Here's How You Can Leverage Your Home To Reduce Your Tax Burden For Next Year

Each year around April, we can find ourselves becoming a little more tense at the thought of what is about to occur: tax time.

Instead of falling into the trap of procrastinating your taxes, however, it's much more beneficial to face tax time head-on and do your research on your applicable deductions well in advance.

Your home is good for many things, but using your home to reduce your tax burden may be one benefit you haven't thought of.

Here are some tax benefits that can be leveraged with your home, and some ways to lower your tax bill in 2014.

Deduct Interest On Home Loans

Though interest paid on personal loans isn't deductible on your tax return, interest paid on mortgages is.

Home mortgage interest, for both your primary residence and a second home such as an investment property, can account for a large bill near the end of the year, and can significantly decrease your tax bill for 2014.

Interest paid on a line of credit for your home or a home equity loan is also usually deductible, and you may also qualify to deduct the insurance premiums on your private mortgage if this was a requirement from your lender. Ensure you keep your Form 1098 from you lender, and be sure not to miss each of your interest deductions.

Deducting Points Paid For A Better Rate

If you paid points in order to get a better interest rate on your home mortgage, the IRS will allow you to deduct these, too. If you meet the requirements for this deduction, one of which is that you paid the points in the same year that you purchased your primary residence, be sure to add the points to your list of deductions.

Deduct Property Taxes

Property taxes are also deductible on your tax return, and since they make up a significant portion of your home expenses each year, they certainly shouldn't be excluded from your list of deductions in 2014.

As an annual deduction for the entire period you own your home, ensure you don't forget about your first year in your home. If you've just purchased your home, the property taxes would have been split between the seller, the previous homeowner, and you, the buyer, at the time of the property transfer. Your portion of your first year's property taxes for the home is also fully deductible.

Tax-Free Sales Gain

If you've owned and lived in your home for a minimum of two years and are ready to sell, you likely qualify for up to $250,000 dollars of tax-free profit, or up to $500,000 for married couples.

If the sale falls short of the two year mark, the IRS provides some tax relief if the sale is due to a list of unforeseen circumstances, such as changes in employment or health. Be sure to see where you qualify, and leverage the sale of your home for tax-free sales gain.

Having the ability to leverage your home in order to lower your tax burden is, of course, another benefit of being a homeowner. Often, reaping the full benefits of tax deductions is a simple matter of doing your research or speaking with a professional to get the information applicable to you.

Ready To Buy Your First Home, Here Is Your Quick Checklist

Buying your first home is a major milestone in your life, similar to graduating high school or moving out of your parent's house.

When you buy a property, you are making a long-term investment decision in your future and potentially taking the first step toward your future financial security.

However, buying a house before you are ready can actually be a negative move that puts a cramp in your plans.

It is important to assess where you are in life, so that you know whether or not it's the right time to buy a house.

Some people buy their first home at 21, others at 30 and some might continue to rent for the rest of their lives – the decision depends on personal circumstances. But how can you determine for yourself whether you are ready?

You Have All Of  Your Finances In Order

Is your credit score looking healthy? Have you paid off your credit card debt, student loans or personal loans?

If not, it is important to clean up your finances and pay down your debts before you start looking for a home, or you will be adding a mortgage on top of the debt before you are able to handle everything.

You Have Enough Savings For A Down Payment

Just because you can buy a home for as little as 3.5% down payment, doesn't mean that you should. You will have your dream home, but your mortgage payments will be so high that you won't have any money left over for repairs or improvements.

Also, you will end up paying thousands of dollars more in interest over the length of the loan. The bigger down payment you can save, creating equity in your home, the better.

You Are Earning Enough To Comfortably Afford The Mortgage Payment

Financial experts recommend that you never take a monthly payment that is more than 25% percent of your take home pay – including taxes and insurance.

Stretching yourself thinner will leave you little room for error and if your income drops for any reason – you will quickly find yourself in hot water.

