Tax Benefits of Home Ownership Are Almost Too Good to Be True

Uncle Sam helps you in three ways when you own your home

1. The purchase When buying your own home, most of the expenses are not tax deductible. But there is one exception that is worth finding. The IRS says you can deduct interest in the year that it is paid, and that is usually part of each monthly loan payment. In addition, if the day you purchase is on any day other than the first of the month, you will likely pay a charge for "daily interest" between the day of closing and the end of the month. Look on line 901 of your HUD settlement statement. Much more importantly, the IRS says that, in most cases, loan discount points and origination fees are tax deductible to the buyer, regardless of who pays them. Look at lines 801 and 802 of your settlement statement and see if you hit the jackpot. This is a particularly unusual deduction because you get the benefit even if the seller paid your closing costs. And because origination fees of 1% and more are common, this can amount to a lot of cash.

2. Mortgage interest In general, you can deduct interest charged on a loan used to acquire or improve your principal residence in the year that it is paid. In the early years of a loan, most of your monthly payment is interest, so this can really add up. If you are in a 28% federal tax bracket, this can have the effect of lowering your borrowing costs by almost a third, depending on which state you live in. This is truly nothing more than a subsidy to home owners, and it's a very popular deduction. In addition, you can always deduct interest on an additional $100,000 of mortgage debt, which can be used for any purpose. This is called the "Home Equity Loan" exception, and it allows you to tap into your home equity for any purpose. This gives home owners the ability to do what is called "debt-shifting." For example, if you live in an apartment and have a credit card balance of $10,000 at 18% interest, none of that interest would be deductible. But if you bought a house, obtained a home equity loan for $10,000 and paid off the credit card, then ALL of the interest expense becomes automatically deductible. Furthermore, the rate on the home equity loan is likely to be around prime plus one or two, usually much lower than credit card rates. This same technique works with any and all personal debt, from car loans to consolidation loans - with only one hitch. In every home equity loan, you have pledged your house as collateral for the loan. If you fail to pay the payments as agreed, you could lose your house to foreclosure. So be careful in using this technique.

3. The sale This is the best. In fact, I can hardly believe this myself. Here's how it works:

If you have owned and occupied your principal residence for at least two of the past five years, you can earn up to $500,000 on the sale of that house and pay no federal income tax whatsoever. That's assuming you are married - singles get up to $250,000 tax free. And here comes the kicker: You can do this as often as every two years for the rest of your life.

This is as good an excuse for getting married as I have ever heard. Buy a fixer-upper in an up and coming neighborhood, work on it nights and weekends for two years, then sell it at a nice profit and pocket the cash, totally free of federal taxes. And most states recognize the federal exclusion, so you put the cash away totally tax free. You don't have to re-invest, you don't have to be age 55, and you can do this every two years forever. No, I'm not kidding.

The one restriction is that you MUST own and occupy the house as your principal residence, so don't try this on a rental property by pretending you live there when you don't. And there are some unclear rules about how you can take a partial exclusion if you live there less than two years, but we don't really know what they mean yet, so I recommend you stay there two years.

Many of these benefits came into being with the 1997 tax law, but lots of folks are just finding out about them now, so buy and sell to your heart's content. Just don't plan on staying forever!

With a Jittery Stock Market, Is Now a Good Time to Buy?

Q. Given what's happening in the stock market, is buying a home a good investment? I don't know what to do with my money right now.

A. That depends. Do you need a place to live? Is your job secure? Do you plan to stay in the area for several years? Do you have sterling credit, and enough money for a 20% down payment? Can you come up with a down payment and closing costs without having to take a major loss on your stock portfolio, or worse, raiding your 401(k)?

If the answer to all of these questions is yes, then yes—I think it would be a good investment.

Italy Vows Faster Fiscal Consolidation

ROME—Italian Prime Minister Silvio Berlusconi pledged to loosen up the country's labor market and said Italy would balance its country's budget by 2013, a year earlier than planned, in an effort to to quell weeks of market concerns that the euro-zone's third-largest economy will be drawn into the continent's escalating debt crisis.

Your home can make you happier

With your house almost certainly worth less now than it was three years ago --and with more declines possible -- you may feel stuck in your current place. Stuck, and bummed out.

