Shortly after the federal government enacted sweeping healthcare reform earlier this year, there was considerable concern over a last-minute addition to the legislation: a 3.8 percent tax on investment income of upper-income households to help shore up Medicare. The tax takes effect in 2013.
Among the concerns expressed among consumers and business people, including real estate professionals, both then and today, is that the tax amounts to a transfer tax on real estate. Not true, NAR Director of Tax Policy Linda Goold says.
Here’s how the tax works. For individuals earning $200,000 a year or more and married couples earning $250,000 a year or more, certain investment income above these income levels might be subject to the 3.8 percent tax on a portion of that income. I say “might” because whether the tax applies or not depends on many factors having to do with the kind and amount of the investment income the household receives.
Investment income includes capital gains, dividends, interest payments, and, for those who own rental property, net rental income.
Importantly, the $250,000 (for individuals) and $500,000 (for married couples) capital gain exclusion on the sale of a principal residence remains in place. So, if you’re a married household that sold a house for a $500,000 gain (that’s gain, not sale proceeds), that amount remains excluded from your income calculation.
Tuesday, April 12, 2011
Thursday, March 10, 2011
30 Things We Need - and 30 We Dont
30 Things We Need — and 30 We Don't
Do you have the feeling, as I do, that in the tsunami of everyday life, we're getting too much of stuff we don't need, and not enough of what we do? Herewith my first set of suggestions about how to redress the imbalance:
WE NEED LESS: WE NEED MORE:
Information Wisdom
Shallow billionaires Passionate teachers
Self-promotion Self-awareness
Multitasking Control of our attention
Inequality Fairness
Sugar Lean protein
Action Reflection
Super sizes Smaller portions
Private jets High-speed trains
Calculation Passion
Experts Learners
Blaming Taking responsibility
Judgment Discernment
Texting Reading
Anger Empathy
Output Depth
Constructive criticism Thank-you notes
Possessions Meaning
Righteousness Doing the right thing
Answers Curiosity
Long hours Longer sleep
Complaining Gratitude
Sitting Moving
Selling Authenticity
Cynicism Realistic optimism
Self-indulgence Self-control
Speed Renewal
Emails Conversations
Winning Win-win
Do you have the feeling, as I do, that in the tsunami of everyday life, we're getting too much of stuff we don't need, and not enough of what we do? Herewith my first set of suggestions about how to redress the imbalance:
WE NEED LESS: WE NEED MORE:
Information Wisdom
Shallow billionaires Passionate teachers
Self-promotion Self-awareness
Multitasking Control of our attention
Inequality Fairness
Sugar Lean protein
Action Reflection
Super sizes Smaller portions
Private jets High-speed trains
Calculation Passion
Experts Learners
Blaming Taking responsibility
Judgment Discernment
Texting Reading
Anger Empathy
Output Depth
Constructive criticism Thank-you notes
Possessions Meaning
Righteousness Doing the right thing
Answers Curiosity
Long hours Longer sleep
Complaining Gratitude
Sitting Moving
Selling Authenticity
Cynicism Realistic optimism
Self-indulgence Self-control
Speed Renewal
Emails Conversations
Winning Win-win
Monday, March 7, 2011
New Rules for Home Improvement Tax Credits
The tax break for energy-efficient home improvements made in 2011 isn't as big as in past years.
By Kimberly Lankford, Kiplinger.com
Can you still get a tax break for making energy-efficient home improvements in 2011?
If you didn't get around to making energy-efficient home improvements last year, don't worry -- it's not too late to get a tax break. But the tax credit in effect for 2011 projects is a lot less attractive than the one that applied to 2009 and 2010.
In 2009 and 2010, you could claim a tax credit worth 30% of the cost of qualifying energy-efficient home improvements, up to a maximum credit of $1,500 for those two years combined. In 2011, the credit is much smaller -- $500 -- and it is off-limits if you already claimed the credit for energy-efficient home improvements in the past. (A tax credit, which reduces your tax bill -- or increases your tax refund -- dollar for dollar, is more valuable than a tax deduction, which merely reduces that amount of income that is taxed.)