You Are Happy To Settle In One Place

Could you see yourself settling in this location for the long term, or are you still considering moving elsewhere in the country or living abroad?

Buying a home is a long-term investment, so if you think that you might possibly move somewhere else in the next five years, you might want to think twice about buying a home and rent instead.

These are just a few of the signs that you are ready to purchase your first property. For more information, contact your trusted real estate professional.

When Should You Shred Your Financial Documents?

How do you know what happens to your documents when you put a piece of paper in the trash? It can be difficult to know who is seeing it and what they are doing with it. It isn't very common to burn trash anymore; therefore you can be sure that your paper garbage or recycling is likely to pass through several hands on its way to a landfill or recycling center.

Step-By-Step, Your Documents Can Get Pilfered

Every step that occurs once the trash leaves your control has risk that someone will find personal information they can use to cause you harm. One way to safeguard personal information is to shred it before it goes into the trash.

Shredding devices are available at most office supply stores. Cross-cut shredders provide more security than strip-cut shredders. You may want to consider one depending on your level of concern. Shredding services or shredding events are often offered by financial institutions or community organizations.

Properly destroying sensitive personal information is a key step in helping to keep your identity secure. You really should shred any documents containing personal information, but be cautious not to shred financial documents that you may still need.

To Shred Or Not To Shred, That Is The Question...Or Maybe It's When To Shred

The Better Business Bureau offers these guidelines on when to shred:

• Deposit, ATM, credit, and debit card receipts can be shredded once the transaction appears on your statement
• Canceled checks, credit card statements, and bank statements with no long-term significance can go through the shredder after one year; if used to support tax returns, keep them for seven years 
• Monthly bill statements can be shredded one year after receiving, to allow for year-to-year bill comparisons (another good way to monitor your budget!) 
• Credit card contracts and loan agreements should be saved for as long as the account is active
• Pay stubs can be shredded yearly after reconciling with your W-2 or other tax forms
• Documentation of investment purchases or sales should be kept for as long as you own the investment and then seven years after that; shred monthly investment account statements annually after reconciling with a year-end statement
• Always shred documents with Social Security numbers, birth dates, PIN numbers or passwords, financial information, contracts or letters with signatures, pre-approved credit card applications, medical and dental bills, travel itineraries, and used airline tickets.

3 Common Myths About Real Estate Short Sales

There is a lot of misleading and incorrect information about real estate short sales.

Many people don't have a clear understanding of the purpose of short sales or how they actually work.

Essentially, a short sale is when one sells their home for less than the balance remaining on the mortgage attached to the property.

The proceeds from the sale are used to repay a pre-negotiated portion of the balance to settle the debt.

A short sale can be a solution for homeowners who really need to sell their home but owe more on the mortgage than the home is worth.

Understanding the short sale process can help make the most out of a real estate sale.

Here are some common myths and why they are false:

A short sale damages one's credit record as much as foreclosure

In many cases a short sale is less damaging to your credit record than a foreclosure. Some lenders may think that the short seller acted in a more responsible manner than simply walking away from the property.

Although the amount paid may have been less than the mortgage balance outstanding, the loan was settled with the lender. Opting for foreclosure is often seen as a lack of responsibility.

To qualify for a short sale one must be behind on payments

This might have been true in the past, but it’s not anymore.

You just need to be able to prove that you are in financial hardship, which could be due to death in the family, divorce, job loss, mortgage rate hike or even loss of property value.

After a short sale you can’t buy again for five to seven years

This may be true in some cases, but not all. In certain situations the waiting period can be reduced as low as two or three years before you are allowed to purchase another home.

It would be wise to speak with licensed real estate professional or home financing specialist to get the most current options in the marketplace.

Pass it on

These are just a few examples of commonly believed short sale myths. A clear understanding of the short sale and the benefits it  can provide is important for financially strapped homeowners.

Feel free to pass this important information on to someone that you feel would benefit from it.