Time to get over it. A new house with a snazzier kitchen or a big media room may seem like the ticket to happiness. But the burgeoning field of evidence-based design -- backed by science that studies the effect of built spaces on our brains and bodies -- indicates that neither tons of space nor high-end furnishings are key to your home satisfaction. Much more important are things that may seem minor but that pack a big emotional wallop.

"Light and color have a definite impact on people's emotional response," says Alison Whitelaw, a San Diego architect and vice president of the Academy of Neuroscience for Architecture, a group that brings research scientists and designers together.

Maximizing full-spectrum light during the day, matching wall color and ceiling height to a room's purpose, and placing the main seating in the "power position" (ideally with a wall at your back) -- those are just some of the tricks researchers say are proven to make houses feel better to their occupants.

Now is a great time to take advantage of these insights. According to a recent poll commissioned jointly by Money and home-improvement chain Lowe's, 52% of homeowners say they are focused on smaller projects that increase their enjoyment of their homes even if they don't increase its value.

Problem is, those people are in danger of wasting money on projects that won't increase their pleasure after all. That's because our survey shows that people aren't always right about what will make them happy in their homes.

For instance, homeowners think that their outdoor space has a big impact on their happiness, but it turns out that's not true. Indoor spaces have much more impact -- particularly the living room or family room, the kitchen, and bedrooms.

That's where this story comes in. It suggests ways you can apply design research to make six key rooms work harder for you. For example, your bedroom can get better at lowering anxiety and promoting sleep; your home office at helping you work more efficiently; and your living room at increasing family togetherness.

That last one is especially important, given that the National Science Foundation's General Social Survey -- which has polled some 53,000 people since it began in 1972 -- finds that what makes people happiest isn't their wealth, work, or health. Rather, it's their family relationships.

Best of all, the suggested fixes don't cost much (with the exception of a couple of kitchen projects). Some are free. And you need not tackle them all -- completing even two or three can make a difference.

Before you dive in, one caveat: We don't all respond to spaces exactly the same way. What brings you joy is affected by your personal associations.

"If your happiest times were at your grandmother's house, which had green walls, then green may make you feel better" than the colors research suggests, says Dr. Esther Sternberg, chief of neuroendocrine immunology and behavior at the National Institute of Mental Health and the author of "Healing Spaces: The Science of Place and Well-Being."

But keep the following tips in mind. They may come in handy when it's time to prep your house for sale -- you know, when your market starts moving again.

Get off the fence

Get off the fence – you’ll be glad you did! Already own a home? REALTORS® are your best resource to explore your options if you’re thinking about selling or refinancing. Call your REALTOR® today!

$1,800 Georgia Homebuyer Tax Credit Available
A tax credit of up to $1,800 is now available to purchasers of an eligible single family residence in Georgia for homes purchased between June 1 and November 30, 2009! Click here for FAQs about the federal and state tax credits.

Up to $8,000 First-Time
Homebuyer Tax Credit
The American Recovery and Reinvestment Act of 2009 provides for an $8,000 tax credit that would be available to first-time homebuyers.

The credit does not require repayment, and it will be claimed on a tax return to reduce the purchaser’s income tax liability.

If any credit amount remains unused, then the unused amount will be refunded as a check to the purchaser.

Unprecedented Incentives for New Homes
Builders are offering unprecedented incentives for new homes such as flooring upgrades, new appliances, and discounted financing.

Don’t just dream about purchasing a home; make your dreams a reality. Right now is the right time to “Get Off the Fence!”

It's a Buyer's Market
Buyers who are pre-approved have incredible negotiating power.

Financing options are available for those with a steady income and good credit.

Sellers are pricing their homes more competitively.

Lower prices also mean a wider range of options from which to choose in a variety of locations.

Historically Low Interest Rates
Interest rates are at historical lows – lower rates equal lower payments, or a larger home – you choose.

Contrary to perceptions, conventional mortgages are available at favorable interest rates for homebuyers.

Buyers with good credit, a steady income and a realistic view of what they can afford are excellent candidates for a mortgage, even in this market.

Building Wealth with Homeownership
Historically, homes are a solid long-term investment. For the past 40 years, real estate has delivered the most consistent positive return over any investment.

When you buy a home, you are building equity and adding to your assets. According to the Federal Reserve Board, the average renter’s net worth is $4,800, while the average homeowner’s net worth is $171,000.

Finally, you’ll see a sizable difference each year when you claim the mortgage interest deduction on your taxes.

