HOMEOWNER TIPS: App helps homeowners keep up with maintenance projects

By Inman News
Inman News®

If you'd like to use your smartphone to manage home maintenance and improvement projects -- you guessed it, there's an app for that.

HomeZada, a new online service and app, available on iPhone, Android and iPad platforms, helps homeowners track various home projects including maintenance, home improvement and home inventory.

"Do you remember when the furnace needs cleaning?" a spokesperson in a promotional video asks. "Are the gutters on the roof clogged?"

Ostensibly, HomeZada will help a homeowner plan, remember and get needed home maintenance jobs like those done. The app also helps homeowners keep track of cleaning, yard work and other projects. The app's alerts notify users when a certain task must be performed.

There's a function that allows homeowners to document all their possessions via photo.

This cloud-based home management tool is free in its "Essentials" version, which includes the inventory tool, property documents management, news and alerts, and access to the mobile versions of the app.

A premium version is available for $9.95 a month or $99 per year that adds tracking functionality for the home improvement project tool, including budget and shopping info; the paid version also offers the ability to integrate the app's calendar with others and to coordinate email reminders.

HOMEOWNER TIPS: 7 easy fixes for common door problems

By Paul Bianchina
Inman News®

If you have some doors around your house that aren't working quite right, don't despair. There are a number of quick and easy fixes that will take care of whatever's sticking, squeaking, swinging or otherwise ailing your doors.

The door binds in the upper corner of the jamb: This is a common complaint, since the weight of the door wants to pull it down at an angle from the top corner, opposite the upper hinge. This causes the door to bind against the jamb in that corner. To fix it, remove one or two of the screws that hold the hinge to the jamb.

Replace these screws with new ones that are long enough to reach all the way through the jamb and into the stud behind the jamb; predrill new pilot holes through the existing holes in the jamb to make it easier to drive the screws.

These new, longer screws will pull the jamb back up against the stud and take the angle out of the door frame, relieving that pinch point in the corner.

The door binds against other parts of the jamb: First of all, ask yourself when this started happening. Is it only in the winter? If so, it's probably due to seasonal swelling, which happens when the wood absorbs moisture from the air.

Check to see if the door is being directly exposed to moisture, such as a drip from a leaky gutter, or perhaps it's constantly shaded by overhanging trees and rarely dries. If you can identify the cause of the seasonal moisture, correct it.

Be careful about planing a door during the winter: When it dries out again, it'll be undersized for the opening.

If the binding isn't seasonal, look for stress cracks in the drywall or moldings around the door. This can indicate settling issues, which may be caused by shifts in the home's foundation, or simple drying of the wood framing, especially in newer homes.

If the settling doesn't continue and the binding doesn't worsen, you can relieve the bound area by tapping against the frame with a hammer and a block of wood, or by removing the door from its hinges and planing it a little. If the settling is worsening, consult with a contractor or structural engineer.

Door won't stay latched: If the door won't stay latched, or if it needs to be pushed hard to get it to latch into the strike plate, first look at the way the door is fitting in the jamb. If you see that it appears to be leaning down at the upper corner, try installing longer screws as described above.

Otherwise, it's a matter of readjusting the strike plate. Site the latch to see where it's hitting the strike plate, to try to determine if the plate needs to move up or down. If necessary, try coating the latch with lipstick or crayon and then closing the door -- the resulting marks on the strike plate will help indicate where it's hitting.

If only a small adjustment is needed, try grinding the opening in the strike plate to make it larger as needed. Use a small file or a rotary tool with a metal grinding bit. If a larger adjustment is needed, unscrew and remove the strike plate, then reposition it on the jamb and reinstall it. You may need to chisel the jamb slightly to accept the plate in its new position.

Screws are coming out: If the screws that hold the hinges are coming out of the jamb, or you've had to reposition the strike plate and the screws want to go back into the old holes, you need to create new wood for the screws to grab into. This is easily done by drilling out the old screw holes to the size of a standard hardwood dowel, typically 3/8 inch. Apply glue to the dowel, insert it into the hole, allow it to dry, then cut it off flush with the surrounding surface. Drill a new pilot hole into the dowel, and reinsert the screws.

