One Loan for Purchase & Renovations
The FNMA Home Style conventional mortgage allows a buyer to purchase a home that needs renovations and include them in the financing. This facilitates the purchase of the home and the renovations in one loan rather than getting a separate second mortgage or home equity line of credit.
Monday, April 15, 2019
Get Rid of Things You Don't Need
Periodically, you need to rid yourself of things that are taking up you time and space to make room for more of what you like and want.
There's a frequently quoted suggestion that if you haven't used something for two years, maybe it isn't essential in your life.
If you have books you'll never read again, give them to someone who will. If you have a deviled egg plate that hasn't been used since the year your Aunt Phoebe gave it to you, it's out of there. Periodically, go through every closet, drawer, cabinet, room and storage area to get rid of the things that are just taking up space in your home and your life.
Every item receives the decision to keep or get rid of. Consider these questions as you judge each item:
- When was the last time you used it?
- Do you believe you'll use it again?
- Is there a sentimental reason to keep it?
You have four options for the things that you're not going to keep.
- Give it to someone who needs it or will appreciate it
- Sell it in a garage sale or on Craig's List.
- Donate it to a charity and receive a tax deduction
- Discard it to the trash.
Start with your closet. If you haven't worn something in five years, get rid of it. Then, go through the things again and if you haven't worn it in two years, ask yourself the real probability that you'll wear it again.
Another way to do it is to move it from your active closet to another closet. If a year goes by in the other closet, the next time you go through this exercise, those clothes are on their way out.
If the items taking up space are financial records and receipts, the solution may be to scan them and store them in the cloud. There are plenty of sites that will offer you several gigabytes of free space and it may cost as little as $10 a month for 100 GB at Dropbox, to get the additional space you need. It will certainly be cheaper than the mini-storage building.
Wednesday, April 10, 2019
Qualified Charitable Contribution
If you're at an age where you need to be taking Required Minimum Distributions (age 70.5) from your IRA, a qualified charitable contribution and some planning may allow you to lower your overall tax liability.
Let's say that a couple's 2019 itemized deductions include $8,000 in property taxes, $4,400 in interest and $20,000 in charitable contributions. That would total $32,400 which exceeds the 2019 $25,300 standard deduction for married couples, 65 years of age or older, filing jointly.
Their required minimum distribution from their IRA is $40,000 which will be taxed at ordinary income. If this couple is in the 24% tax bracket, the tax liability would be $9,600.
Alternatively, if they made the $20,000 in charitable contributions from their IRA as a Qualified Charitable Contribution, it would not be taxable in the withdrawal. The balance of the RMD of $20,000 would be taxable at 24% which would have a tax liability of $4,800.
Their $32,400 worth of itemized deductions would be reduced by the $20,000 because it was paid from the IRA which makes their itemized deductions $12,400. The $25,300 standard deduction would benefit them more by an amount of $12,900 increased deductions. At 24%, this would reduce their liability by $3,096.
In the first instance, they would owe $9,600 in taxes due to the $40,000 RMD from their IRA. In the second example, because of the increased amount by taking the standard deduction, the net tax liability would be $1,704 ($9,600 - $4,800 - $3,096 = $1,704).
This example shows how shifting contributions to a Qualified Charitable Contribution will get the same amount to the charity but lower the Required Minimum Distribution that must be recognized as ordinary income. The shifting also gives the taxpayers the advantage of a higher amount of the standard deduction than the itemized deduction.
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