[schema type="organization" orgtype="LocalBusiness" url="http://4salebydonna.com" name="Real Estate Agent Donna Baker" description="Real Estate Agent showing homes for sale and available real estate in Monrovia, Pasadena, Arcadia the San Gabriel Valley in Southern California." city="Monrovia" state="Ca" postalcode="91016" email="donna@4salebydonna.com " phone="(626) 408-7766 "]

Homeowner Tax Deductions: Real Estate’s Ace in the Hole

Sure, even the idea of homeownership is appealing for all of the traditional emotional and lifestyle reasons. Having proprietary control over your family’s center of operations is a goal for most Monrovia residents—just as most of us would consider it a necessary evil if professional obligations make frequent moves unavoidable. Travel may be broadening, but most rolling stones (no matter how moss-less) eventually hanker to settle down.

But aside from the lifestyle aspects, another major advantage to settling down and owning your home gets its turn in the limelight at least once a year. This advantage is anything other than abstract. The time of year is April 15, when the concrete financial benefits are tallied up in the very welcome form of area homeowner tax deductions.

Tax advice is not my specialty—for that, you should always defer to your qualified financial advisor, whose full time job it is to do all that’s humanly possible to keep track of the ever-changing Federal Tax Code. But even non-specialists know that some of the most beneficial provisions in the Code’s 75,000 pages do relate to the range of significant homeowner tax deductions.

In the National Association of Realtors’ periodical Houselogic, writer Dona DeZube recently surveyed some of the major ones—tax tips that deserve to be investigated by any town homeowner who will soon be charting out their own mid-April strategies.

The list was headed by the most obvious one, the mortgage interest deduction, which applies to interest paid on a loan secured by the place you live in. That doesn’t have to be a house—it could also be a trailer or a boat. As long as you sleep and cook in it, if it also has toilet facilities, interest paid for its purchase falls into the category.

Likewise, there is the prepaid interest deduction. Prepaid interest (aka “points”) you pay in when you take out a mortgage or refi can usually be deducted in the year it is originated. An exception is when you refinance and use the proceeds for other than home improvements, in which case the deduction is spread out over the life of the loan. If you refinance again, it gets a little more complicated (may be time to ring up that qualified advisor again).

Another hefty deduction is the one for area property taxes you have paid. If your mortgage lender required you to insure repayment through private mortgage insurance (PMI), if your income is less than a set amount, the premiums may be fully deductible (otherwise, a reduced deduction will apply). Even more complicated rules apply to government insurance premiums (qualified advisor time).

More homeowner tax deductions can be applicable, too, with varying degrees of complication—particularly those which relate to area vacation homes. And there are also tax credits for things like energy-efficient home systems.

The bottom line deductibility of many aspects of homeownership can be a major reason why April 15 gets many area renters to do some serious examination of their residential futures. I’m here to help with any of your own real estate plans!

Is there an Election Year Effect on Real Estate?

This one was news to me. The Wall Street Journal had it buried in a ‘spread sheet’ section of their online Real Estate section: “Why It’s Harder to Sell Your Home in an Election Year.” If you are like me—never having had an inkling that homes for sale have rough sledding in an election year (like this one)—you’d have to read the details.  The short answer is, with amazingly low interest rates and industry projections that California home prices and rents are on the rise, even if there is a slight Election Effect, it doesn’t outweigh the benefits of getting into the market now.

“The uncertainty of a looming election can cause a dip in home sales,” it detailed, “especially if the race is close.” The article was illustrated by a cartoon showing a neighborhood street whose every lawn was graced by alternate “vote!” signs and homes for sale signs. The underlying thesis was that in close elections, house hunters are reluctant to buy if an uncertain political future makes them unsure about their own financial fortunes.

This might sound reasonable from a logic perspective, but as you read further into the factual basis for the idea, you’re likely to start losing confidence.

The whole basis for the article is a political science paper published in 2014.

In the British Journal of Political Science.

