Real Estate Information Archive

Blog

Displaying blog entries 1-6 of 6

Home Sweet Tax Shelter

by Jessica Hunt with Preservation Properties

Tax Tips

by Jessica Hunt with Preservation Properties

As we enter the new year I wanted to remind you of how lenders are considering self employed income and rental income.  Please use this information as a rule of thumb not an underwriting decision – only income reported on tax returns can be considered – the days of “stated income” are over!
 
If you are self employed as a Sole Proprietor your income will be taken from your filed and signed federal tax return 1040 Schedule C net income after your business expenses have been deducted.  You must have been in the same industry for at least 2 years and normally your income from the last 2 years tax returns will be averaged.
 
If you are self employed as a S Corporation your income will be taken from your filed and signed tax return 1040’s with all Schedules.  W2’s will be matched to 1040 income.  K-1 forms will be matched to corporations listed on page 2 of Schedule E.  Income will be W2 income + non-passive  income less non-passive loss on Schedule E.  You must have been in the same industry for at least 2 years and normally your income from the last 2 years tax returns will be averaged.
 
If you are self employed as a Corporation your income will be taken from your filed and signed tax return 1040’s with all Schedules.  W2’s will be matched to 1040 income.  No K-1 pass through.  Corporate Tax Returns will likely be required.  Existence of the business will be verified via the Secretary of State’s Database.  You must have been in the same industry for at least 2 years and normally your income from the last 2 years tax returns will be averaged.
 
If you are self employed as a Partnership your income will be taken from your filed and signed tax return 1040’s with all Schedules.  K-1 forms will be matched to corporations listed on page 2 of Schedule E.  Income is reported on page 2 of Schedule E.  You must have been in the same industry for at least 2 years and normally your income from the last 2 years tax returns will be averaged.
 
Rental Income:  Income as reported on filed and signed  tax return 1040’s with all Schedules.  Income is reported on page 1 of Schedule E.  Income calculation is gross rent less gross expenses.  There may be a required time of owning the property.

What Does It Mean To Deduct Mortgage Interest On Your Income Taxes?

by Jessica Hunt with Preservation Properties

Everyone knows that owning a home is the American dream, but did you know that borrowing to pay for one is a taxpayer's dream? Home mortgage interest is deductible on your income taxes if you itemize. You can deduct the interest on up to one million dollars of home mortgage debt, whether it is used to purchase a first or a second home. You can also deduct the interest on up to $100,000 of home equity debt, even if you don't use the money for home improvements. Real estate taxes are deductible as well. With the availability of these tax deductions, you should consider whether borrowing on a home is right for you. What could the home mortgage deduction mean to you? What follows are some examples of the potential tax savings for several scenarios:

Example 1

Bob rents a home at a cost of $1,200.00 per month. He is single with no children and takes the standard deduction on his income taxes. His adjusted gross income is $128,000. He has $3,500 in state income tax withheld from his paychecks throughout the year, but doesn't qualify for any other itemized deductions. Bob's federal income tax liability for 2008 will look something like this:

Adjusted gross income $128,000

less standard deduction, Single $4,400

less personal exemption $2,800

Taxable income $120,800

Bob's 2008 federal income tax $32,129

However, if Bob purchases a home with a monthly mortgage payment of $1,200, his tax liability is lowered. At the end of the year Bob will receive a form 1098 from his mortgage company that shows how much of his mortgage payments for the year went to mortgage interest. Bob's 1098 for the year 2008 shows that he paid $11,400 in mortgage interest. Bob also paid $1,500 in real estate taxes on his home in 2008. Bob's federal income tax liability for 2008 will look something like this:

Adjusted gross income $128,000

less itemized deduction for state income taxes $3,500

less itemized deduction for real estate taxes $1,500

less itemized deduction for mortgage interest $11,400

less personal exemption $2,800

Taxable income $108,800

Bob's 2008 federal income tax $28,409

In this example Bob saves $3,720 in federal income taxes. In addition, his monthly housing cost stays the same and he owns his home, rather than renting. Good deal, Bob!