The 2011 home energy tax credit is now limited to 10% of the purchase price of energy-efficient windows, doors and skylights, up to a maximum credit of $500, and only $200 of that amount can be allocated to the cost of replacement windows. Certain home improvements have specific dollar limits for the credit such as $300 for eligible central air conditioning, $300 for an air source heat pump, $300 for an electric heat pump water heater, and $150 for eligible natural gas, propane or oil furnaces. Even if you install several improvements, the maximum credit you can claim is $500. And you won't be able to claim it on your 2011 federal tax return if you already received $500 or more in credits for energy-efficient home improvements from 2006 through 2010.
Some of the rules for tax-credit eligibility have changed, too. To see which products qualify, see the Tax Credit page at EnergyStar.gov or EnergyTaxIncentives.org for details.
A more generous credit is still in effect for taxpayers who buy and install alternative energy equipment in their homes. Qualified equipment includes geothermal heat pumps, solar water heaters, solar panels, fuel cells and small wind-energy systems (as long as no part of these systems is used to heat a swimming pool or hot tub). That credit -- worth 30% of the cost and installation of such improvements -- has no maximum dollar amount, and you have until December 31, 2016, to place those items in service.
If you're still preparing your 2010 taxes and you're wondering whether you can claim the energy-efficient tax break for home improvements you made last year, see these two articles about the 2010 credits: Tax Credits for Going Green and Tax Breaks for Energy-Efficient Home Improvements.
Reprinted with permission. All Contents c2011 The Kiplinger Washington Editors. www.kiplinger.com.
By Kimberly Lankford, Kiplinger.com
Can you still get a tax break for making energy-efficient home improvements in 2011?
If you didn't get around to making energy-efficient home improvements last year, don't worry -- it's not too late to get a tax break. But the tax credit in effect for 2011 projects is a lot less attractive than the one that applied to 2009 and 2010.
In 2009 and 2010, you could claim a tax credit worth 30% of the cost of qualifying energy-efficient home improvements, up to a maximum credit of $1,500 for those two years combined. In 2011, the credit is much smaller -- $500 -- and it is off-limits if you already claimed the credit for energy-efficient home improvements in the past. (A tax credit, which reduces your tax bill -- or increases your tax refund -- dollar for dollar, is more valuable than a tax deduction, which merely reduces that amount of income that is taxed.)
The 2011 home energy tax credit is now limited to 10% of the purchase price of energy-efficient windows, doors and skylights, up to a maximum credit of $500, and only $200 of that amount can be allocated to the cost of replacement windows. Certain home improvements have specific dollar limits for the credit such as $300 for eligible central air conditioning, $300 for an air source heat pump, $300 for an electric heat pump water heater, and $150 for eligible natural gas, propane or oil furnaces. Even if you install several improvements, the maximum credit you can claim is $500. And you won't be able to claim it on your 2011 federal tax return if you already received $500 or more in credits for energy-efficient home improvements from 2006 through 2010.
Some of the rules for tax-credit eligibility have changed, too. To see which products qualify, see the Tax Credit page at EnergyStar.gov or EnergyTaxIncentives.org for details.
A more generous credit is still in effect for taxpayers who buy and install alternative energy equipment in their homes. Qualified equipment includes geothermal heat pumps, solar water heaters, solar panels, fuel cells and small wind-energy systems (as long as no part of these systems is used to heat a swimming pool or hot tub). That credit -- worth 30% of the cost and installation of such improvements -- has no maximum dollar amount, and you have until December 31, 2016, to place those items in service.
If you're still preparing your 2010 taxes and you're wondering whether you can claim the energy-efficient tax break for home improvements you made last year, see these two articles about the 2010 credits: Tax Credits for Going Green and Tax Breaks for Energy-Efficient Home Improvements.
Reprinted with permission. All Contents c2011 The Kiplinger Washington Editors. www.kiplinger.com.
Thursday, January 20, 2011
Things in the Real Estate Market are on the Rise
December Existing-Home Sales Jump
Existing-home sales rose sharply in December, when sales increased for the fifth time in the past six months, according to the National Association of REALTORS®.
Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, rose 12.3 percent to a seasonally adjusted annual rate of 5.28 million in December from an upwardly revised 4.70 million in November, but remain 2.9 percent below the 5.44 million pace in December 2009.