Based on housing sales back in 1999-2006.

In 73 elections.

Most of us would begin to worry about why this couldn’t make the grade in a United States journal of political science, since it centered on U.S. elections. Perhaps a research quality issue? Then there’s the fact that those dates are 10-17 years old. There is also the puzzling notion that there have been 73 elections in the past couple of decades…but it turns out that they are dealing with gubernatorial elections from a select number of states. Perhaps our average house hunter checking out homes for sale in town actually does hang their financial fortunes on who the next Governor is going to be…but I wouldn’t bet on it.

As for Presidential elections, the article mentions a separate analysis that “uncovered a similar effect.” But, on closer reading, not really. This analysis was by someone who studied California sales only, and determined that in the Golden State, home prices rose by an average of about 1% less during election years. But they still rose by 4.5% in those years. If that means they were “harder to sell,” you’d have to explain why…

This is only a guess, but if you were trying to determine if it will be easier or harder to find buyers for San Gabriel Valley homes for sale in Election Year 2016, it seems more logical to look for factors that directly affect the buyers—such as today’s historically low mortgage interest rates. When buyers do the arithmetic showing how low monthly payments have become, I’m willing to bet that overshadows thoughts about who the next country leader is going to be.

If you are readying to buy or sell a local home, you probably don’t really need to worry about who will occupy the Whitehouse as much as who will be helping you navigate the market. I hope you’ll elect me for the job!

Increase the value of your home? Find out what buyers want.

Add french doors and an outdoor seating area to increase the value of your home.

Living Space re-think: Add french doors and an outdoor seating area to increase the value of your home.

Are you wondering how to remodel or upgrade for the most bang for your buck when you sell? The answer is simple. Find out what buyers want.  Consumer Reports magazine tells us that there are several steps a homeowner can take that may boost the value of your home, directed by research from today’s buyer.

Ranked in order of preference, here is the short list of what can do to potentially increase your home’s value or in other words, what the buyers are looking for.

  1. Kitchen –  Buyers want “a modern/updated kitchen.”  This doesn’t mean to start from scratch, nor does it mean spending tens of thousands of dollars. A simple update of appliances and counter tops with a fresh finish to the cabinets can do the trick. Also, consider an update of cabinet hardware, kitchen faucet, and light fixtures.
  2. Living space re-think -Buyers would like to see an “open floor plan with flexible living space” according to the article. Think about a room that buyers could stand as a home office, a workout room, or a place for a grandparent…with a door into a private bath. Can that tired old backyard work as an “outdoor entertainment area” if you add french doors from the family room and maybe some decking?  Gone are the days of the big lawn in the back yard. Buyers like to see a seating area with room for a BBQ, outdoor TV viewing and maybe a firepit.
  3. Energy Efficiency –  Water is a big deal in Southern California. Change out that lawn and install a low water yet lush looking landscape, swap out old toilets with sleek new dual flush low-flow toilets. Buyers prefer a home that addresses lower energy costs. How about considering dual pane windows with low E, or insulation in the attic. LED lighting is the newest take on energy savings.
  4. Update major systems – consider the heating, air conditioning, roof, plumbing, and electrical systems. Many of these upgrades bring high value to your home.  Buyers like to know they will not have to contend with aging systems. Younger buyers are also looking for fuss-free surfaces that clean easily and do not stain. Wood, laminate, or porcelain tile floors, quartz counter tops: these work well with the modern and sleek look that is popular now.
  5. Senior features – Baby boomers are still a driving force as buyers. They are looking for single level homes, or at least one with a master bedroom on the main floor. Considering their potential for walkers and wheel chairs, that means wider doorways, easy to navigate outdoor surfaces, step in showers with a seat, non-slip floor materials.
  6. Cosmetic touches – fresh paint is always the lowest cost way to add increased value and buyer appeal. Go for neutral colors, white or off white. If you are looking at remodeling that kitchen or bath, go to neutral colors for all surfaces for the best value when you sell.