In today’s show we will be covering some advantages the new tax law is giving to homeowners, home buyers and real estate investors. You may have to make some changes to your strategies, but the advantages are there.
Call me or email me about your real estate and financing questions. It would be a pleasure to get to work with you. Subscribe at www.JoGarner.com to get our weekly podcasts and show notes so we can stay connected with you.
To Your Success,
Jo Garner, Mortgage Loan Officer NMLS# 757308
(901) 482-0354
email: Jo@JoGarner.com
website: www.JoGarner.com
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WELCOME TO LISTENERS AND OUR SPONSOR
Good morning, Memphis! Welcome to our listeners across the 50 states! You’re on Real Estate Mortgage Shoppe. I’m your host, Jo Garner, Mortgage Loan Officer. You can connect with me at www.JoGarner.com. Our general topic is HOW HOMEOWNERS CAN TAKE ADVANTAGE OF THE NEW TAX LAW IN 2018. Thank you to Chad Irwin, Evolve Bank and Trust Memphis Mortgage Officer Manager for sponsoring today’s Real Estate Mortgage Shoppe. If you want to enjoy a successful mortgage career, give Chad a call at 901 260-1480. If you have a question or comment text me at 901 482-0354 or call me directly off the show at the same number (901) 482-0354. You can call us while we are live at (901) 535-9732 Today is January 20th, 2018.
HERE’S THE TOPICS COVERED TODAY
In today’s show we will be covering some advantages the new tax law is giving to homeowners, home buyers and real estate investors. You may have to make some changes to your strategies, but the advantages are there.
INTRODUCING TAX ATTORNEY, WIS LAUGHLIN
Sitting in the co-host chair is former IRS attorney for over 35 years. Now Wis Laughlin helps his clients strategize so that they get the most legal tax deductions as possible. Wis speaks at Talk Shoppe and other venues. Today, YOU get to talk with Wis about how to take advantage of the new tax law as a homeowner in 2018. Wis, it’s great having you back on Real Estate Mortgage Shoppe. Tell our listeners a little bit about yourself and what you do for your clients as a CPA and tax attorney. (Wis Laughlin introduces himself and talks about what he does for his clients—)
THE NEW TAX LAW AND HOMEOWNERS
(Jo) The subject of taxes have been making the headlines lately. This the first major tax overhaul since the one we saw back in 1986—over 30 years ago. The stock market likes it and has hit over 26,000. Yields on the 10-year bond is going up and taking the mortgage rates with them. The economists at the National Association of Realtors and other agencies are predicting the 30- year fixed mortgage rate could go up as much as a half to a full point in 2018. If that prediction is true, then getting your mortgage to buy your home or refinance your home SOONER rather than LATER would be a smart move.
The news has made it clear that a mortgage interest deduction can only be used on home financing with a balance under $750,000. But if you are buying real estate for rental income, you can write off your mortgage interest no matter what the debt amount.
Do you owe money on a home equity line of credit? The news headlines are telling you that you cannot write off the interest on a Home Equity Line of Credit anymore. However, if you read down a little further, they will tell you that you CAN write off the interest on a Home Equity Line of Credit if it was used to acquire or improve the property. If you used your home equity line of credit on your home in order to buy a different piece of property to use as rental, you should be able to write of the interest on that loan too. It’s in the fine print.
If you are a real estate investor listening to this show, give us a call while we are live today in the studio at (901) 535-9732 or you can text me at 901 482-0354. If you are a first-time homebuyer, or if you own your home but want to consolidate and restructure your debt into a fixed rate loan, let’s talk! But you have to talk with me PERSONALLY so I can work with you personally. (901) 482-0354 or email at jo@jogarner.com. You may feel more comfortable completing the loan application securely online. Whatever works for you . The secure loan application site is https://jogarner.evolve.mortage
NEW TAX LAW HIGHLIGHTS FROM TAX ATTORNEY
Wis, what are some other items in the new tax law that you want to share? (Wis starts covering some the tax law changes and uses some examples)
Wis cover how many of the principles in the new tax law remain the same as the old tax law.
Wis covers some differences in the new tax law, which may require some strategy changes to get the tax deduction write offs you need as a homeowner.
New law did away with deduction for children, but replaced it with a $2,000 tax credit for children which makes it better than the old law.
Standard deduction of $24,000 for a couple which is much higher than the standard deduction from the old tax law.