Lawrence Yun, NAR chief economist, said sales are on an uptrend. “December was a good finish to 2010, when sales fluctuate more than normal. The pattern over the past six months is clearly showing a recovery,” he said. “The December pace is near the volume we’re expecting for 2011, so the market is getting much closer to an adequate, sustainable level. The recovery will likely continue as job growth gains momentum and rising rents encourage more renters into ownership while exceptional affordability conditions remain.”
The national median existing-home price for all housing types was $168,800 in December, which is 1.0 percent below December 2009. Distressed homes rose to a 36 percent market share in December from 33 percent in November, and 32 percent in December 2009.
“The modest rise in distressed sales, which typically are discounted 10 to 15 percent relative to traditional homes, dampened the median price in December, but the flat price trend continues,” Yun explained.
Inventory Levels
Total housing inventory at the end of December fell 4.2 percent to 3.56 million existing homes available for sale, which represents an 8.1-month supply at the current sales pace, down from a 9.5-month supply in November.
NAR President Ron Phipps said buyers are responding to very good affordability conditions despite tight mortgage credit. “Historically low mortgage interest rates, stable home prices, and pent-up demand are drawing home buyers into the market,” Phipps said. “Recent home buyers have been successful with very low default rates, given the outstanding performance for loans originated in 2009 and 2010.”
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 4.71 percent in December from 4.30 percent in November; the rate was 4.93 percent in December 2009.
Transaction Types
A parallel NAR practitioner survey shows first-time buyers purchased 33 percent of homes in December, up from 32 percent in November, but are below a 43 percent share in December 2009.
Investors accounted for 20 percent of transactions in December, up from 19 percent in November and 15 percent in December 2009; the balance of sales were to repeat buyers. All-cash sales were at 29 percent in December, compared with 31 percent in November, but up from 22 percent a year ago. “All-cash sales have been consistently high at about 30 percent of the market over the past six months,” Yun said.
Single-family home sales jumped 11.8 percent to a seasonally adjusted annual rate of 4.64 million in December from 4.15 million in November, but are 2.5 percent below the 4.76 million level in December 2009. The median existing single-family home price was $169,300 in December, down 0.2 percent from a year ago.
Existing condominium and co-op sales surged 16.4 percent to a seasonally adjusted annual rate of 640,000 in December from 550,000 in November, but remain 5.2 percent below the 675,000-unit pace one year ago. The median existing condo price was $165,000 in December, which is 7.4 percent below December 2009.
Performance by Region
Regionally, existing-home sales in the Northeast jumped 13.0 percent to an annual pace of 870,000 in December but are 5.4 percent below December 2009. The median price in the Northeast was $237,300, which is 1.4 percent below a year ago.
Existing-home sales in the Midwest rose 11.0 percent in December to a level of 1.11 million but are 4.3 percent below a year ago. The median price in the Midwest was $139,700, up 3.3 percent from December 2009.
In the South, existing-home sales increased 10.1 percent to an annual pace of 1.97 million in December but are 2.5 percent below December 2009. The median price in the South was $148,400, unchanged from a year ago.
Existing-home sales in the West surged 16.7 percent to an annual level of 1.33 million in December but remain 1.5 percent below December 2009. The median price in the West was $204,000, down 5.6 percent from a year ago.
Existing-home sales rose sharply in December, when sales increased for the fifth time in the past six months, according to the National Association of REALTORS®.
Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, rose 12.3 percent to a seasonally adjusted annual rate of 5.28 million in December from an upwardly revised 4.70 million in November, but remain 2.9 percent below the 5.44 million pace in December 2009.
Lawrence Yun, NAR chief economist, said sales are on an uptrend. “December was a good finish to 2010, when sales fluctuate more than normal. The pattern over the past six months is clearly showing a recovery,” he said. “The December pace is near the volume we’re expecting for 2011, so the market is getting much closer to an adequate, sustainable level. The recovery will likely continue as job growth gains momentum and rising rents encourage more renters into ownership while exceptional affordability conditions remain.”
The national median existing-home price for all housing types was $168,800 in December, which is 1.0 percent below December 2009. Distressed homes rose to a 36 percent market share in December from 33 percent in November, and 32 percent in December 2009.
“The modest rise in distressed sales, which typically are discounted 10 to 15 percent relative to traditional homes, dampened the median price in December, but the flat price trend continues,” Yun explained.