Door swings and won't stay open: This is caused by a door that's out of plumb in its opening. To correct it, you need to insert a small amount of shim between the back of the hinge and the door jamb -- usually the bottom hinge. To do that, loosen the hinge screws almost all the way, so that you have some play between the hinge and the jamb.

Insert a piece of wooden shim or other material, such as small pieces of plastic laminate, behind the hinge, then retighten the screws. You may need to adjust the amount of shim to get the door to swing correctly, and you may also need to add a small amount of shim to the center hinge as well.

The door latch hits the strike plate: This is caused by a strike cylinder that's worked loose, or by a loose doorknob. If the strike cylinder that goes into the edge of the door is held in place with a small rectangular plate and two screws, first try tightening the screws.

If they'll tighten and hold OK, that will pull the cylinder back into the door and hold it. If the screws won't hold, then you'll need to install dowels as described above.

Many newer doors have strike cylinders that are drive-in, meaning they're held in place by a friction fit in the hole that's drilled in the edge of the door, rather than by screws. They're also held by tension on the doorknob, which is what the strike cylinder is connected to. First, loosen the screws holding the doorknob, so that you have a little play in the knob.

Set a block of wood against the strike cylinder, and tap it with a hammer to drive it back into the door until it's flush with the door's edge. Finally, securely tighten the doorknob's screws to hold the knob and cylinder in place.

The door hits the wall: You need a door stop. There are three types of door stops available, depending on the situation. The simplest is a solid or flexible stop with a screw on one end and a rubber cap on the other, which is screwed into a pilot hole that's drilled into the door or into the baseboard.

Another style is a hinge stop, which is used when you want to stop the door before it can open far enough to contact a stop on a wall. To install this type of stop, remove the top or center hinge pin, slip it through the hinge stop, then reinstall the pin in the hinge.

The hinge stop has an adjustable rod that screws in and out to contact the door at different points, allowing you to stop the door's swing exactly where you want it.

The third type is called a floor stop. Floor stops are attached directly to the floor, and are the strongest of all the stops, making them especially well suited for commercial applications. On the downside, because they sit directly on the floor, they can sometimes be in the way.

Floor stops typically have a long pin that fits into a predrilled hole in the floor for strength, along with a screw that secures it to the floor.

MORTGAGE RATE UPDATE

Interest Rate Update

Interest Rates continue to remain at historic lows.  Last Friday's weaker than expected jobs report is further evidence that interest rates will remain low until the economy starts to recover.

30 Year Fixed up to $417,000                                  3.50% to 3.875%
30 Year Fixed "Agency" up to $625,500                 3.75% to 4.0%
30 Year Fixed FHA up to $417,000                         3.50% to 3.75%
30 Year Fixed FHA "Jumbo" up to $729,500          3.75% to 4.0%

4 things homeowners must stop doing

By Tara-Nicholle Nelson
Inman News®

Bad-habit cessation is the holy grail of behavior-change specialists and self-help gurus alike. Many millions of dollars have been made and books bought by consumers on the hunt for the key to stop whatever self-destructive actions constitute their particular vice, from smoking to overeating to overspending and gambling.

But these are simply the behaviors on the extremely and obviously destructive end of the bad-behavior spectrum.

In almost every area of our lives, there's something we could do differently or better to get closer to the results we want. Often, we learn these lessons and are motivated out of our bad behavior the hard way, as so many homeowners and mortgage consumers learned what not do to with respect to their real estate decisions by the collective spanking the housing market took in the recent recession. But our memories can be short, and the more subtle bad habits can be the hardest to break.

So even while the market seems to be giving off hints that it might be making a slow turn onto the path to recovery, I think now is precisely the right time to revisit some of the common homeowner behaviors that we should stop doing -- now.

1. Trying to time the market. There is some core human psychological craving to chase after windfalls, no matter how risky or unlikely the chase, and to avoid losses at any costs. Perhaps it's even a sign of a healthy dose of self-esteem that we each seem to feel entitled to avoid the natural ups and downs of the economic markets, including the real estate market.

When it comes to buying and selling homes, locking mortgage rates and the like, people who have zero financial credentials and can barely balance their checkbooks seem, for some strange reason, to believe that they can and should make moves timed to always sell at the top and buy and lock in their interest rates at the very bottom.

