Feb 16, 2016 07:00 am

online toolOrganization is my strong suit; design, not so much. I recognize beautiful finishes when I see them, but I panic before a gazillion types of tile, granite slabs, and cabinets, trying to pick the ones that go together best. Add paint color choices and I start breathing into a paper bag. Lowe’s, apparently, feels my pain and has put together two complete bathrooms — from floor tile to faucets to drawer pulls — that take the angst out of decision-making. I call them “bathrooms-in-a-box.” This concept was a godsend when I recently added a bedroom and bath to my unfinished basement, looking to increase the house’s sales appeal when we put it on the market in the spring. When we built the house 17 years ago, we didn’t have the money to completely finish the basement. But we did have the foresight to rough-in plumbing for a someday bathroom and an above-grade egress window for a someday bedroom. That day had come, and our goal was to construct a potential nanny or in-law suite — functional, not extravagant. I could have hired an interior designer at $125/hour to make the space shine, but, since we won’t be living here much longer (fingers crossed!), the bathroom didn’t need to be fabulous, just inoffensive.

I’ve built houses, so adding a bedroom/bath was no biggie. Well, I don’t do hammering, but I hire the subcontractors and kept the trains running on time, which saves money on hiring a general contractor. My bathroom-in-a-box turned out beautifully; it’s soothing and expensive-looking. Who knew it could be so easy?
There are two designs featured on the Lowe’s site under Bath Collections —  Ballantyne and Norbury. I picked Ballantyne, with its Mediterranean-y dark wood cabinets, oiled-bronze fixtures, and earth-tone tile. I measured the space, and ordered the bathroom online. The computer walked me through the few decisions I had to make myself. Did I want:

  • One or two under-mount sinks? (One, please.)
  • Beige-family or grey-family tile? (I like beige.)
  • Oil-rubbed bronze or polished nickel fixtures? (Ooh! Oil-rubbed!)
  • 3-lamp or 4-lamp light fixture? (4 works for me.)
  • Redstone Blue Spruce or Perfect Storm or Cliveden Sandstone or Tagsale Linen paint? (Too many choices — send me samples of all of the above. I wanted to defer the paint decision until I could put a sample of each on the wall when everything else was installed.)shower tile

I spent about 30 minutes making the decisions, and another hour on the phone with Lowe’s customer service, adding a toilet that wasn’t included in the Ballantyne collection, deciding that a glass shower door wasn’t worth the money ($300), and arranging delivery.

Going My Own Way

There was one minor problem with the Ballantyne collection: The 1-by-1-inch floor tile didn’t float my boat, so I drove over to my local Lowe’s and selected tile that went with the rest of the collection. Par for the course, I spent an hour trying to pick the right tile.

While I was there, I checked out the Ballantyne collection vanity to make sure the color matched the online picture — it did. Then I passed another hour in the paint department as the guys dipped a stick into each of the paint samples so I could get an idea what each looked like. I didn’t like any, so I asked my designer friend, Lynne, to pick a neutral that would go with both the bathroom design and the bedroom carpet. In fact, Lowe’s wants customers to do a little riffing on their all-in-one designs. The collections are meant to “inspire customers and give them a starting point,” says Kelly Connelly, a spokesperson for Lowe’s. “This is how we envision a bathroom, and these are the products we used to make it a reality,” she says. “However, we hope the collections will help customers start thinking about other options for their bathrooms.” More batoiletthroom designs, Connelly says, are in the works. Which is great, because I didn’t see any pre-designed bathrooms — with tile, paint, the whole nine yards — on other big box store sites.

Installation Ease For $75, Lowe’s delivered and schlepped the order into my basement. Everything fit and looked great, except for the medicine chest (I mistakenly ordered a wall-mount cabinet when I needed a recessed); and the mirror, which looked better online than in person.

I returned the cabinet, mirror, and sample tiles to Lowe’s, no questions asked. Materials for the entire bathroom cost about $1,800. The entire project — bath and bedroom suite — cost just under $13,000 (including labor).

Bottom Line Image: Lisa Kaplan Gordon for HouseLogic My bathroom is lovely, but it’s not unique. As far as I know, there are thousands of bathrooms just like it — and that’s the downside of buying a bathroom-in-a-box. “The risk is a cookie cutter solution that applies to everyone,” says Kevin Mulvaney of the American Society of Interior Designers. “If you’re trying to offend no one, you’re probably going to impress no one either.” But actually, my Ballantyne bathroom has impressed everyone who’s seen it. So there.

