As the deadline nears for filing 2015 income taxes, there's no time like the present to get a jump on being ready to file. Experts say planning ahead may help lower the stress created by filing your income taxes. Getting an early start can give you the time you may need to cover all the bases. The following tax strategies may help.
Planning For 2015 Taxes Made Easier
1. Be sure to check and double-check all tax withholdings. Review your withholding information with your employer's payroll department to make sure you're not having too much – or not enough – withheld from your paycheck. If you make quarterly estimated tax payments review them, too.
2. Consolidate your outstanding debts. Give some thought to paying off high-interest credit card balances with a home equity loan or line of credit. The rate will be lower and the interest will be tax deductible.
3. Take refinancing into account. If you refinanced your mortgage during the tax year, you probably have a lower interest deduction. And if you used any or all of the refinance proceeds for anything other than home improvements, that money may be subject to an alternative minimum tax. Don't forget, you can deduct points that were paid in the refinance if you haven't already.
4. You should prepay your quarterly estimated state taxes. Pay the fourth-quarter 2015 estimated state income taxes and any balance owed by December 31. You can deduct the payments for the 2015 tax year and you won't be subject to the alternative minimum tax.
5. You should prepay your personal property taxes. Some counties bill taxpayers twice – once in November and again in February. If you pay the February installment by the end of the tax year you can deduct it on your 2015 income taxes. A word to the wise, however, the alternative minimum tax does not allow this deduction.
As always, if you have questions about your withholdings, exemptions, deductions or other tax matters see a qualified tax professional.
Find more tips and articles on Columbia SC taxes to your right in the Columbia SC Real Estate Categories. Follow us on Facebook and Twitter for daily news and tips we post there.
Most Columbia SC tax advisors suggest their clients to start thinking about their taxes early. As the end of the year rapidly approaches, now’s the time to do some tax planning. By starting now, you can make next April 15 a good bit less stressful. Here are a few tax tips that may be helpful.
Four Columbia SC Tax Tips
Columbia SC tax tips: 1) You can receive a tax credit for energy savings. Install a energy-efficient solar system and you can get a credit for 30% of the cost. Visit EnergyStar.gov for more information on other energy credits.
Columbia SC tax tips: 2) Use any stock market or other investment losses to offset any other gains or to reduce your taxable income. By law, you can wait until December 31, but it may be a good idea to begin planning now.
Columbia SC tax tips: 3) Know your retirement plan options. You have until next April 15 to fund your IRA, but only until December 31 to make your maximum contribution to a 401(k). You can contribute up to $18,000 if you’re under age 50, and up to $24,000 if you’ll turn 50 by on or before December 31.
Columbia SC tax tips: 4) Plan any charitable donations now. Cleaning out your closets ahead of time will help maximize any charitable deductions and get the jump on spring cleaning! If you plan to donate cash, spreading it out over the next couple of months may make it easier on your pocketbook.
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In our Columbia SC Real Estate News for April 2015:
Renters Squeezed By Higher Columbia SC Housing Costs
Renters are being squeezed in the Columbia SC housing market by a disproportionate growth in rental costs on one side and stagnant income on the other.
New research finds that rent growth is far exceeding wages, according to the National Association of Realtors.
The NAR reviewed data on income growth, housing costs and changes in the share of renter and owner-occupied households over the past five years across the country. Lawrence Yun, NAR chief economist, says the disparity between rent and income growth has widened to unhealthy levels and is making it harder for renters to become homeowners.
Income Not Keeping Up With Columbia SC Housing Costs
In the past five years, typical rent rose 15 percent while the income of renters grew by only 11 percent. The gap has worsened in many areas as rents continue to climb and the accelerated pace of hiring has yet to give workers a meaningful bump in pay.
The share of renter households has been increasing and homeownership in the Columbia SC housing market is falling. Those financially able to buy a home in recent years were insulated from rising Columbia SC housing costs since most take out 30-year fixed-rate mortgages with established monthly payments.
Moreover, a typical homeowners’ net worth climbs because of upticks in home values and declining mortgage balances. The result has been an unequal distribution of wealth as renters continue to feel the pinch of increasing Columbia SC housing costs every year.