Inventory Levels
Total housing inventory at the end of December fell 4.2 percent to 3.56 million existing homes available for sale, which represents an 8.1-month supply at the current sales pace, down from a 9.5-month supply in November.
NAR President Ron Phipps said buyers are responding to very good affordability conditions despite tight mortgage credit. “Historically low mortgage interest rates, stable home prices, and pent-up demand are drawing home buyers into the market,” Phipps said. “Recent home buyers have been successful with very low default rates, given the outstanding performance for loans originated in 2009 and 2010.”
According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 4.71 percent in December from 4.30 percent in November; the rate was 4.93 percent in December 2009.
Transaction Types
A parallel NAR practitioner survey shows first-time buyers purchased 33 percent of homes in December, up from 32 percent in November, but are below a 43 percent share in December 2009.
Investors accounted for 20 percent of transactions in December, up from 19 percent in November and 15 percent in December 2009; the balance of sales were to repeat buyers. All-cash sales were at 29 percent in December, compared with 31 percent in November, but up from 22 percent a year ago. “All-cash sales have been consistently high at about 30 percent of the market over the past six months,” Yun said.
Single-family home sales jumped 11.8 percent to a seasonally adjusted annual rate of 4.64 million in December from 4.15 million in November, but are 2.5 percent below the 4.76 million level in December 2009. The median existing single-family home price was $169,300 in December, down 0.2 percent from a year ago.
Existing condominium and co-op sales surged 16.4 percent to a seasonally adjusted annual rate of 640,000 in December from 550,000 in November, but remain 5.2 percent below the 675,000-unit pace one year ago. The median existing condo price was $165,000 in December, which is 7.4 percent below December 2009.
Performance by Region
Regionally, existing-home sales in the Northeast jumped 13.0 percent to an annual pace of 870,000 in December but are 5.4 percent below December 2009. The median price in the Northeast was $237,300, which is 1.4 percent below a year ago.
Existing-home sales in the Midwest rose 11.0 percent in December to a level of 1.11 million but are 4.3 percent below a year ago. The median price in the Midwest was $139,700, up 3.3 percent from December 2009.
In the South, existing-home sales increased 10.1 percent to an annual pace of 1.97 million in December but are 2.5 percent below December 2009. The median price in the South was $148,400, unchanged from a year ago.
Existing-home sales in the West surged 16.7 percent to an annual level of 1.33 million in December but remain 1.5 percent below December 2009. The median price in the West was $204,000, down 5.6 percent from a year ago.
Thursday, January 13, 2011
Housing Starts Expected to Climb in 2011
New home construction is looking up this year.
During an economic update Wednesday at the International Builders' Show in Orlando David Crowe, chief economist of the National Association of Home Builders, projected single-family housing starts to rise by 21 percent in 2011, reaching 575,000 units.
The estimate is slightly more conservative than the Dec. 30 projection of 716,000 housing starts this year by Lawrence Yun, chief economist of the National Association of REALTORS®. Both estimates assume sustained job growth, increasing U.S. population, as well as continued low interest rates driving construction.
Yun expects about 2 million jobs to be added in 2011. However, as NAHB presenter Frank Nothaft, chief economist for Freddie Mac, pointed out, 2011 got off to a slow start with nonfarm payrolls rising only by 103,000 in December. He called the figure weaker than expected.
Credit is another factor. Lending remains tight, but if it opens up with safe underwriting standards for creditworthy buyers, Yun says there would be a bigger boost to the housing market with spillover benefits for the broader economy. The 30-year fixed-rate mortgage is forecast to rise gradually to 5.3 percent around the end of 2011; at the same time, unemployment should drop to 9.2 percent, according to NAR.
In addition, over the past 10 years the U.S. has added 27 million people. Continued population growth will also spur home construction and sales. “All the indicator trends are pointing to a gradual housing recovery,” Yun says.
An even more conservative projection of 492,000 housing starts in 2011 was released by the Portland Cement Association during the International Builders Show Wednesday. Edward Sullivan, PCA chief economist, does not expect significant increases until 2012 due to tight lending standards, a high home inventory count, and unstable housing prices. He also says that new home construction will vary considerably by region.
-- Erica Christoffer, REALTOR® Magazine
During an economic update Wednesday at the International Builders' Show in Orlando David Crowe, chief economist of the National Association of Home Builders, projected single-family housing starts to rise by 21 percent in 2011, reaching 575,000 units.
