With the a new year just around the corner it’s a great time to check up on things that may end or begin with a new year, like annual enrollment for insurances or tax deadlines. Below are some tips courtesy of Sidney Stonecypher with People’s Bank Home Loan Center for helping your transition to a new year more efficiently.
1. Review health and dental care choices. Many employers allow you to make changes to your benefit plans now. Check with doctors and dentists to make sure they’re still in your plan’s preferred provider network and that your family has adequate coverage.
2. Review use-or-lose accounts. Pretax Flexible Spending Accounts (FSAs) are set up this way. Review your plan to see if you have some spending to do, or if your employer offers a grace period. Even then, make sure 2011 expenses are still allowed in 2012.
3. Review your withholding. Check the withholding calculator at the IRS website. If you haven’t been withholding enough to cover your taxes, you might want to increase the amount. Under-withholding can result in penalties.
4. Get ready for 2011 taxes. Check last year’s returns to see who needs to send you what tax documents, and by when. Make a list and follow up if anyone holds you up at the beginning of the year. Also, check last year’s return for itemized deductions. See if you should make deductible purchases now or wait until 2012.
Note: Be sure to consult with a tax professional before making any decisions related to your tax situation.
5. Set your 2012 financial goals. Now is the time to write down what you’d like to achieve financially next year. Save money for a down payment on a new house? Start a college fund for your kids? Put more into your retirement fund?
Thanks Sidney and People’s Bank for the wonderful and helpful tips!
This morning I received my Home & Wealth Newsletter from Sidney Stonecypher at People’s Bank, and came across an article in it that I would like to share. The following is courtesy of Sidney at People’s Bank:
The Truth about the 3.8% Medicare Tax What it Means When You Sell Your Home
The new health care legislation includes a 3.8% Medicare tax that may apply to certain real estate transactions in certain very specific circumstances. Unfortunately, this has been misreported all over the internet in some alarming ways. For example:
“The new health care legislation imposes a 3.8% tax on all home sales.” “If you sell your home for $400,000, you’ll pay a $15,200 ’sales tax.’” “Middle-income people will pay the full tax even if they’re only ‘rich’ the day they sell their home.”
Please note: Every one of the above statements is COMPLETELY FALSE.
What the Law Really Says
One of the provisions of the Patient Protection Affordable Care Act (PPACA) health care legislation makes so-called “high-income” households subject to a new 3.8% Medicare tax on investment income beginning in 2013. All the misreporting arose because this provision is contained in a complicated section of a complicated piece of legislation. But here are the facts:
The Medicare tax is not a 3.8% “sales tax” on all real estate transactions. In truth, it is not a sales tax at all and it does not apply to all real estate transactions. The 3.8% Medicare tax is a tax on investment income (which may or may not come from the sale of a property). And it is for persons who earn more than certain amounts specified in the bill.
When you sell your home, there is still a capital gains threshold of $250,000 per individual or $500,000 per couple. This is profit NOT subject to capital gains tax. However, you will be required to pay the added 3.8% Medicare tax on any gain you realize above your applicable threshold.
Most Home Sellers Not Affected
Experts tell us most people selling their homes won’t be impacted by this new regulation. Your home sale would have to make you a so-called “high earner” and here’s what that would take. For example, a couple will be subject to the 3.8% tax only if they made MORE THAN $500,000 profit on the sale of their home. And if they did, the 3.8% tax would apply only to the part of that profit that was ABOVE $500,000. So, if their profit were $600,000, they would have to pay $3,800 of that as tax–3.8% of the $100,000 profit above the $500,000 threshold. Their net profit would still be: $596,200.
We hope this clearly explains how the 3.8% Medicare tax is not a tax on all real estate sales. Instead, it is a tax on investment income that may result in an extremely small percentage of home sellers paying additional taxes on their home sale profits above the designated threshold amount that applies to them ($250,000 for individuals, $500,000 for couples).
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It has been estimated that the bill’s definition of “high earners” includes less than 5% of all taxpayers. In addition, as of March 2011, the median existing home sale price was $159,600. So, mathematically, only a small percentage of home sales will likely be affected when the Medicare tax is implemented in 2013.
As always, consult with a professional tax advisor before making any decision with tax implications. And for home financing or refinancing, please feel free to call or email us with any questions. We’re always glad to talk…. Have a great day!  Thank you People’s Bank for the great article!
Often times we receive real estate questions that might be a help to others. Below is a blog question and answer would thought we would share.
Would an owner of investment property be willing to give our church a reduction in rent if we paid for the property tax?