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Why Being Organized Saves You Money

Published: Feb 09, 2016 07:01 am

At best, clutter in the home causes mistakes, late fees, overdue payments, and missed deadlines. At worst, a house in chaos can eat away at your finances, mar your credit, and reduce your productivity. That’s a whopping price to pay for being disorganized. According to an Ikea “Life at Home” survey, 43% of Americans admit to being disorganized, and the average American wastes 55 minutes per day looking for stuff they’ve lost or misplaced. “Do you think organizing is just for appearances?” asks Lisa Gessert, president of Organizing.buzz, a professional organizing service in Staten Island, N.Y. “Organizing your home is financially beneficial.” Gessert stresses to clients the need to sort, purge, assign things a home, and containerize. “This process saves people tons of money.” Here’s why being organized saves you money, and how to get your home into shape:

Disorganization in the Home Office Costs YouHome office with paperwork on shelves

  • Lost papers = time spent looking for them, money wasted on duplicates
  • Misplaced bills = late fees, bad credit causes higher interest rates
  • Missed tax deadlines = penalties

If any of these sound familiar, you’ll need a home office system for dealing with important papers, bills, and personal correspondence. The Ikea survey found 23% of people pay bills late because they lost them. Wall-mounted bill organizers can help you stay organized. Look for ones with two or more compartments to categorize by due date. “Having your papers organized will save time, help you pay bills on time, and allow you to be more productive,” says Alison Kero, owner of ACK Organizing, based in New York City. Mount shelving and create a file system for important papers, such as insurance policies and tax receipts. Look for under-utilized space, such as converting a standard closet into built-in storage with shelves and cabinets for your papers, files, and office equipment. If you need to use stackable bins, don’t stack them around equipment that needs air ventilation, such as scanners and Wi-Fi receivers, since they could overheat and malfunction — costing you money.

Disorganization in Your Closets Costs You:

  • Missing clothes = money spent on duplicates
  • Hidden items = wasted time since you can’t see what you own
  • Accessory mess = wasted money on items you don’t wear, can’t find
Clothes organized in a closet“Organizing often reduces duplication of possessions,” says Lauren Williams, owner of Casual Uncluttering LLC, in Woodinville, Wash. “No more buying an item for a second, third, fourth time because someone can’t find it.” If closets are crammed, paring down is a must. First, take everything out. Rid yourself of multiples, anything you no longer wear, and assess your shoe collection. Create piles: purge, throw out, or donate. For what’s left, you’ll need a better closet system. You can choose a ready-made system that simply needs installation, or create your own. PVC pipe can be used to create additional hanging rods, and you may also want to add shelving to store folded clothes, hats, and bulky items. Look for wire mesh shelving, solid wood shelves, or an all-in-one closet shelving system depending on space. Large and small hooks can be wall-mounted to hold belts, accessories, and scarves. Disorganization in the Kitchen Costs You:
  • Expired food = wasted money
  • Overflowing pantry = can’t see what ingredients you have and duplicate them
  • Crammed cabinets = overspending on multiple dishes and gadgets
  • Lost keys, missing wallet = late for work, lost productivity
  • Not being able to fully enjoy your home = you spend money elsewhere for fun
  • Blocked ventilation = utility costs rise
Organized living room Your living space is where you want to get the most enjoyment out of your home. If you can’t relax and enjoy yourself there, you’ll constantly be seeking out other places to find solace and fun — and that can add up to a lot of money spent on entertainment and recreational venues. And, meanwhile, you could be paying more than you should for the living space you’re not enjoying. “I run into people whose homes are unorganized to the point of papers, boxes and ‘stuff’ blocking air vents that supply heat and air conditioning to their homes,” says Gessert. This costs a fortune in utility bills. Likewise, a jumble of electrical wires around TVs and home entertainment systems can be sucking energy from always being plugged in. Connect them all to smart power strips that can turn everything off with one switch. Once you’re living with organization, you’ll start to see the benefits everywhere. No more dealing with late fees on bills, having to buy replacement earrings or bread knives when items go missing, and — perhaps best of all — no more having to leave your home in order to find relaxation and entertainment. After all, saving on bills can be a big boost to your monthly budget, but there’s no greater value than getting more enjoyment out of your home.

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Tax Advantages Homeowners Get That Renters Don’t

Published: Feb 02, 2016 08:00 am

Homebuyers get a host of tax benefits that renters don’t — critical deductions that can lower your overall tax bill.

But how much do homeowners really save on their taxes? Using 2012 IRS data, the most recent available, we calculated that a homeowner who took the average for each of four tax benefits would claim $15,871 in home-related deductions (if he or she itemizes).

1. The interest they pay on a mortgage

2. The points they pay on the mortgage

3. The cost of all property taxes

4. The cost of insuring their mortgage

Those are just the start: If Congress renews a long-standing tax credit in 2015, some homeowners can also shave their tax bill by up to $500 by making their homes more energy efficient. (The alternative minimum tax can affect whether you can claim homeowner-related tax benefits. Consult your tax adviser for advice regarding your situation.) And years from now, when they sell their home, most of them won’t owe taxes even if they pocket up to one-half million dollars in profit, unlike other investments that typically are taxed at 15% or more.