The problem is, the data overwhelmingly shows that other human tendencies and flawed logic flows make the vast majority of us really, really bad at timing the market -- especially the housing market.

Think about it, at the top of the market, you see your neighbors achieve such high profits on their homes that you feel like a fool if you're not in the game, and buy as much house as you can as soon as you can. At the bottom, you are afraid to buy a home that may still continue to decline in value after closing, so you sit right on that fence until prices come up -- maybe even selling a home or walking away in a desire to cut your losses, locking them in in the process.

Bargain-hunting buyers who wait for the bottom tend to wait too long, until prices have already started to recover, when buying seems like it might be a good idea once again.

Think about it: The true market-beating strategy with any investment is to buy at or just before the bottom and to sell at the top, which, by definition, is when others are buying. But homes are nowhere near as liquid (easy to sell) as other investments, and they are not even pure investments. For most us, they're also the place where we live!

I believe that we'll make better real estate decisions around our homes when we make those decisions based on what is right for our lifestyles and our families and our personal finances at a given time (then optimize those decisions based on market dynamics), rather than trying to time the market for big profits and no losses.

2. Complaining. For such an affluent bunch (on average, relative to renters), homeowners sure do complain a lot. They complain about the market. They complain about real estate commissions. They complain about buyers and how aggressive they are. They complain about property taxes ... heaters breaking down ... the banks ... this president ... the last president ... the president before that ... and the list goes on.

They say that whatever we focus on grows. So, if we focus on our complaints, they will seem to get larger and larger, more and more important, crowding out all the things we should truly be grateful for, like the fact that a mortgage empowered us to buy the comfortable place in which we live, or the amazing tax advantages we're getting by virtue of homeownership, or simply having a roof over our heads and having made it through the recession this intact.

Complaining is precisely how homeowners who planned to be in their homes for decades and still have the same jobs and incomes they always did wind themselves up into being frustrated with the down market and strategically defaulting on their mortgages, losing their homes and incurring myriad credit and even legal troubles when it really doesn't make financial sense. (This is not to say that strategic defaults are never sensible, just that I've observed many that are not.)

3. Fixating on things beyond their control. You can't make the banks grant your loan modification. You can't make interest rates stay where you want them until you can wrangle a high-enough appraisal to refinance your home. You can't make a buyer show up with a suitcase full of exactly enough cash to pay off your mortgage and slide you comfortably into your next home.

So stop fixating on these things.

Obsessing about things that we have no control over is a shortcut to fear, panic and chronic stress, all of which, in turn, lead to irrational decision-making. If you're inclined to engage in these sorts of fixations, shift your focus to the things over which you do have some control, like:

• following up and making sure every "i" is dotted and every "t" crossed on your modification paperwork (even if that means sending the same documents in a dozen times);
• watching the sales prices of homes in your area for any seasonal spring upticks in sales prices that might boost the chances your refinance appraisal will come through; and
• staging, prepping, primping and pricing your property to lure in the right buyers and get it sold.

4. Looking for tricks and shortcuts to sound financial principles. A homeowner I know recently told me that he'd applied over and over for a loan modification (on a mortgage vastly outsized to what he can truly afford, by the way) and was frustrated by the repeated rejections he'd received. The specifics of the situation suggested to me that it was not that he failed to show a sufficient hardship, but more an indicator that the subprime-era mortgage was simply set up to fail because the home was more than his income would ever be able to sustainably support.

As I tried to advise this young man, he said in exasperation: "I know they just want me to say the right numbers, but no one will tell me what they are. I need an inside connection!"

As I see it, one of the worst impacts on the housing-consumer populace of the subprime era and late-night "get rich with real estate" infomercials has been the creation of the sense that it is acceptable, even savvy, to game the mortgage system to get your short-term real estate goals met, at any cost.

Sometimes, situations arise in which you may have to go to great lengths or leverage your agent or mortgage broker's relationships or expertise to get your mortgage application approved or to get your loan mod application through the bowels of your lender's loss mitigation maze.

But engaging in paperwork or document trickery with the specific intention to subvert the core financial standards and affordability principles that were once built into loan-qualifying guidelines has turned out to be more harmful than helpful, on net, to American homeowners.