(Jo) You’re listening to Real Estate Mortgage and I’m your host, Jo Garner, licensed Mortgage Loan Officer with Evolve Bank and Trust. Attorney Wis Laughin is sitting here ready to talk with you about How Homeowners Can Take Advantage of The New Tax Law of 2018. Call us while we are live in the studio (901) 535-9732
We are always remind you to “Make You Plan. Work Your Plan. If the deal works for you today, do it today. We’re going to be sharing more advantages you as a homeowner can enjoy with the new tax bill when we come back from break…
LOOK BACK MEMPHIS TRIVIA CONTEST
2nd segment after 9:15 break: The Look Back Memphis Trivia Contest is sponsored by John and Jennifer Lawhon of Lawhon Landscape (901) 754-7474 the Lawhon’s can help you plan your landscaping if you have a BIG, BIG project or a smaller project . The Lawhons are giving away a $25 gift card to the first person with the correct trivia answer. If you know the answer to our trivia question, call us at 901 535 WREC 901 535-9732.
TRIVIA QUESTION: What year did Memphis lose its charter and ability to levy taxes and go into receivership?
Trivia Answer: 1879
TRIVIA HINTS
1. Late in the year prior to Memphis losing her charter, Yellow Fever swept into Memphis like a killing machine. The city lost three-quarters of her population from people fleeing and other dying from the Yellow Fever epidemic by the thousands. A few heroic characters stayed and tried to help the sick, bury the dead and restore order and infrastructure. But in the beginning of the following year, Memphis was bankrupt and lost her charter, went into receivership until 1893. me this major epidemic ended, Memphis had lost a total of over 30,000 people to Yellow Fever and the cits financially broke and desperate. In _________________________________________________________
TOPICS COVERED BY WIS LAUGHLIN:
Are you upset about your tax bill?
– I bet you’re missing some tax breaks!
– Do you want the maximum tax savings from your home?
Then hire me to as your tax preparer and advisor. I am
• a former IRS attorney
• with over 30 years’ experience.
The first half hour appointment is free
The tax benefits of home ownership include a deduction for real estate taxes and mortgage interest and the ability to sell your home tax free.
The author is a former IRS attorney who prepares tax returns and advises taxpayers how to reduce taxes.
Deduct Mortgage Interest
Most interest that you pay is not deductible. However, one of the best tax breaks available is “qualified residence interest. Qualified residence interest is interest charged on either (i) home acquisition debt or (ii) home equity debt.
Home Acquisition Debt
“Acquisition debt” is debt used to buy, build or substantially improve a qualified residence and secured by this residence. You can deduct interest on up to $1 million of acquisition debt secured by up to two homes. If there is a delay between borrowing and buying, special rules apply.
Refinancing. Debt used to refinance acquisition debt also qualifies as acquisition debt if it does not exceed the replaced debt. So, refinancing does not increase acquisition debt unless the loan is used to acquire substantial improvements.
Home Equity Debt
You can deduct interest on “home equity debt” up to $100,000 ($50,000 for a married filing separately). It is debt secured by a principal or second residence. Home equity debt may not exceed the fair market value of the securing residence, less any home acquisition debt.
TIP: It does not matter how you use home equity debt, so you can save taxes by using it to replace debt for which interest is not deductible, such as credit card interest or an auto loan.
Save taxes by using home equity debt to replace debt for which interest is not deductible, such as credit card interest.
Qualified Residences
One principal residence and one second residence qualifies for the mortgage interest deduction on. A principal residence is the taxpayer’s primary home. A taxpayer may have only one principal residence at a time.
I can advise vacation property owners whether it is better to treat them as residences instead of residential rental property.
A second residence is any residence other than the principal residence that the taxpayer owns and elects to treat as a second residence. A taxpayer may generally elect only one second residence per year.
“Residences” include condominiums, cooperatives, time shares, mobile homes, boats and house trailers with sleeping place, toilet and cooking facilities.
A taxpayer may use a vacation home and also rent it out to others. However, it is still treated as a qualified residence if personally used it for the greater of 14 days or 10% of the days rented during the year.
Home Construction
A taxpayer may treat a residence as a qualified residence for up to 24 months while it is under construction if it becomes a qualified residence when completed. Consequently, debt used to construct such a residence may qualify as acquisition debt.
“Residence” includes a boat or house trailer with a sleeping place, toilet and kitchen
Debt incurred before completion of a residence is considered as used for its construction if spent on construction no more than 24 months before.
Debt borrowed no more than 90 days after you complete a home is considered acquisition debt if applied no more than 24 months before completion and not after borrowing the debt.
Settlement Sheet Gold
At closing, your settlement sheet shows many potential deductions that you may miss. For example, it may show interest or real estate taxes that your lender does not report to you.
“Points” (loan origination and discount fees) on a loan to buy or build a principal residence are qualified residential interest. However, points on refinancing are not deductible unless the loan is used for home improvements.