Example 2

Suppose there is another guy named Bob who is married and has two kids ages 16 and 19. This Bob has owned his home for a number of years. In fact, he has paid down his mortgage so much that his Form 1098 shows only $3,000 in mortgage interest paid in the year 2008. Bob's wife earns no income and they file their taxes married filing jointly. Bob's federal income tax liability for 2008 will look something like this:

Adjusted gross income $128,000

less itemized deduction for state income taxes $3,500

less itemized deduction for real estate taxes $1,500

less itemized deduction for mortgage interest $3,000

less personal exemptions for Bob, wife, and 2 kids $11,200

Taxable income $108,800

Bob's 2008 federal income tax $24,849

Bob is still itemizing because his deductions exceed the standard deduction, but just barely. The standard deduction for married filing jointly is $7,350 and the total of Bob's itemized deductions are $8,000. This saves Bob about $200 on his federal income tax in 2008.

Suppose that Bob and his wife decided to fix up their home a little bit in 2008. They also want to buy a new car, take a family vacation, and pay for their oldest child's college tuition. They've been saving for years and they could take $100,000 out of a mutual fund to pay for it all. But the mutual fund is earning an average of 10% interest a year so they decide to get a home equity loan for $100,000 at an interest rate of 8% instead. They are already ahead by borrowing for less than their money is earning, but look at what the $100,000 home equity loan does to their tax bill. Bob receives a Form 1098 that shows he paid $7,800 in interest on his home equity loan. Bob's federal income tax liability for 2008 will look something like this:

Adjusted gross income $128,000

less itemized deduction for state income taxes $3,500

less itemized deduction for real estate taxes $1,500

less itemized deduction for mortgage interest $3,000

less itemized deduction for home equity interest $7,800

less personal exemptions for Bob, wife, and 2 kids $11,200

Taxable income $101,000

Bob's 2008 federal income tax $22,580

Bob saves $2,269 on his federal income taxes by taking out a home equity loan!

Example 3

Suppose there is a third Bob out there. This Bob is single with no children and is paying the mortgage on the home he purchased a few years ago. Bob has been saving up and this year he fulfills his dream of purchasing a vacation home. It's not much, just a cabin in the woods, but it has a bedroom, bath, and kitchen. Here is what Bob's second home does to his tax liability for 2008:

Adjusted gross income $128,000

Less itemized deduction for state income taxes $3,500

Less itemized deduction for real estate taxes on 1st home $1,500

Less itemized deduction for mortgage interest on 1st home $7,800

Less itemized deduction for real estate taxes on 2nd home $1,100

Less itemized deduction for mortgage interest on 2nd home $10,200

Less personal exemption for Bob $2,800

Taxable income $101,100

Bob's 2008 federal income tax $26,022

The $1,100 Bob pays for real estate taxes on his 2nd home and the $10,200 he pays for mortgage interest on his 2nd home save Bob approximately $3,500 on his federal income taxes in 2008. Bob is so slick, fulfilling his dream of owning a 2nd home and saving money on his taxes!

New Mass. push to reduce toxic chemicals in everyday products

by Preservation Properties

google map to real pro systems

This week's article is brought to you by Boston.com's Green Blog

Massachusetts legislators are filing legislation this week to protect children, families and workers from harmful chemicals found in everyday household products from window cleaner to shampoo.

For years, environmentalists have pushed for stricter laws governing chemicals, especially as a series of government and other studies have found increasing amounts of chemicals in people bodies, including pregnant women.

The legislation, called The Safer Alternatives Bill, would require businesses to replace toxic chemicals with safer ones if there are ones available. It also sets up a review system for other chemicals. This is the 6th year the bill will be filed in Massachusetts, but despite the budget woes of the state, environmentalists say they expect to make headway.

“As a father and a legislator, I am committed to better protecting children and families in Massachusetts from the toxic chemicals in every day products, from cleaners to non-stick cookware to cosmetics,” said Representative Jay Kaufman (D-Lexington), lead House sponsor of the Safer Alternatives bill filed this week. “We must break the cycle of preventable disease that starts with exposure to chemicals that can cause cancer, birth defects and reproductive disorders.”

The American Chemistry Council issued a response saying "we agree that it’s time to modernize the chemicals management program in this country" and support reform that "will keep consumers safe, preserve innovation and protect jobs. However, we believe that the right way to regulate chemicals is at the federal level.