6 signs a home will hold its resale value

By Dian Hymer
Inman News®

Most buyers have a wish list of features they'd like to have in a home. Often missing from that list is how salable the home will be when they later decide to sell.

Generally, buyers deal indirectly with resale value. They want a home they can buy at market value or less. They want to buy a home that will retain its value. They want to buy a home that will suit their needs. They want to buy a home they can make their own.

A listing that's priced low to sell fast may be one that will have good resale value only if you use this marketing strategy. The low price may offset an incurable defect, such as a location on a busy street.

There's nothing wrong with buying a home on a busy street as long as (1) you buy it at a price that reflects the location issue; (2) it suits your long-term needs; and (3) you understand that you will probably have to discount the price accordingly when you sell, depending on the market at the time.

In a hot seller's market, buyers are desperate to buy. They often overpay, and they are more likely to overlook defects that they would shun in a sour market.

Resale value has become a bigger issue since the housing recession began five years ago. Buyers are more cautious in their homebuying decisions. They don't want to buy just any home; they don't want to make a mistake and end up wanting to move in a slow market in which they might lose money.

The homes that hold their resale value well are the ones that appeal to a broad cross section of buyers; offer a good floor plan that works for different lifestyles; have a good amount of space but are not enormous and expensive to maintain; and exhibit a pride of ownership. They should also be in good condition.

Location is also a critical element of resale value. There are market niches that are always in demand, in both hot and soft markets. For example, there are always buyers for homes in the Rockridge neighborhood of Oakland, Calif., and the adjacent Elmwood neighborhood in Berkeley. Both are conveniently located to shops, cafés and a Bay Area Rapid Transit (BART) stop for easy commuting to work.

That's not to say that every listing in these areas sells quickly. To sell, it needs to be priced right for the market.

It's easier to recognize a home with good resale value in the current market than it was in the bubble market of 2005 and 2006 when virtually all homes sold in many areas. In a soft market, the homes that sell within 30 to 60 days are either good homes or good deals.

Ideally, you want to buy a home that has good resale value. Not one that's just a good deal. There's no urgency to buy now in many areas, although it would be nice to take advantage of record-low interest rates. But you shouldn't buy a home that won't work for you long term just to lock in a great interest rate.

Even though there are a lot of homes for sale on the market, in many areas there is a not a surplus of quality inventory on the market. One reason for the lack of quality homes on the market is that many sellers are waiting for a better time to sell. Another reason is that homes with good resale value don't tend to change hands that often.

THE CLOSING: There may be good news ahead. Leslie Appleton-Young, chief economist for the California Association of REALTORS®, predicts that sellers who have been waiting for a better time to sell may decide they've waited long enough and list their homes for sale in 2012.

DOs and DON'Ts for Listing Your Home

Dos:

Be flexible.  Often it's the little things that push a buyer into the "yes" zone.  If the buyer goes on and on about how much they love your ice maker, throw it in.  If the buyer would like to close earlier and your new home is not ready, use a PODS container and store your belongings so you can meet the buyer's request.

Clean up.  One person's baseball card collection is another person's cluttered nightmare.  Declutter your home before you list it.  PODS containers work well to store personal collections that cause clutter and can distract buyers from seeing the true potential of a home.

Wash the windows.  Inside and out.

Clean your kitchen and bathrooms.  Scrub like crazy, particularly the kitchen and bath (s).  The kitchen may be old but it can still sparkle.  De-clutter here too, especially counter top appliances, canisters, etc.

Don'ts:

Don't be greedy.  The market-not your emotions-dictate's the price of your home.  If comparables in the area, and several trusted real estate agents tell you your home is worth $400,000, you are not fooling anyone by pricing it at $500,000.

Don't get personal.  If you're selling your house for a certain amount, and someone offers something much lower, don't take this as a personal affront and refuse to counteroffer.  Negotiation is part of the process and letting your emotions get in the way can potentially ruin the deal.

Don't procrastinate.  If you are serious about selling, consider doing it now.