Interest on a loan to buy a building lot may be deductible during construction.
TIP: When refinancing, it may be better to accept higher interest and fewer points, since the interest is deductible.
Tax Free Sale of One’s Home
A taxpayer can choose to exclude gain from the sale of a principal home up to $250,000 ($500,000 for joint filers). If the gain is entirely excluded, the transaction is not reported on the return at all. The home must have been owned and used by the taxpayer as a principal residence for at least 2 of the 5 years before the sale. However, the exclusion doesn’t apply if the taxpayer applied the exclusion to another of his home sales within the 2-year period ending on the sale date,
Married taxpayers filing jointly for the year of sale qualify if one spouse met the ownership rule and both spouses met the use rule.
If the gain is entirely excluded, the transaction is not reported on the return at all.
Certain total destructions and condemnations are treated as a sale for purposes of the home-sale exclusion.
Exceptions
Married taxpayers who are not eligible for the full $500,000 exclusion may qualify for a portion of the exclusion. A surviving spouse qualifies for the $500,000 exclusion if the survivor hasn’t remarried as of the date of the sale.
If the taxpayer or spouse used the home for something other than as their principal residence, a portion of the gain is not eligible for the exclusion. The taxable portion is proportional to the nonqualified use period divided by the period owned. For a home used as a home office, the exclusion also does not apply to gain attributable to post-May 6, ’97 depreciation. There are exceptions.
If property is used for both residential and business (or investment) purposes, no allocation of gain is required if both the residential and non-residential portions of the property are within the same dwelling unit, but gain isn’t excludable to the
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REAL ESTATE TAX TOPICS DISCUSSED BY JO GARNER :
1. The primary home gain sale exclusion remains at $250k/$500k for single/married couples and is eligible for properties that are lived in as a primary home for at least 2 out of the last 5 years.
2. Home equity line of credits (HELOC) for primary homes are tax deductible starting in 2018, but only if the HELOC proceeds are used to acquire or improve an investment property, the related HELOC interest remains tax deductible. It will be up to you to document the use of the equity line proceeds.
For real estate investors buying real estate to rent for income, the proceeds taken out on investment properties continue to be tax deductible but only if the proceeds are used for investment properties and not personal expenses.
Jo tells a story of one of her real estate investor clients we will call Barry (not his real name.) Barry had a life dream of not having to work a job and to be able to spend quality time with his wife and children and later his grandchildren. Before he had clearly defined what he truly wanted out of life, he found it hard to go look for rental properties to buy after work and rolling out of bed early on Saturday to go negotiate with a home seller. It was hard work.
After a while Barry looked back and could see that he was getting nowhere because good rental home deals didn’t just fall in his lap. At one point, though, Barry begin to realize just how much he wanted to give his family the life of their dreams. Now he had a REASON to compel him to do what he needed to do. He finally had a big enough WHY to power him forward.
What do you want YOUR life to look like? How many hours a day do you want to work and what do you want YOUR work environment to look like in the future? What kind of income do you want? Is your WHY big enough to compel YOU to do the tasks each day to propel you to YOUR dream? If your WHY is big enough, you can do anything!
Once (Barry) who committed to do the tasks needed to move him toward his dream, he is now buying 2 to 3 rental properties per year. He buys the home at a bargain price because it usually needs some fix-ups. For that reason, he buys the house using his home equity line secured on his primary residence or a line of credit secured on something other property so he can give the seller a cash offer. The seller usually is more willing to sell at a bargain price because Barry is using money not connected with the house he is buying so there is no need to wait on an appraisal and he can close quicker.
Barry is pretty happy at the closing. Barry has a plan. He gets the keys to the house he bought and heads over there with his fix it up crew. Within a couple of weeks or more Barry’s bargain house is fixed up, painted up and ready for some happy tenants to move in and start paying him rent.
Since I am Barry’s mortgage officer, he and I work together a lot. I already know he wants to pay his variable credit line back as soon as possible and get his low fixed rate 30-year mortgage in place. Before Barry even closes on a house, he and I have already started processing his loan request for the long term fixed rate mortgage. Once Barry has driven the last nail and painted the last wall in the house, I have done an appraisal for his permanent loan and gotten him approved.
Now he closes on the fixed low interest 30-year mortgage with me and he uses the funds to pay off the credit lines he used to purchase the home. Once his credit lines are paid off, they are ready for him to use to make his next bargain purchase.
Barry has built a portfolio of money making rental properties and is feeling really good about himself and his future. You can too. Let’s you and I talk!