The estimate is slightly more conservative than the Dec. 30 projection of 716,000 housing starts this year by Lawrence Yun, chief economist of the National Association of REALTORS®. Both estimates assume sustained job growth, increasing U.S. population, as well as continued low interest rates driving construction.
Yun expects about 2 million jobs to be added in 2011. However, as NAHB presenter Frank Nothaft, chief economist for Freddie Mac, pointed out, 2011 got off to a slow start with nonfarm payrolls rising only by 103,000 in December. He called the figure weaker than expected.
Credit is another factor. Lending remains tight, but if it opens up with safe underwriting standards for creditworthy buyers, Yun says there would be a bigger boost to the housing market with spillover benefits for the broader economy. The 30-year fixed-rate mortgage is forecast to rise gradually to 5.3 percent around the end of 2011; at the same time, unemployment should drop to 9.2 percent, according to NAR.
In addition, over the past 10 years the U.S. has added 27 million people. Continued population growth will also spur home construction and sales. “All the indicator trends are pointing to a gradual housing recovery,” Yun says.
An even more conservative projection of 492,000 housing starts in 2011 was released by the Portland Cement Association during the International Builders Show Wednesday. Edward Sullivan, PCA chief economist, does not expect significant increases until 2012 due to tight lending standards, a high home inventory count, and unstable housing prices. He also says that new home construction will vary considerably by region.
-- Erica Christoffer, REALTOR® Magazine
Tuesday, January 11, 2011
Foreclosures may stall again - think twice about buying one
Lenders May Be Not-So-Fast to Foreclosure
After a pivotal court ruling last Friday in Massachusetts, lenders are likely to be more willing to help home owners who are struggling to make their mortgage payments.
Last Friday, the Massachusetts Supreme Judicial Court ruled that two foreclosures in the case were invalid because the banks didn’t follow proper steps to show they had the authority to foreclose on the homes.
The case likely has set a precedent for the rest of the nation’s lenders to follow: Before you foreclose on a home owner, make sure you have authority to do it.
“What banks are going to have to do is make sure they’ve dotted their I’s and crossed their T’s before going through with a foreclosure,” says Stuart Rossman, director of litigation at the National Consumer Law Center.
This could mean an even slower pace for foreclosures as banks take extra caution on their paperwork, says Roy D. Oppenheim, senior partner at Oppenheim Law in Weston, Fla.
Experts say the court ruling was a positive for home owners who are in the middle of the foreclosure process, those trying to work out modifications, refinance, or do a short sale. They say that reaching a deal with lenders may become easier.
“I am expecting the banks to do fewer foreclosures and to engage in serious conversation in pre-foreclosure with borrowers,” Oppenheim says. “We’re already seeing [some] modifications that included for the first time principal reduction.”
Source: “Foreclosure Ruling May Be Good News for Homeowners,” MarketWatch (Jan. 11, 2011
After a pivotal court ruling last Friday in Massachusetts, lenders are likely to be more willing to help home owners who are struggling to make their mortgage payments.
Last Friday, the Massachusetts Supreme Judicial Court ruled that two foreclosures in the case were invalid because the banks didn’t follow proper steps to show they had the authority to foreclose on the homes.
The case likely has set a precedent for the rest of the nation’s lenders to follow: Before you foreclose on a home owner, make sure you have authority to do it.
“What banks are going to have to do is make sure they’ve dotted their I’s and crossed their T’s before going through with a foreclosure,” says Stuart Rossman, director of litigation at the National Consumer Law Center.
This could mean an even slower pace for foreclosures as banks take extra caution on their paperwork, says Roy D. Oppenheim, senior partner at Oppenheim Law in Weston, Fla.
Experts say the court ruling was a positive for home owners who are in the middle of the foreclosure process, those trying to work out modifications, refinance, or do a short sale. They say that reaching a deal with lenders may become easier.
“I am expecting the banks to do fewer foreclosures and to engage in serious conversation in pre-foreclosure with borrowers,” Oppenheim says. “We’re already seeing [some] modifications that included for the first time principal reduction.”
Source: “Foreclosure Ruling May Be Good News for Homeowners,” MarketWatch (Jan. 11, 2011
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