“A patchwork of state and local laws would actually hinder an effective, comprehensive national program. Different laws at the state and local level create confusion for consumers, retailers and manufacturers, and make it increasingly difficult to do business, which in turn hampers investment and future job creation.”

The industry group also noted that the Centers for Disease Control and Prevention has done biomonitoring work and said that the mere presence of a chemical in the body does not mean that it will cause effects or disease.

The legislation comes as 71 chemical safety laws have been passed in the last eight years by bipartisan state legislators across the country and bills in 30 other states are filed are will be filed this year. Some bills include bans on Bisphenol A, a chemical used in a wide variety of products that has been partially banned in Massachusetts, hazardous flame retardants, requirements that children’s product manufacturers use only the safest chemicals; and resolutions urging Congress to overhaul the 1976 Toxic Substances Control Act (TSCA) – the federal law that allows dangerous and untested chemicals to be used in everyday products and materials.

“Dozens of states around the country are coming together to update our chemical safety laws so that hazardous chemicals are replaced with safer alternatives,” said Senator Steven Tolman (D-Brighton), lead Senate sponsor of the Safer Alternatives bill. “If Congress is not going to act quickly enough to protect families in Massachusetts, we’re going to move forward at the state level.”
Last year, the President’s Cancer Panel report noted that "the true burden of environmentally induced cancers has been grossly underestimated" and called for stricter control.

"As the burden of chronic diseases linked to hazardous chemicals like cancer and learning disabilities mounts up, we are demanding leadership from officials at all levels of government,” said Elizabeth Saunders, Legislative Director for Clean Water Action, an advocacy group that is part of a coalition known as the Alliance for a Healthy Tomorrow pushing the legislation. “Toxic chemicals such as cadmium and BPA simply do not belong in every day products in our homes and workplaces, and our families are paying too high a price.

Six ways to go green and save money in 2011

by Preservation Properties

Since the economy imploded and the value of most peoples' 401k's have dropped faster than a cheapskate bending over to pick up loose change on a sidewalk, I've been thinking a lot about the investing side of personal finance. In part, that's because in the New Economy I think the smart money is on investing in things that decrease your cost of living, as opposed to things that you hope will increase your net worth.

google map to real pro systems

If you believe, as I do, that the economic volatility is far from over -- that we may just be seeing the leading edge of fundamental changes in the way we live and the type of economy we've always known -- then maybe it's time to adopt a different perspective when it comes to investing.

In the New Economy, maybe the question should be: How much will this investment save? Not: How much will this investment earn? Maybe it's time to invest more in ourselves, to equip ourselves to live more self-sufficiently, to take stock in ourselves and reap the guaranteed dividends of our own performance, rather than continue to speculate on the hypothetical performance of our stock portfolios. Maybe we'll be better served and happier if we stop fixating on traditional ROI (Return on Investment) and instead focus on a new ROI -- Return on Independence.

In this spirit of financial independence, here are six surefire investments that will save you money and make you more self-sufficient in the New Year:

1. Energy efficiency and generation: A recent study by the University of California-Davis claims that world oil supplies will run out 90 years before replacement energy technologies are fully developed, based on the current pace of research and development. You don't need to have a degree in economics to realize that energy -- particularly petroleum-based energy -- is only going to keep getting more expensive as supplies dwindle.

From simple things like installing programmable thermostats at home and consolidating errands to save gas whenever you leave your driveway, to more elaborate and costly energy-savings solutions like hybrid vehicles, Energy Star appliances, and solar and geothermal home energy systems, investing in things that reduce energy consumption or help you generate your own energy are almost always smart money moves.

In recent years the federal and state governments have even been providing a tank-full of tax incentives to encourage consumers to conserve and generate energy, making the financial proposition that much more attractive.

2. Tools: I've always said that when shopping for tools, don't be cheap. You should generally buy the best that you can possibly afford.

From power and hand tools to kitchen knives, gardening implements to sewing machines, by buying quality tools your do-it-yourself projects will be easier, more enjoyable, and turn out better. Plus, by making the front-end investment in quality tools, you'll be motivated to take on more projects yourself and save even more.

As a longtime DIY'er, I can tell you that with the slump in the construction and home improvement trades, at least in my part of the country I'm seeing some of the lowest prices on tools and building supplies in years. When it comes to tools, it's a buyer's -- and builder's -- market.

