SOLDbyNat.com Real Estate Services

"How long do I have to keep this stuff?" is the usual question you ask yourself when feeling that you are running out of room for all this "paper" that may never be needed.   The paper receipt you get from your fast-food lunch may go directly into the trash.   The prudent consumer may keep it to reconcile it with their monthly statement and then, trash it.   The natural hierarchy with receipts and documents associated with purchases is that as the price or value goes up, the more important it is to keep them.   The question becomes "but for how long?" The following table will give you an indication on how long certain documents related to your home need to be kept according to best practices of tax professionals.   IRS recommends that records are kept for three years from the date the taxpayer files their original return or two years from the date the tax was paid, whichever is later.   There is no time limit in the case of fraud or failure to file a t...

There is a little-known provision in the tax code that allows homeowners to rent their principal  residence or second home for up to 14 days a year without having to recognize the income.   In this situation, the taxpayer does not deduct the rental expenses associated with the income. There is no restriction on how much you earn.   If your first or second home is in a desirable area where people are looking for short-term rentals, it could provide a windfall to the homeowner. In cities where any big sports championships are played, there could be a market for a temporary rental of a home.   Events like PGA tournaments, college basketball tournaments, Bowl games, NFL playoffs and others can create a demand for this type of rental. For instance, there are people in Augusta, Georgia who rent their homes during the Master's Golf Tournament each year.   There are not a lot of hotel rooms in the area relative to the number of people who usually attend in non-pan...

Before you pay cash for a home, ask yourself if there is a possibility, at some point in the future, you might put a mortgage on the home and would want to deduct the mortgage interest on your federal tax return. Current federal tax law allows homeowners to deduct the interest on up to $750,000 in acquisition debt used to buy, build or improve a property.   When a person pays cash for a home, the acquisition debt is zero.   The only way to increase the acquisition debt is to make and finance the improvements to the home. As with many IRS regulations, there are exceptions to this rule.   If a mortgage is secured on the first or second home within 90 days of the purchase closing, the debt is considered acquisition debt.   The interest on the funds used to purchase the home can be deducted on up to $750,000 of the mortgage balance. Assuming a borrower has good credit, the ability to repay the loan and the home justifies the loan, lenders are willing to make mortga...

National homeowner equity grew in the fourth quarter of 2020 by $1.5 Trillion or 16.2% year-over-year based on a CoreLogic analysis.  The study was done on the six out of ten homeowners who have mortgages on their home. The fourth quarter of 2020 also saw the number of mortgaged residential homes with negative equity decrease by 8% from the third quarter.  Compared to the same quarter in 2019, negative equity decreased by 21%. Equity is defined as the value of the home less the mortgage owed.  Negative equity means that the homeowner's debt is more than the value of the home.  Appreciation is the dynamic that is moving homeowner's equity to the positive position. On a national basis, according to National Association of REALTORS®, annual price growth for the last ten years has been 6.4%.  In the last five years, it has grown at 7.3% annually.  According to the CoreLogic Home Price Index, home prices in December 2020 were up 9.2% from the year befo...

For generations, people have begun their homeowner experience with a "starter" home.  Part of the  logic may be that by beginning with a smaller home, they can learn what it takes to run the home and discover some of the unexpected costs that come along with it.   A slightly longer view into the future could suggest a different strategy. As of March 4, 2021, the average 30-year mortgage rate according to Freddie Mac was 3.02%; up .37% from the week of January 7th this year.    At the same time, in 2020, the rate was 3.29% and in 2019, it was 4.41%.   That is a difference of 28 and 139 basis points. The principal and interest payment on a $300,000 mortgage would have been $236 higher two-years ago and $44 more one-year ago.   Today's low mortgage rates are saving buyers lots of interest especially when you factor in the median tenure for sellers is approximately ten years.   Even though prices have increased over the last two years, some people...

One of the silver linings to filing your income tax return is finding out that you are going to receive a refund that could literally open the door to owning a home.   If you happen to be one of these fortunate taxpayers, your next decision is what to do with it.   With the average tax refund near $3,000, it could be the ticket to buying a home sooner rather than later.   Regardless of the size of your refund, it can be used toward the down payment or closing costs of the home. Most people think it takes 10% or more down payment to purchase a home, but actually, it is much less because of several low down payment mortgages .   There are VA and USDA mortgages that allow for no down payment for qualified buyers.   FHA has a 3.5% down payment program and FNMA and Freddie Mac have 3% down payment mortgages for qualified creditors as well as 5% down programs. Closing costs for originating new mortgages can easily range from two to three percent of the purchase ...

Sometimes, as people approach the inevitable, they start trying to get their things "in order".   They may even have a will, but they decide to transfer title to real estate prior to their death which could be an unnecessary expense for the would-be heir. Generally, when property is passed through direction of a will, the heir will receive a stepped-up basis which means that the fair market value of the property at the time of death becomes the cost basis for the heir.   If the property were sold for that fair market value, there would be no gain and no capital gains tax due. However, if the property is gifted prior to death of the donor, along with the title to the property comes the cost basis of the property.   The transfer of title does not trigger the capital gains tax but when the property is sold, the gain is calculated by subtracting the basis from the sales price leaving a capital gain subject to tax.   In other words, the person receiving the gift does ...