Foreclosure Sales Continue to Plummet

For the second month in a row we've seen a dramatic drop in the number of properties sold at foreclosure, or "trustee sale", auctions. Foreclosure sales in California are down 16.7 percent from February to March 2012 and down 53.1 percent from March a year ago. A total of 86,487 sales were scheduled to occur in California, but of those 80.0 percent postponed, and 10.6 percent were cancelled, leaving just 8,392 that were actually sold. Third parties, typically investors, purchased a record 38.6% of the properties that did sell in California.
Foreclosure starts rose in most states, with the largest increases occurring in Washington, California and Nevada. This, at least temporarily, reverses a downward trend, but even with the increase the volume of new foreclosures remains significantly down year-over-year in all the states we cover.

The increase in foreclosure starts is especially interesting in Nevada. Bank foreclosures came to an almost complete halt there after the passage of Assembly Bill 284, which made significant changes to Nevada's foreclosure laws. The increase this month is directly attributable to new foreclosure starts by Fannie Mae, which is one of very few lenders to have filed any new foreclosures in Nevada since September 2011. Even with the increase by Fannie Mae it is still homeowner associations that are initiating the vast majority of foreclosures in Nevada.

10 HOME MAINTENANCE TIPS FOR SPRING

The sun is peeking out and the plants are starting to blossom, so it must be about time for spring chores again. Here's my annual spring checklist of important issues to tend to around the house.

1. Roofing repairs: If you suspect winter storms may have damaged your roof, it needs to be inspected. (If you're not comfortable with the height or steepness of your roof, hire a licensed roofing contractor for the inspection.) Look for missing or loose shingles, including ridge-cap shingles.

Examine the condition of the flashings around chimneys, flue pipes, vent caps, and anyplace where the roof and walls intersect. Look for overhanging trees that could damage the roof in a wind storm, as well as buildups of leaves and other debris.

If you have roof damage in a number of areas, or if older shingles makes patching impractical, consider having the entire roof redone. Also, remember that if the shingles have been damaged by wind or by impact from falling tree limbs, the damage may be covered by your homeowners insurance.

2. Check gutters and downspouts: Look for areas where the fasteners may have pulled loose, and for any sags in the gutter run. Also, check for water stains that may indicate joints that have worked loose and are leaking. Clean leaves and debris to be ready for spring and summer rains.

3. Fences and gates: Fence posts are especially susceptible to groundwater saturation, and will loosen up and tilt if the soil around them gets soaked too deeply. Check fence posts in various areas by wiggling them to see how solidly embedded they are.

If any are loose, wait until the surrounding soil has dried out, then excavate around the bottom of the posts and pour additional concrete to stabilize them. Replace any posts that have rotted.

4. Clear yard debris: Inspect landscaping for damage, especially trees. If you see any cracked, leaning or otherwise dangerous conditions with any of your trees, have a licensed, insured tree company inspect and trim or remove them as needed.

Clean up leaves, needles, small limbs and other material that has accumulated. Do any spring pruning that's necessary. Remove and dispose of all dead plant material so it won't become a fire hazard as it dries.

5. Fans and air conditioners: Clean and check the operation of cooling fans, air conditioners and whole-house fans. Shut the power to the fan, remove the cover and wash with mild soapy water, then clean out dust from inside the fan with a shop vacuum -- do not operate the fan with the cover removed.

Check outdoor central air conditioning units for damage or debris buildup, and clean or replace any filters. Check the roof or wall caps where the fan ducts terminate to make sure they are undamaged and well sealed. Check dampers for smooth operation.

6. Check and adjust sprinklers: Run each set of in-ground sprinklers through a cycle, and watch how and where the water is hitting. Adjust or replace any sprinklers that are hitting your siding, washing out loose soil areas, spraying over foundation vents, or in any other way wetting areas on and around your house that shouldn't be getting wet.

7. Check vent blocks and faucet covers: As soon as you're comfortable that the danger of winter freezing is over, remove foundation vent blocks or open vent covers to allow air circulation in the crawl space.

While removing the vent covers, check the grade level around the foundation vents. Winter weather can move soil and create buildups or grade problems that will allow groundwater to drain through the vents into the crawl space, so regrade as necessary. Remove outdoor faucet covers. Turn on the water supply to outdoor faucets if it's been shut off.