3. Education/skills: As a teacher friend of mine always says, "Your education is the one thing no one can ever take away from you." Today, with unemployment nearing double digits, skills and knowledge can make the difference between a paycheck and an unemployment line.

Whether it's going back to school to pick up some classes to bolster your resume, or just taking some non-credit classes to learn a new skill so that you can do more things for yourself, America's 1,600 community colleges are likely to be where you'll find the best value for your tuition dollars. Since the start of the recession, community college enrollment has increased by almost 10% per year. At community colleges you typically pay only about 10% of what tuition costs at the average four-year college.

4. Paying down debt: Perhaps the greatest asset you can have in the New Economy isn't something you own, but rather something you don't own: DEBT. With the uncertain job market and current investment climate, paying off debt -- including aggressively paying down your home mortgage -- is, in my opinion, the smartest investment you can make. And since the start of the recession, smart consumers have been doing just that.

We've been borrowing less than in nearly 20 years, and we've raised the personal savings rate to 6% (compare that to China's saving rate, which is estimated at 30 to 40%). Still think it doesn't make financial sense to pay off your home mortgage early? If you've never experienced the peace of mind that comes from sleeping under a roof that you own free and clear, I guess you just can't understand.

5. Now that's a growth fund: Here's a prediction that you can take to the bank: Food prices are going to continue to increase. Resolve to start raising more of your own food in 2011 by planting a backyard vegetable garden, tending a plot of your own at a local community garden, or buying a share and pitching in at a local farm through a Community Supported Agriculture program.

Don't have space for a veggie garden? Try planting a few easy-to-grow perennial vegetables alongside the petunias in your flowerbed. Or grow some herbs in pots on the windowsill -- they'll not only save you money on cooking spices, but they might lower your medical expenses as well.

And invest in planting a few trees around the yard while you're at it; not only will they increase your home's value, but according to the U.S. Department of Energy, planting as few as three strategically placed trees in your yard can reduce your heating and cooling expenses by up to 20%.

6. Health/fitness: Regardless of your views on healthcare reform, you can't lose if you start reforming your own health in the New Year. Young people often ask me for financial advice, and I tell them that the single biggest thing they can do to ensure a healthy financial future is to maintain their physical health and stay fit. It's not just a matter of saving big money on future healthcare costs, but most people generate most of their lifetime wealth through their labor, not through investments. In order to work, you obviously need to be healthy. What's more, getting and staying fit doesn't need to cost a lot.

Some of the healthiest foods you can eat happen to cost the least -- often under $1 a pound -- if you shop smart. And you can skip the expensive health club membership if you simply start doing more things for yourself, which will save you even more.

There's an old cheapskate saying: The surest way to double your money is to fold it in half and put it back in your wallet. Particularly in this New Economy, investing in things that save you money and make you more self-sufficient is the best way I know to protect your financial future and the future of the planet as well. I wish you a happy, prosperous, and green New Year.

 

This article is brought to you by Jeff Yeager at Yahoo.

 

Household Chemicals & Indoor Air Quality

by Preservation Properties

"If you don't have your health, you don't have anything." This is a saying that is so old but as true today as it was when it was first uttered. Don't worry. While the topic of household chemicals and indoor air quality is very serious, some of the solutions are quite fun! From new cleaning products to paints, and from body care products to cosmetics, there are many fun, clean, and beautiful options that make living healthy worth living!

1 The Secret Chemicals in Fragrances
2 10 Ingredients To Avoid In Your Face Products
3 Bubble Trouble: What Is Sodium Lauryl Sulfate?
4 How To Read Labels and Avoid Toxic Cleaning Products
5 Hygiene Products for Dummies: Cosmetic Safety Database

6 The 10 Best All-Natural and Organic Mattress Sources
7 The Dirt on Bleach: What Makes Chlorine Bleach Bad News
8 The Best Interior Paints with Low Toxicity
9 What is BPA, a.k.a. Bisphenol A?
10 How Worried Should We Be About Everyday Chemicals?

Displaying blog entries 1-6 of 6

Contact Information

Preservation Properties
439 Newtonville Avenue
Newtonville MA 02460
Office: 617.527.3700
Fax: 617.527.2050