3. Mortgage Interest tax deduction is limited to the first $750k of debt taken out after 12/15/17 on primary and second homes.
BUT, if you get a loan are credit line on your primary residence and use the proceeds to invest in real estate rental properties, the entire interest expense may be tax deductible against rental income and escape the new limitation. The mortgage interest you pay for investment properties continues to be tax deductible without the $750k limitation.
6. Here’s a bonus for real estate investors—if you purchase equipment, appliances, furniture or computer equipment for your real estate business activities, you can now take 100% bonus depreciation deduction and write these off as expenses all in the same year if you purchased these items after 9-27-17.
If you are an investor purchasing business assets
(Consult with your certified tax advisor on anything we cover on this show today, because your options may be different based on your individual situation.)
7. Section 179 now allows for certain taxpayers to take an immediate deduction of up to $1M on assets placed in service for a business.
In the past Section 179 did not include real estate activities when they allowed certain tax payers to take an immediate deduction up to $1 million on assets put in service for a business. BUT, starting in 2018, this advantage is now available to non-residential real estate and appears to be available for lodging businesses such as a dormitory and Airbnb. Assets typically used have included roofs, fire protection, heat/ventilation/air conditioning and security systems.
9. The 1031 Exchange has been repealed for most business assets, it remains intact for real property, allowing real estate owners to buy a real estate property and sell a real estate property under the 1031 Exchange guidelines to put off having to pay taxes on the gain.
10. If you sell a real estate property, capital gains rates remain in effect under the new law, so you might be able to qualify for a lower tax rate if you hold the property for over one year.
11. Although it was in the original proposals to accelerate depreciation of commercial and rental properties, the final bill did not give us this tax benefit.
You can still depreciate your residential and commercial properties for 27.5 years for residential real estate and 39 years for commercial real estate.
12. The new tax law took away the ability to deduct Tax preparation fees in 2018 as an itemized deduction. But the tax preparation fees are still deductible against rental income. So for real estate investors, make sure you allocate as much of your tax preparation fees as reasonable possible to Schedule E to lock in the tax benefit.
13. The amount that is free from estate taxes has doubled to $11M for single tax payers and $22M for a married couple.
Wis said that if you are a landlord you are subject to PAL (passive activity loss rule) If you own a couple of properties and you have depreciaton, the max you can take is $25k loss
The Passive loss limitations remain in effect for rental properties.
REAL ESTATE TIP OF THE WEEK (Wis Laughlin gave a tip about writing off the tax preparation fee. Under the new tax law, you can no longer write off the tax preparation bill. However, if you allocate as much as reasonably possible of your tax preparation fee to a business or rental property, you can write off the tax preparation fee):
ANNOUNCEMENTS:
Talk Shoppe offers free networking & education to anyone interested in real estate or in business. Talk Shoppe meets every Wednesday 9A-10A CT at Pinot’s Palette 8225 Dexter Rd Cordova, TN. This Wednesday January 24th, 2018 Talk Shoppe presents: January 24th, 2018 Shana Woods, slwoods@TVA.gov, TVA programs to “Conserve Energy in Your Home through Weatherization”
Talk Shoppe events are free thanks to advertisers like Peggy Lau, Independent Representative with World Ventures. Peggy can show you how to earn free first-class vacations with a one-of-a-kind travel community. Give Peggy a call at (901) 289-0747
Thank you also to Taylor Eason, videographer. What story would you like to tell your targeted market segment? Taylor can help you with the videography www.CreatedFlawless.com
2. Thank you to Chad Irwin, Evolve Bank and Trust Memphis Mortgage Officer Manager for sponsoring Real Estate Mortgage Shoppe today. If you want to enjoy a successful career in mortgage, talk with Chad at 901-260-1480 or you can call me at 901 482-0354
3. SPECIAL NOTE: REAL ESTATE MORTGAGE SHOPPE RECOMMENDS THAT YOU CONSULT WITH A FINANCIAL, LEGAL OR OTHER CERTIFIED, LICENSED PROFESSIONAL BEFORE ACTING OR INVESTING ON ANYTHING YOU HEAR OR SEE FROM THE CONTENT ON THIS SHOW OR BLOG POSTS. THE INFORMATION WE SHARE ON REAL ESTATE MORTGAGE SHOPPE IS GENERAL IN NATURE MEANT FOR GENERAL EDUCATIONAL PURPOSES ONLY.
4. Real Estate Mortgage Shoppe offers solutions to your real estate and financing scenarios. FOR THIS PODCAST OF REAL ESTATE MORTGAGE SHOPPE AND MORE, GO TO JOGARNER.COM. Subscribe to our weekly podcast and show notes by clicking our subscribe button on JoGarner.com. We will not sell your email.
