Ro Troia

Pay Your Mortgage Early, Boost Your 2011 Federal Income Tax Deductions

Time is running out to boost to your 2011 federal tax refund. All you have to do is make your January 2012 mortgage payment while it’s still December.

It’s a simple tax strategy that works because of how mortgage interest is paid, and of how the U.S. tax code is written.

Different from rent which is paid for the month ahead (i.e. “you’re paying January’s rent”), mortgage payments are made only after mortgage interest has accrued (i.e. “you’re paying for money you’ve already borrowed from the bank”).

This is called “paying interest in arrears” and U.S. tax code states that the mortgage interest is tax-deductible in its year paid, subject to limitations.

By making the January 2012 mortgage payment in December 2011, therefore, homeowners who itemize their on their tax returns can apply their January mortgage payment’s interest portion to their 2011’s tax returns.

The alternative is to pay the mortgage on schedule, and wait for April 15, 2013 to claim the credit.

If you choose to pre-pay your mortgage and typically send your payment via USPS, give your check ample time to be delivered to your lender, and processed. Mail your check no later than Saturday, December 24.

For Broomfield homeowners that pay electronically, the process is simpler. Edit your online bill pay program to have your mortgage payment post no later than Thursday, December 29.

Make note, however. Not all mortgage interest is eligible for tax-deductibility, and not all homeowners throughout the state of Colorado who pay mortgage interest should itemize said interest on their tax returns.

Before prepaying on your mortgage, ask your tax professional for advice.

Tags: Tags: IRS, Mortgage Interest Tax Deduction, Tax Code

Don’t Let A 1031 Exchange Frighten You.

 

It’s not scary if you let them work FOR you.  What exactly is a 1031 exchange?  In Boulder Colorado and other parts of Colorado, it is a lawful transaction in which an asset is sold and the proceeds of the real estate sale are reinvested in a similar asset.  Because the transaction exists between two like assets, then no gain or loss is recognized, allowing the deferment of capital gains taxes that would otherwise have been due on the first sale.   There are several important factors to consider when partaking in 1031 like-kind exchanges.  This is a brief overview that a seller/exchanger needs to know in order to pursue this further.  Don’t be scared, all you need is a little help to get you going in the right direction.

 

 

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Tags: Tags: 1031 exchange, bouler colorado real estate, exchanger, investing, IRS, realtor, seller

IRS taking a bite out of Real Estate exchanges

Ever feel like you can’t win for losing?  Beware, the IRS is closing loopholes on Capital Gains for 1031 real estate exchanges.  Here we go again – the IRS is changing the status of what constitutes capital gains on investment property.   As if we don’t already have enough to think about as a real estate investor.  The reason I bring this up is because we are in a super “investor” real estate market right now.  I live and work in Boulder Colorado where we have people moving here from all over the world, not only because of the beautiful scenery, but because it’s still a good place to invest and that appreciation of the homes are still above average.  I recently picked up a buyer that was looking at one of my foreclosure listings and she was thinking about buying it as an investment and then moving into it themselves in the next few years.   Read the rest of this entry »

Tags: Tags: 1031 exchange, 1031 property exchange rules, boulder, IRS, real esate markets, real estate investors