Get Off the Fence in 2009
Prices are right, rates are low and there are plenty of homes on the market NOW.
As the economy improves and more people look for homes, prices will rise.

If you’re playing the waiting game, remember that the market will come back around – it always does – and you could miss your opportunity for a fantastic deal.

Take advantage of today’s market - you’ll be glad you did. Get off the fence and into a home!

Talk to Market Experts: REALTORS®
Not only can REALTORS® help you find your perfect home, they are an invaluable resource for selling your home as well.

Did you know there are over 180 steps in a typical real estate transaction? It’s not worth navigating such a complex process by yourself.

Get organized and informed and get ready to get off the fence –

New home sales blast past expectations

More people are buying: Sales of new homes hit their highest level since last September.

NEW YORK (CNNMoney.com) -- Sales of newly constructed homes leaped unexpectedly in July to hit their highest level since last September.

New homes sold at an annualized rate of 433,000 during the month, according to a joint report issued by the Census Bureau and Department of Housing and Urban Development.

That far exceeded analysts' forecasts and was up 9.6% from the revised 395,000 rate recorded in June. A consensus of industry experts surveyed by Briefing.com had predicted July sales of 390,000.

The news followed other positive housing market reports earlier this month, including a spike in existing home sales, home prices and affordability.

"There are many economic conditions that led to the surge," said Bob Walters, chief economist for Quicken Loans. "But certainly low mortgage rates, huge price reductions on the high inventory of new builds, and the first-time homebuyer tax credit have been instrumental in getting consumers to take the plunge into the real estate pool of opportunity."

Plus, the psychology of the market is changing, according to Peter Morici, an economics professor at the University of Maryland. "The notion that prices will drift down forever is gone," he said. "Now people are thinking the window of opportunity will not be open forever."

"Home shoppers visiting builders' model homes are more likely to purchase than earlier in the year," added Brad Hunter, chief economist for Metrostudy a real estate research and consulting firm.

They are also canceling fewer contracts. Of the 10 markets where Hunter examines cancellation rates, most are running at substantially lower levels. In Phoenix, for example, the cancellation rate lately has been about 4% compared with 7% late last year.

It certainly is an attractive market. The median price of a new home declined again last month to $210,100, down only slightly from June but off more than 11% from July 2008.
Latest Home Prices in Your City

The Housing Market Index, a measure of builder confidence calculated by the National Association of Homebuilders and Wells Fargo, inched up again this month to 18, its highest level in more than a year.

That's still low by normal standards: Anything below 50 indicates that more builders think business conditions are poor. And new sales, though rising, are still well below what they were last August, when they sold at a 520,000 annualized rate.

But the sales spike did help reduce the inventory: Available new homes dropped to 271,000 -- the lowest total in 16 years -- from 281,000 a month earlier. That's down to a healthier 7.5 month supply at the current rate of sales from 8.8 months in June.

Still, when factoring in existing homes for sale, inventory levels remain high, according to Mike Larson, real estate analyst for Weiss Research. He also pointed out that the continued influx of foreclosed properties over the next year or so will replenish supplies.

"But this [report] is clear evidence the dramatic cut back in housing starts, plus increasing consumer confidence and the targeted tax cut for first-time buyers, is restoring stability to the new home market," he said. To top of page

Major Bank Fails in South

Colonial's Assets Sold to Rival in 6th-Largest Collapse on Record; Blow to FDIC

Regulators seized Colonial Bank on Friday after reaching a deal to sell its branches, deposits and most of its assets to rival BB&T Corp. in the sixth-largest bank failure in U.S. history.

The demise of Colonial, a regional bank based in Montgomery, Ala., with assets of $25 billion and 346 branches in five states, signals an ominous phase in the nation's banking crisis. Even as some large institutions show signs of stabilizing, a slew of regional lenders remain on the ropes. And regulators appear to be giving up hope that some of them can be saved.

The FDIC is going to need to tap their lifeline..."The FDIC agreed to share losses with BB&T on $15 billion of the $22 billion in assets included in the deal." and yet "Colonial's collapse will cost the FDIC's dwindling deposit-insurance fund an estimated $2.8 billion, the agency said. The fund stood at just $13 billion as of March." So they are going to share $15 Billion in losses, and only had $13 billion as of March...and many banks have shuttered since then. Doesn't take a mathematician to add this one up...time to sell some more T-bills...China will keep buying, right?