Meanwhile, current renters seeking relief and looking to buy are facing the same dilemma: home prices are rising much faster than their incomes. With rents taking up a larger chunk of household incomes, it's difficult for first-time buyers – especially in high-cost areas – to save for an adequate downpayment.
NAR's research analyzed changes in the share of renters and homeowners, mortgage payments, median home prices, median household income for renters and the rental costs in 70 metro areas. Even with the tax benefits of owning versus renting, affordability is still the major stumbling block for many who would like to enter the Columbia SC housing market as an owner rather than a renter.
Speaking of taxes and the benefits of owning versus renting, we're devoting the rest of this month's newsletter to the subject of taxes…
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Some Last Minute Moves for Taxes
Here we are, time to do taxes, and this is no April fools joke.
With just two weeks left of tax-season 2015, here are a few actions worth taking to save you money on your 2014 taxes, jumpstart savings for you or a relative, or possibly get a tax break on health coverage for 2015.
- Contribute to an IRA. You have until April 15th to contribute to a 2014 traditional IRA, potentially reducing your taxable income. The maximum deductible contribution is $5,500 for those under age 50 and $6,500 for those age 50 and older. Your deduction will be limited based on income and whether you or your spouse has a retirement plan at work. Do you own a small business? Then you might be eligible for higher income and contributions limits through a simplified employee pension (SEP) IRA. Go to irs.gov and search for IRS Publication 590, “Individual Retirement Arrangements,” for details on contributions and income limits.
. - Contribute to the IRA of a young relative or someone else starting out. Lower-income workers of all ages will benefit in three ways: more savings, less taxable income, and, if they're not medically insured through your plan or one at work, a larger insurance premium tax credit.
. - Apply for health-insurance coverage. Taxpayers in states with state-run health-insurance Marketplaces who didn't realize they would owe a penalty for lack of coverage in 2014 can take advantage of extended sign-up periods for 2015 coverage, through April 17th or even later. They may find themselves eligible for income-based tax credits to use toward premiums.
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Don't Let Tax Identity Theft Happen to You
While we're on the subject of taxes, let's look at a growing problem and hopefully help you avoid calamity.
Tax-related identity theft can turn your life upside down and take years to resolve. You may know of someone who has had this happen to them. Someone submits an electronic tax return containing personal information about the person along with a bogus return address. The mess takes piles of paperwork, a tax advocate, and can take years to resolve.
Fortunately, consumers are more aware of the problem, and the IRS has made strides to educate the public, help victims, and prevent a recurrence. Here's some advice to flag potential problems:
I.D. Protection Tips
Protecting sensitive information in the first place and following up quickly to minimize the damage are paramount. Healthy skepticism can go a long way. For instance:
Ignore e-mails and social media purportedly from the IRS. The IRS will NEVER contact taxpayers by e-mail, text message, Facebook, Twitter, or other social media. Nor does it send e-mails stating that you're being audited or getting a refund. That's a "phishing" scam, which you should report at phishing@irs.gov.
Confirm the authenticity of letters from the IRS. Check the agency's official contact page.
Check the URL of "IRS" tax information pages. The agency's website begins with www.irs.gov. Others are fakes.
If You Become a Victim
Hundreds of thousands of people have been victimized by identity thieves. To help those taxpayers, the IRS is:
- Assigning victims a unique personal identification number. It must be included on their tax returns. This has given a lot of people peace of mind. It means faster processing and a speedier refund.
. - Speeding up victim case resolution. Because resolving I.D. theft cases can take up to six months, the IRS has assigned more employees to sort through the details and streamline the process.
. - Lending an ear. The IRS now has a dedicated section on its website devoted to the problem. In addition, it has implemented a special phone number for victims. The IRS Identity Protection Specialized Unit is available at 1-800-908-4490.
If you haven't already filed your taxes, good luck over the next two weeks. And remember, filing an extension for your taxes doesn't mean an extension to pay. You still must submit what you think you'll owe whenever you get around to filing or face penalites and interest from April 15th to the day you finally pay up.