    Commercial properties – office space, warehouses, etc – are almost always leased on a “triple net” basis, which means that the tenant pays all taxes, insurance and maintenance as part of the lease, so your proposal offers them no benefit. If an owner is still depreciating the building, they might have some tax benefit in leasing it for a lower amount because their income would be lower. Whether they could claim the difference in market rent and your rent as a charitable contribution, I doubt, but that is a question for an accountant. Living facilities are typically not permitted in commercial/industrial areas unless they are homes that existed at the time the zoning was changed to that designation.Â
    Conversely, if you get a house in a residential area and plan to use it for anything other than a residence, i.e. offices, meeting space, etc., you will need to get a conditional use permit, which involves filing an application, notifying neighbors and participating in a hearing regarding the proposal in front of the hearing examiner. The examiner would make the final decision. There could be some advantage to a property owner to rent to you if the lower rental amount were offset by you paying the property taxes, although the net result to the owner could be the same if the rental discount were equivalent to the tax amount.Â
How would you suggest our church locate an owner of investment property that would be willing to lease the property to our church?
To explore the residential possibilites, the best place to find such a property owner may be within your own membership and their sphere of influence. If that is not productive, I would suggest taking to residential property management companies.
Recently, when we think of a distressed property, we think of an owner who is behind on their payments or who owes more on their home than it is worth. Other types of distress can cause a property to be sold at auction…as noted in the following question:
I just saw a notice in the classified section of the newspaper saying that my neighbor’s property is going to be sold at auction to pay the back taxes. Can I just go pay the taxes?
Yes, you can…and if you would do it to save the property for your neighbor, I must say that is an incredibly nice thing for you to do. Paying the taxes will remove the lien. On the other hand, if your idea is that you can pay the taxes and get the property, you need to hold off for the auction. The process goes something like this:Â
    In the State of Washington, when a property owner is 3 years delinquent in tax payments, the County in which the property is located can give notice to the owner, through mailed and published notices, that they intend to foreclose on the property unless the owner brings the taxes current. The notice process is defined by law as to when and how notice must be given. If the owner does nothing, the property is auctioned on the courthouse steps (in Whatcom County, it happens inside the courthouse rotunda) on the designated Friday morning. Buyers must have cash or its equivalent. Any amount generated more than the taxes due and foreclosure fees is paid to the owner. It is also interesting to note that the same process can be initiated by a homeowners association for non-payment of dues.
    In both cases, there is no title insurance provided (a buyer might want to check the title ahead of time and buy a title policy), there is no opportunity to look inside any structures and there is no disclosure of property condition, so there are some risks. In addition, it may be possible for the owner to come back for up to a year after the sale and reclaim the property upon payment of all the costs.Â
    It may be a screamin’ deal, but buyer beware!
 How Do You Get the Extended Home Buyer Tax Credit?
This is what the National Association of Realtors suggests you do
You’ve decided to purchase a home and take advantage of the Extended Home Buyer Tax Credit. Here’s what you have to do to get your benefit:
Close on your home purchase between November 7, 2009 and April 30, 2010, or have a binding written contract in place by April 30, 2010 with a closing date no later than June 30, 2010.
 Decide whether to:Â
apply the credit to your 2009 tax return, filed on or before April 15, 2010;
 file an amended 2009 return; or,Â
apply the credit on your 2010 return, filed on or before April 15, 2011.
Attach documentation of purchase to your return.
Documentation of Purchase
Details concerning the precise documents required to confirm your purchase have not yet been released. When this information becomes available, we will include instructions and links to the appropriate forms.
When to Apply the Credit
Buyers purchasing homes on or before December 31, 2009 may claim the credit on their 2009 tax returns.
Buyers purchasing in 2010 will have the option to:
 Claim the credit on their 2009 return, even if the purchase is completed after December 31, 2009;
 File an amended return for 2009 if their purchase is completed after April 15, 2010; or,
 Claim the credit on their 2010 tax returns.
Applying the Credit to Your 2009 Taxes
You will need to do three things to claim the credit on your 2009 tax return:
Fill out Form 5405 to determine the amount of your available credit;
Apply the credit when you file your 2009 tax return or file an amended return;
Attach documentation of purchase to your return or amended return.
With the a new year just around the corner it’s a great time to check up on things that may end or begin with a new year, like annual enrollment for insurances or tax deadlines. Below are some tips courtesy of Sidney Stonecypher with People’s Bank Home Loan Center for helping your transition to a new year more efficiently.
This morning I received my Home & Wealth Newsletter from Sidney Stonecypher at People’s Bank, and came across an article in it that I would like to share. The following is courtesy of Sidney at People’s Bank:
Often times we receive real estate questions that might be a help to others. Below is a blog question and answer would thought we would share.
 ![bulldog-with-headache[1]](http://www.johnsonteamrealestate.com/blog/wp-content/uploads/2010/04/bulldog-with-headache1-150x150.jpg "bulldog-with-headache[1]")
If by this time, you have a king sized head ache and would like some other sources of information, you might want to try one of the following, the ![Reblog this post [with Zemanta]](http://img.zemanta.com/reblog_e.png?x-id=b157064b-8a2c-4b58-8291-073ba046ce0e)
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