Rent your home tax free

20 Apr

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There is a little-known provision in the tax code that allows homeowners to rent their principal residence or second home for up to 14 days a year without having to recognize the income. In this situation, the taxpayer does not deduct the rental expenses associated with the income.

There is no restriction on how much you earn. If your first or second home is in a desirable area where people are looking for short-term rentals, it could provide a windfall to the homeowner.

In cities where any big sports championships are played, there could be a market for a temporary rental of a home. Events like PGA tournaments, college basketball tournaments, Bowl games, NFL playoffs and others can create a demand for this type of rental.

For instance, there are people in Augusta, Georgia who rent their homes during the Master’s Golf Tournament each year. There are not a lot of hotel rooms in the area relative to the number of people who usually attend in non-pandemic years and the homes can fetch a nice daily rate.

There can be confusion about the different types of properties and what constitutes a home. The intended use coupled with actual experience will usually determine the type of property.

There are four types of property. A principal residence is the home you live in. There is income property that you rent and do not live in. There is investment property that is primarily held for an increase in value. And, there is inventory, which is related to your business like homes that are built or purchased to be flipped.

A second home is one that is used for the primary enjoyment of the owner in addition to their principal residence. Taxpayers are allowed to deduct the mortgage interest and property taxes on a first and second home up to specific limits. A vacation home could be another name for a second home but more accurately, it is a rental property that has more than 14 days of personal use during the year. It becomes a hybrid.

You might want to check with your insurance agent to see if your current policy covers temporary rentals, including liability in case of an accident involving personal injury. This could affect your decision as to whether you want to consider the rental.

For more information, see IRS facts about renting out a residential property or consult your tax professional.

6983 Single Creek Trail, Frisco

14 Apr

Single Creek Twilight Front

This Stunning & Updated Highland Beauty Has it All!!

5 Bedrooms / 3.1 Baths / Study / Game / Pool / Spa
3197 sq ft / Built 2001 / Frisco Schools

CLICK HERE TO VIEW HD TOUR

This gorgeous Highland home is a rare find in sought-after Hunters Creek and offers rich upgrades and an amazing backyard oasis with a beautiful Riverbend-Sandler pool and spa all on an oversized lot! Large trees and landscaped stone borders enhance the curb appeal and elevation of this home and upon entry your guests will be greeted by rich nailed-down hardwood flooring through most of downstairs and Plantation shutters throughout. Double crown moldings in the entry leads you to the elegant formal dining area and private study recently painted (2020) and boasts large windows and French doors. The large kitchen area with neutral tones would delight any chef with its huge granite island, stainless steel appliances to include a GE 5-burner gas range, Profile dishwasher, microwave and convection oven. The 42” cabinetry provides storage and plan meals or events at the granite planning desk that includes cabinets. The breakfast area is a perfect spot for your morning coffee or gathering of friends. Entertain in the adjacent family room with vaulted ceilings and wall of windows with pool views and a gas log fireplace.

Escape to the spacious and split owner’s retreat with hardwoods, plantation shutters and luxurious bath with dual vanities and two walk-in closets. In addition there is a convenient bedroom, play room, or 2nd study downstairs.  Upstairs,  friends or family will enjoy staying in the Guest suite with full bath and walk-in closet and there are two other spacious bedrooms that are served by a full bath and storage with a linen closet. The large upstairs game room/media room has insulated floors and double doors to reduce sound through the house, is painted for optimal viewing experience (2019), and has a remote-controlled ceiling fan. And a rare 16’ x 6’ storage room, or study provides additional space.

So much more awaits you outside as the back yard is a relaxing oasis with a beautiful stamped concrete covered patio with custom-built cedar patio cover with standing-seam metal roof, mature landscaping, pool with flagstone coping and an attached spa. A large secondary backyard with 8’ BOB fence recently stained (2021), storage shed and electric gate is a rare find in Hunters Creek. A three-car wide driveway leads to the garage that boasts a work bench, cabinet storage and overhead shelving, along with a utility room with sink and cabinets. Other outstanding upgrades are….LiftMaster garage door opener with Wi-Fi connectivity(2018), floored attic space over entire garage, Rheem natural gas pool and spa heater (2019), Pentair Superflo high performance pump (2020), Rheem tankless water heater (2018), downstairs AC cooling system with R410A refrigerant (2019) and radiant barrier roof decking and solar-powered attic ventilation fans. This home presents outstanding upgrades and Hunters Creek is an incredible community with parks, pools, walking trails along the creek and community events.

Please contact Jeff Jacobs at 972.978.6539 for more information or click HERE.

For more information and other homes for sale in this area, check out www.myrealtytown.com 

Before you pay cash for a home

13 Apr

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Before you pay cash for a home, ask yourself if there is a possibility, at some point in the future, you might put a mortgage on the home and would want to deduct the mortgage interest on your federal tax return.

Current federal tax law allows homeowners to deduct the interest on up to $750,000 in acquisition debt used to buy, build or improve a property. When a person pays cash for a home, the acquisition debt is zero. The only way to increase the acquisition debt is to make and finance the improvements to the home.

As with many IRS regulations, there are exceptions to this rule. If a mortgage is secured on the first or second home within 90 days of the purchase closing, the debt is considered acquisition debt. The interest on the funds used to purchase the home can be deducted on up to $750,000 of the mortgage balance.

Assuming a borrower has good credit, the ability to repay the loan and the home justifies the loan, lenders are willing to make mortgages for homeowners. It does not mean that the interest on the mortgage will be deductible.