8. Prepare yard tools: Replace broken or damaged handles, and clean and condition metal parts. Tighten fittings and fasteners, sharpen cutting tools and mower blades, and service engines and belts in lawn mowers and other power equipment.

9. Change furnace filters: Now is the time to replace furnace filters that have become choked with dust from the winter heating season. This is especially important if you have central air conditioning, or if you utilize your heating system's fan to circulate air during the summer.

10. Check smoke detectors: Daylight Savings Time snuck up early again this year, and that's usually the semi-annual reminder to check your smoke alarms. So if you haven't already done it, now's the time. Replace the batteries, clean the covers, and test the detector's operation before it's too late.

If you have gas-fired appliances in the house, add a carbon monoxide detector as well (or check the operation of your existing one). CO2 detectors are inexpensive and easy to install, and are available at most home centers and other retailers of electrical parts and supplies.

FHA CHANGES

Misconceptions about 2 common real estate tax breaks

Some homeowners better off not taking home office deduction

By Tom Kelly - Inman News®

One of the biggest financial advantages of owning a home is the mortgage interest deduction, but the amount many taxpayers submit is often greater than the allowed limit.

And, while home offices have become more popular because of convenience and the downturn in the economy, many homeowners may be better off not taking the deduction because of the depreciation recapture upon sale.

Both the mortgage interest and home office topics need to be double-checked before the April 17 deadline. Why April 17 this year instead of April 15? According to the Internal Revenue Service, taxpayers will have until Tuesday, April 17, to file their 2011 tax returns and pay any tax due because April 15 falls on a Sunday.

In addition, Emancipation Day, a holiday observed in Washington, D.C., falls this year on Monday, April 16. According to federal law, Washington, D.C., holidays impact tax deadlines in the same way that federal holidays do; therefore, all taxpayers will have two extra days to file this year.

Taxpayers requesting an extension will have until Oct. 15 to file their 2012 tax returns. Remember that an extension of time to file is not an extension of time to pay. You will owe interest on any past-due tax and you may be subject to a late-payment penalty if timely payment is not made.

In a recent column, we discussed the benchmark for the mortgage interest deduction is set at acquisition debt, which is the amount of debt in place when the home is acquired. For example, if you buy a $200,000 home with a $50,000 down payment, your acquisition debt is $150,000.

Many consumers stay in their homes for years, accumulate appreciation and then refinance to put a child through school, mom into a nursing home or attend a much anticipated family reunion. The new debt on the refinance will qualify as home acquisition debt only up to the amount of the balance of the old mortgage principal just before the refinancing.

For example, let's assume your home is now worth $300,000 and you need to take cash out for college tuition. The balance of your loan before you refinance is $135,000 and you take $100,000 "cash back" for a new loan balance of $235,000.

However, the maximum allowable mortgage interest deduction remains $135,000 -- the acquisition debt, not the bigger number from the refinance.

Another popular deduction that is often taken yet needs additional consideration is the home office deduction. It's relatively easy for taxpayers to deduct the cost of a home office. To qualify for a deduction, the space must be used exclusively and on a regular basis for either the entire business or its administrative and management activities.

If you are an employee, additional rules apply for claiming the home office deduction. For example, the regular and exclusive business use must be "for the convenience of your employer."

A home office deduction is comprised mainly of depreciation, utilities and insurance. For example, if a home has 2,500 square feet and the detached garage now deemed "the office" is 250 square feet, then 10 percent of the utilities and insurance are deductible.

The actual office depreciation is 10 percent of what would be a depreciation deduction if the entire home were being depreciated for tax purposes. (Depreciation is not allowed on a typical principal residence, so the square footage allotted to "residence" would not qualify.) Supplies and other expenses directly related to the home office are fully deductible.

However, all these benefits do come at a price. The tax law originally stated that if you sell your home at a gain, any depreciation for a home office will have to be "recaptured." That means that any profit on the business portion is taxable as capital gain.

On Dec. 23, 2002, the IRS issued new regulations concerning gain on home sales. As long as the home office was in the same structure and not separated from the home, only the depreciation taken for the home office after May 6, 1997, is subject to tax.

Still, that depreciation recapture amount could be a lot more than you expect. It may be worthwhile to simply work from home and not deem the space a "home office."