5. Real Estate Mortgage Shoppe reminds you that MAKE YOUR PLAN. LET’S WORK YOUR PLAN. IF THE DEAL WORKS FOR YOU TODAY, DO IT TODAY.
QUOTE CORNER:
Anonymous- “ A fine is a tax for doing wrong. A tax is a fine for doing well.”
Will Rogers-“ The tax payers are sending congressmen on expensive trips abroad. It might be worth it except they keep coming back.”
Wis Laughlin shares a quote from Judge Learned Hand from the US Supreme Court- paraphrased- “Anyone may arrange his affairs so his taxes will be as low as possible”
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REJOINDERS:
1. Marcus Fors, Puroclean of Memphis Water Clean Up, Fire/Smoke Repair/Mold Removal/Biohazard Clean Up (901) 237-2040
2. Bernice Ross, Ph.D., and Nationally syndicated real estate columnist. Bernice L. Ross, Ph.D., Professor Emeritus of Psychology and CEO of RealEstateCoach.com, is an international author, speaker, and trainer. With five books and over 1,000 published articles to her credit, Dr. Ross has over 30 years of experience assisting people in building not only successful businesses, but creating happier and more fulfilling lives as well.
3. Chad Irwin, Memphis Mortgage Office Manager at Evolve Bank and Trust, (901) 260-1480
ABOUT ATTORNEY WIS LAUGHLIN
Do you realize how many thousands of dollars you have wasted on taxes and legal costs for yourself, your business and your estate. How can I help?
As a former IRS attorney with over 35 years experience, I will advise you, represent you, and teach you to stay ahead of the game. I specialize in successful businesses, landlords and highly compensated employees, providing you:
1. Professional tax return preparation,
2. My personally developed Tax Commenter© software (developed with Excel), shows you how to pay the lowest legal taxes,
3. Representation against the IRS (by a former IRS lawyer ),
4. Win-win contracts negotiated by me that benefit both parties and avoid conflicts,
5. Caring and considerate estate plans, wills and trusts,
6. A noted speaker and teacher for professional as well as lay groups.
7. Monthly updates by my WealthWISe e-letter.
8. A wealth of information at my website: www.wislaughlin.com<http://www.wislaughlin.com>
9. and in brochures.
–
Harry W. (Wis) Laughlin, Attorney at Law
901 507-4274; cell: 901 218-7820
Website: www.wislaughlin.com http://www.wislaughlin.com/
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ABOUT JO GARNER-MORTGAGE LOAN OFFICER:
www.JoGarner.com (901) 482 0354 jo@jogarner.com twitter @jogarner
WHAT DO YOU WANT TO ACCOMPLISH WITH YOUR MORTGAGE?
“Whatever YOUR personal priorities are, my job is to help you get the mortgage terms that will give you bragging rights when you talk about it and help you score on hitting your goals .”
As a mortgage loan officer, my job is to help you get to the benefits you want from your financing terms. What is most important to you? I can help you find the financing terms that will help you get to what you want. What is your comfort level on a house payment? How much are you comfortable paying down,? What type of financing do you need to get the house you want to buy or refinance?
Different clients have different priorities in life—some are buying their first home with very little down payment funds. Some are recovering from medical challenges, divorces or preparing to send children to college and some are embarking on a long term goal of buying properties to build rental income.”
Jo Garner is a mortgage officer with extensive knowledge in tailoring mortgages to her customers who are refinancing or purchasing homes all over the country. She offers conventional, FHA, VA or other loan programs for refinancing and purchases.
Jo can help you look at rent vs buy, when it makes sense to refinance, how to get the best deal on your home purchase financing.
Jo Garner has been in the real estate/financing business for over 20 years. She got her start in Portland, Maine where she first began her real estate career. She received her real estate education from the University of Southern Maine and was personally mentored in San Diego, California by Robert G. Allen, author of Nothing Down, Creating Wealth and The Challenge.
On moving back to West Tennessee in 1987, she went into business buying and selling discounted owner-financed notes secured on real estate. In 1990 Jo went to work for a residential mortgage company and has been a mortgage loan officer for over 20 years. Her goal is to offer excellent, affordable service to her customers, tailoring the loan programs to the specific needs of her clients.
In addition to her work in the mortgage field, Jo Garner is the primary sponsor and founder of Talk Shoppe in Memphis. www.TalkShoppe.com She was also the editor of Power Shoppe, a free weekly e-zine designed for real estate professionals and others indirectly connected to the real estate industry and currently publishes on her blog www.JoGarner.com.
