On December 20, 2019, President Trump signed into law the Appropriations Act of 2020, which included a number of tax law changes, including retroactively extending certain tax provisions that expired after 2017 or were about to expire, a number of retirement and IRA plan modifications, and other changes that will impact a large portion of U.S. taxpayers as a whole. This article is one of a series of articles dealing with those changes and how they may affect you.
For tax years 2007 through 2017, when taxpayers itemized deductions, they could deduct the cost of premiums for mortgage insurance on a qualified personal residence as home mortgage interest.
This deduction has been retroactively extended back to 2018 and through 2020. If you paid premiums for mortgage insurance in 2018 or were amortizing prepaid mortgage insurance premiums from an earlier year’s home purchase, you may be able to amend your 2018 return for a tax refund.
There are many reasons to convert a home into a rental, such as to ensure that a prior home produces income and appreciation after the owner buys a new home; to maximize the tax benefits for an elderly person who can no longer live alone by delaying the sale of that person’s home; and to ensure that a home provides value when its owner takes a temporary job assignment in a different location. Some homeowners even mistakenly think that, when a home has declined in value, converting it into a rental can allow them to deduct that loss. Regardless of why an individual makes such a conversion, a number of tax issues come into play as a result of that decision.
As part of the recent tax reform, the Tax Cuts and Jobs Act of 2017, the deduction for home mortgage interest and property taxes has undergone substantial alterations. These changes will impact most homeowners who itemize their deductions each year. Please read this article for more information as it pertains to your situation.
The Tax Cuts and Jobs Act of 2017, more commonly referred to as tax reform, substantially altered the itemized deduction for home mortgage interest and affects just about everyone who has been deducting their home mortgage interest as an itemized deduction on their tax returns.
Determining when home mortgage interest is deductible and how much was deductible was frequently complicated under the prior tax law, and the new rules have added a whole new level of complexity. Please call us if you have questions about your particular home loan interest, refinancing, or equity debt interest tracing circumstances.
If you sold your home this year, or if you are thinking about selling it, you should be aware of the many tax-related issues that could apply to that sale so that you will be prepared at tax time and not have to deal with unpleasant surprises. This article covers home sales and the home-sale gain exclusion, particularly when that gain exclusion applies and what portion of it applies. Certain special issues always affect home sales, such as the use of a portion of the home as an office or daycare center, previously use of the property as a rental, and acquisition in a tax-deferred exchange. Other frequently encountered issues are related to the “2 years out of 5” rules for ownership and use, as these rules must be followed to qualify for gain exclusion.
Many retirees have insufficient financial resources to keep up with inflation and the ever-increasing costs of medical care. What options do these seniors have, especially if they have a mortgage on their home and their retirement income is too low to cover their mortgage payments with enough left over for some enjoyment in their golden years, without relying on help from family?
Not a day goes by that we don’t see ads on television for “reverse mortgages,” which allow homeowners to borrow against the equity they have built up in their home over the years. The loan is not due until the homeowner passes away or moves out of the home. If the homeowner dies, the homeowner’s heirs can pay off the debt by selling the house, and any remaining equity goes to them. If the loan balance at that time is equal to or more than the value of the home, the repayment amount is limited to the home’s worth.
It seems like you can’t watch TV these days without being exposed to home solar ads touting free electricity and big tax credits. Be careful, as these savings and tax credits may not be all that they are advertised to be; this depends upon your financial and tax circumstances. Home solar is not necessarily the best option for everyone. Before you take the leap, please take a moment to consider the tax and financial aspects of solar electric systems as they apply to your circumstances. Once you’ve done so, you can make an educated decision.
Small business owners frequently find it difficult to obtain financing for their businesses without pledging their personal assets. With home mortgage interest rates at historic lows, tapping into your home equity is a tempting alternative but one with tax ramifications that should be carefully considered.
Generally, interest on debt used to acquire and operate your business is deductible against that business. However, depending upon the circumstances of the loan structure, debt secured by your home may be nondeductible, only partially deductible or wholly deductible against your business.
Whether you already own a home or are considering buying one, you should be aware of the many tax benefits that go along with home ownership. There are plenty of reasons for owning a home, including the potential for capital appreciation and the fact that many of the costs are tax deductible, while rent is generally not.