If you're a first time Columbia SC home buyer, there may be some important things you already know about, like things you now have to take care of yourself that a landlord used to do for you. But being a homeowner also affects tax deductions you can take to help lower your tax bill.
Now that we're in full swing for taxes, we've put together this list of what you can and can't deduct, along with other tips for tax season.
What Can Be Deducted by a Columbia SC Home Buyer
Mortgage Interest
As a new Columbia SC home buyer, a new mortgage means a little more work for you when it comes time to file your taxes. However, the extra work is worth it in the end. Perhaps the most important tax deduction you need to be aware of is your mortgage interest. At year-end, refer to Form 1098 from your lender to see how much mortgage interest you paid. This is still deductible, though it may not be forever, so take the deduction while you still can.
Mortgage Points
Mortgage points are nothing more than prepaid interest. You can buy points to lower your interest rate when you get your loan. By purchasing points, you can save money in the long run if you stay in the home for a certain period of time, depending on the amount of points you buy.
For example, if you have a $300,000 mortgage and buy two points, you'll owe $6,000 for those points at closing. (Each point is 1% of the value of your mortgage.) If buying the points lowers your payment $250 a month, you’ll have to stay in your home for at least 16 months to break even. After that time passes, you'll start putting money back in your pocket.
Are you eligible to deduct money you spent on mortgage points from your taxes? Each situation is different, but it's definitely worth looking into. Ask your accountant or tax attorney.
Property Taxes
Becoming a Columbia SC home buyer also gives you the responsibility of paying property taxes. In most cases, your taxes are rolled into your monthly mortgage payment, and your mortgage company pays your taxes from your escrow account when they're due.
If you're a first-time Columbia SC home buyer, you'll need to know the total real estate taxes for the real property tax year and the number of days in the property tax year that you owned the property. This is usually handled at closing by a closing attorney, if you had one.
Private Mortgage Insurance (PMI)
Thanks to a bill the Senate approved in late December 2014, homeowners can deduct the cost of mortgage insurance premiums on their 2014 tax forms. The tax break covers PMI premiums and premiums paid on FHA, VA and Rural Housing Service guaranteed loans, according to an article on National Mortgage News.
What Can NOT Be Deducted by a Columbia SC Home Buyer
Property hazard insurance premiums
Homeowners association dues
General closing costs
Home repairs
As you can see, purchasing your first home can have a major impact on your taxes. With a little research and perhaps some help from your tax professional, you can recoup some of the costs associated with becoming a Columbia SC home buyer.
Find more news articles as they relate to taxes in the Taxes section under our Columbia SC Real Estate Categories to your right. And find us on Facebook and follow us on Twitter for daily updates we post there as well.
Columbia SC short sellers who completed short sales during 2014 and had mortgage debt cancelled, got a huge 11th-hour tax break when the Senate extended the Mortgage Debt Forgiveness Act.
The average Columbia SC short sellers had a mortgage balance one and a half times higher than the market value of the house.
Big Break for Columbia SC Short Sellers
Normally, the Internal Revenue Service treats forgiven debt as ordinary income going to the borrower, taxable at regular rates.
But under an exception for forgiven mortgage that took effect in 2007, qualified borrowers that saw their debt cancelled by a lender as part of a short sale, loan modification or foreclosure do not have to pay taxes on the wiped out debt. Lawmakers averted the exemption's expiration on December 31, 2014.
In a short sale, the homeowner agrees to sell the property, typically for a price well below what is owed to the bank. The difference between the sale price and the total amount owed can be forgiven by the lender.
Those Columbia SC short sellers who fall under the tax break under the Mortgage Forgiveness Debt Relief Act should receive Form 1099C (Cancellation of Debt) from their lender, if the amount of cancelled debt was more than $600.
Following the passage of the extenders bill, the IRS said that it anticipates opening the 2015 filing season as scheduled this month. The IRS will begin accepting tax returns electronically on January 20th. Paper tax returns will begin processing at the same time.
Get more information about Taxes and how Columbia SC short sellers may be affected in our section on Taxes to your right under Columbia SC Real Estate Categories.
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