Additional information can be found in Publication 936, Home Mortgage Interest Deduction, of the Internal Revenue Service at IRS.gov.

To deduct home mortgage interest, you must file Form 1040 or 1040-SR and itemize deductions on Schedule A. The mortgage must be secured debt on a qualified home in which you have an ownership interest. Interest on home equity loans is only deductible if the borrowed funds are used to buy, build or substantially improve the taxpayer’s home that secures the loan.

If you answered yes or even maybe to the question first posed in this article, contact your tax professional to determine the best way to approach your individual situation. For more information, download the Homeowners Tax Guide.

1631 Cross Timbers Drive, Prosper

9 Apr

1631 Cross Timber-2

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15048 Mountain Creek Trail, Frisco

7 Apr

Mountain Creek Twilight Front

This Stunning & Updated Landstar Beauty Has it All!!

4 Bedrooms / 3.1 Baths / Study / Game / Outdoor Living Area
3315 sq ft / Built 2003 / Frisco Schools

CLICK HERE TO VIEW HD TOUR

This gorgeous Landstar home in sought after Hunters Creek offers rich upgrades, a stunning remodeled kitchen and a relaxing covered patio overlooking a pool-sized yard. Professional landscaping to include a stone border, Austin stone elevation as well as beautiful custom iron and glass double doors enhance the curb appeal and elevation of this home and upon entry your guests will be greeted by rich nail-down hardwood flooring in the study, formal living, dining area and the family room with plantation shutters throughout. The elegant formal living and dining areas have upgraded lighting and double crown-moldings and just adjacent, the study boasts stylish blue shiplap, 8’ French doors, a charming rustic light fixture and hardwoods. And nearby, the updated powder bath has a stylish marble vanity, trendy tile and fixtures. The remodeled kitchen and spacious breakfast with neutral tones would delight any chef with its double oven and six-burner Kitchen Aid gas range and walk in pantry. Plenty of working and storage space are available with 42” painted cabinets, rich granite island, farm sink, designer lighting and also a Bosch dishwasher. The spacious breakfast area is that perfect spot for your morning coffee or gathering of friends. This warm and friendly kitchen has a wainscoted ceiling and opens to the family room with soaring 21” ceilings, upgraded fireplace with shiplap, tile, gas logs, double mantle and hearth, art shelving and entertainment niche.

Escape to the Texas-sized split owner’s retreat with an upgraded chandelier and crown moldings that boasts a beautiful backyard view. Enjoy the jetted tub and oversized shower in the luxurious master bath with split vanities in addition to a large walk-in closet with built-in shelves.

Upgraded iron spindles and patterned carpeting on the stairs are your gateway upstairs with plush carpet (12-20) where you will find a large game room wired for sound. Your guests can stay in the split and private guest suite with full bath and there are two other bedrooms served by a Jack and Jill bath and both provide plenty of space with walk-in closets and linen closet. So much more awaits you outside in the pool-sized yard surrounded by a Board on Board fence, nice trees, large flagstone covered patio and serving area with a built-in GE grill, murphy bar, lighting, fan and TV connections. Other outstanding upgrades are….upgraded front-facing windows, radiant barrier in attic, Trane HVAC (2018), water heaters (2019), designer lighting and covered patio (2019). This home presents outstanding upgrades and Hunters Creek is an incredible community with parks, pools, walking trails along the creek and community events.

Please contact Jeff Jacobs at 972.978.6539 for more information or click HERE.

For more information and other homes for sale in this area, check out www.myrealtytown.com 

1631 Sandstone Drive, Frisco

1 Apr

1631 Sandstone-33

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5921 Wilford Drive, McKinney

1 Apr

5921 Wilford-2

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Homeowner Equity and Wealth Accumulation

23 Mar

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National homeowner equity grew in the fourth quarter of 2020 by $1.5 Trillion or 16.2% year-over-year based on a CoreLogic analysis. The study was done on the six out of ten homeowners who have mortgages on their home.

The fourth quarter of 2020 also saw the number of mortgaged residential homes with negative equity decrease by 8% from the third quarter. Compared to the same quarter in 2019, negative equity decreased by 21%.

Equity is defined as the value of the home less the mortgage owed. Negative equity means that the homeowner’s debt is more than the value of the home. Appreciation is the dynamic that is moving homeowner’s equity to the positive position.

On a national basis, according to National Association of REALTORS®, annual price growth for the last ten years has been 6.4%. In the last five years, it has grown at 7.3% annually. According to the CoreLogic Home Price Index, home prices in December 2020 were up 9.2% from the year before.

Frank Nothaft, Chief Economist for CoreLogic, is quoted as saying “the amount of home equity for the average homeowner with a mortgage is more than $200,000.”

Equity in a home is a significant component of net worth. The latest Survey of Consumer Finances reports the median homeowner has 40 times the household wealth of a renter: $254,000 compared to $6,270. According to the 2019 Survey of Consumer Finances by First American, housing wealth was the single biggest contributor to the increase in net worth across all income groups.

The study also concluded that housing wealth represented nearly 75% of total assets of the lowest income households. For homeowners in the mid-range of income, it represented 50-65% of total assets and 34% of total assets for the highest income households.

Renters do not benefit from the appreciation of housing or the amortization of the mortgage which are significant contributors to home equity that results in net worth. Examine what a down payment can grow to in seven years with a Rent vs. Own.

301 Misty Meadow Drive, Allen

18 Mar

301 Misty Meadow-8

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1412 Snowberry Drive, Allen

18 Mar

1412 Snowberry-2

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