Renting still makes sense for many, particularly when you’re in transition. But you can’t deduct rent on your income taxes. That’s why it’s important to consider the tax benefits when you consider the advantages of buying vs. renting.

Before you continue — watch to find out if renting remains right for you:

 

Homeowners Can Deduct the Interest They Pay on Their Mortgage (Average deduction: $9,540*)

The mortgage interest deduction lets homeowners deduct the interest on their home mortgage up to $1 million ($500,000 if you’re married filing separately).

In the first few years of a mortgage, about two-thirds of the monthly mortgage payment is interest. That can translate to a hefty tax deduction.

For example, with a $200,000, 30-year fixed-rate mortgage at 4%, you’ll pay about $8,000 in interest the first year you own your home. Deducting that interest will save you $2,000 if you’re in a 25% income tax bracket ($8,000 x 0.25 = $2,000).

Since renters don’t have mortgages, they don’t get the mortgage interest deduction. The landlord gets the benefit while the renter typically pays the cost.

Homeowners Can Deduct Discount Points When They Buy (Average deduction: $611*)

When you buy a home, you can lower your interest rate by purchasing discount points.

Each point typically costs 1% of the loan amount, but you may be able to deduct that cost. So if you take out a $200,000 mortgage and buy one discount point for $2,000, you’d get a one-time $500 tax savings, assuming you’re in the 25% tax bracket ($2,000 x 0.25 = $500). Plus, you’ll be lowering your monthly mortgage payment because your interest rate will be lower.

Homeowners Can Deduct Property Taxes (Average deduction: $4,420*)

All homeowners pay taxes to their local jurisdictions, such as the county, city, or school district. Those property taxes are fully deductible. Renters aren’t eligible for a property tax deduction, even though their rental payments often help fund the property taxes their landlords pay. But only the landlord can take the deduction since he’s the owner.

A Tax Deduction That Helps Offset the Cost of Buying First Home (Average deduction: $1,300*)

Most first-time homebuyers want to make the smallest downpayment possible because saving up for it is one of the toughest hurdles to homeownership. A loan guaranteed by Fannie Mae, Freddie Mac, VA, or FHA can help you buy a home with as little as 3.5% to 5% down instead of the typical 20%.

If you put down less than 20%, though, you’ll likely be required to buy mortgage insurance.

The good news: You probably earned another tax deduction. The cost of mortgage insurance is deductible, based on income limits. You can deduct the full cost if your income is less than $100,000, and some of the cost if your income is between $100,000 and $109,999.

Note: The mortgage insurance deduction expired at the end of 2014, and Congress has yet to renew it for 2015. In past years, Congress has renewed it late in the year or early in the following year.

The Biggest Tax Benefit Homeowners Get

The capital gains exclusion is probably the biggest of all the tax benefits homeowners enjoy. Plus, they can use it more than once (but not more than once every two years) to be exempt from paying taxes on profits of up to $500,000 (filing jointly) from selling their home.

Balance this benefit with investing in stocks and bonds. Unless those investments are in a Roth IRA or some other tax-free account, you’ll likely pay capital gains tax of at least 15% on your profit when you cash in those assets. A $500,000 profit in the stock market is typically going to mean you’d owe $75,000 in capital gains taxes.

Tax Credit for Going Green?

One more possible benefit: If Congress renews a long-standing benefit for 2015, you may also be able to claim up to $500 for making your home more energy efficient.

A tax credit is even better than a tax deduction because you use a credit dollar-for-dollar to offset what you owe in taxes. So if you owed $500 in federal taxes and you could claim a $100 tax credit, you’d have to pay only $400 in taxes.

Although getting several thousand dollars in deductions is a terrific benefit, it’s only part of the financial boost you get as a homeowner. Once you buy, you’ve locked in your monthly housing costs — no rent increases — and in the future, you end up with a valuable asset: a paid-for home.

* IRS, “SOI Tax Stats – Individual Income Tax Returns Publication 1304 (Complete Report);” Basic Tables: Exemptions and Itemized Deductions, Table 2.1: Returns with Itemized Deductions: Sources of  Income, Adjustments, Itemized Deductions by Type, Exemptions, and Tax Items 2012, available here.

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Neil Gortler
CBR, SRES - Licensed Real Estate Salesperson

Phone: 516.849.5895 | neil@neilgortler.com

As an experienced professional Neil will do the leg work, keeping you up-to-date with new listings and the various market conditions that may impact the home purchase process. Sellers can also benefit from his skills in finance, negotiation, contractual agreements, and RE marketing. Call today and allow Neil to guide you through the complexities of buying or selling your home, eliminating hassles, and stress.

Member of:
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Long Island Board of Realtors
Multiple listing service of long Island
New York State Association of Realtors
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