Tom Kelly's new e-book, "Bargains Beyond the Border: Get Past the Blood and Drugs: Mexico's Lower Cost of Living Can Avert a Tearful Retirement," is available online at Apple's iBookstore, Amazon.com, Sony's Reader Store, Barnes & Noble, Kobo, Diesel eBook Store, and Google Editions

Misconceptions about 2 common real estate tax breaks

Some homeowners better off not taking home office deduction

By Tom Kelly - Inman News®

One of the biggest financial advantages of owning a home is the mortgage interest deduction, but the amount many taxpayers submit is often greater than the allowed limit.

And, while home offices have become more popular because of convenience and the downturn in the economy, many homeowners may be better off not taking the deduction because of the depreciation recapture upon sale.

Both the mortgage interest and home office topics need to be double-checked before the April 17 deadline. Why April 17 this year instead of April 15? According to the Internal Revenue Service, taxpayers will have until Tuesday, April 17, to file their 2011 tax returns and pay any tax due because April 15 falls on a Sunday.

In addition, Emancipation Day, a holiday observed in Washington, D.C., falls this year on Monday, April 16. According to federal law, Washington, D.C., holidays impact tax deadlines in the same way that federal holidays do; therefore, all taxpayers will have two extra days to file this year.

Taxpayers requesting an extension will have until Oct. 15 to file their 2012 tax returns. Remember that an extension of time to file is not an extension of time to pay. You will owe interest on any past-due tax and you may be subject to a late-payment penalty if timely payment is not made.

In a recent column, we discussed the benchmark for the mortgage interest deduction is set at acquisition debt, which is the amount of debt in place when the home is acquired. For example, if you buy a $200,000 home with a $50,000 down payment, your acquisition debt is $150,000.

Many consumers stay in their homes for years, accumulate appreciation and then refinance to put a child through school, mom into a nursing home or attend a much anticipated family reunion. The new debt on the refinance will qualify as home acquisition debt only up to the amount of the balance of the old mortgage principal just before the refinancing.

For example, let's assume your home is now worth $300,000 and you need to take cash out for college tuition. The balance of your loan before you refinance is $135,000 and you take $100,000 "cash back" for a new loan balance of $235,000.

However, the maximum allowable mortgage interest deduction remains $135,000 -- the acquisition debt, not the bigger number from the refinance.

Another popular deduction that is often taken yet needs additional consideration is the home office deduction. It's relatively easy for taxpayers to deduct the cost of a home office. To qualify for a deduction, the space must be used exclusively and on a regular basis for either the entire business or its administrative and management activities.

If you are an employee, additional rules apply for claiming the home office deduction. For example, the regular and exclusive business use must be "for the convenience of your employer."

A home office deduction is comprised mainly of depreciation, utilities and insurance. For example, if a home has 2,500 square feet and the detached garage now deemed "the office" is 250 square feet, then 10 percent of the utilities and insurance are deductible.

The actual office depreciation is 10 percent of what would be a depreciation deduction if the entire home were being depreciated for tax purposes. (Depreciation is not allowed on a typical principal residence, so the square footage allotted to "residence" would not qualify.) Supplies and other expenses directly related to the home office are fully deductible.

However, all these benefits do come at a price. The tax law originally stated that if you sell your home at a gain, any depreciation for a home office will have to be "recaptured." That means that any profit on the business portion is taxable as capital gain.

On Dec. 23, 2002, the IRS issued new regulations concerning gain on home sales. As long as the home office was in the same structure and not separated from the home, only the depreciation taken for the home office after May 6, 1997, is subject to tax.

Still, that depreciation recapture amount could be a lot more than you expect. It may be worthwhile to simply work from home and not deem the space a "home office."

Tom Kelly's new e-book, "Bargains Beyond the Border: Get Past the Blood and Drugs: Mexico's Lower Cost of Living Can Avert a Tearful Retirement," is available online at Apple's iBookstore, Amazon.com, Sony's Reader Store, Barnes & Noble, Kobo, Diesel eBook Store, and Google Editions

MORTGAGE RATE UPDATE

Interest Rate Update

Interest rates continue to remain at historic lows.  Last Friday's weaker than expected jobs report is further evidence that interest rates will remain low until the economy starts to recover.

30 Year Fixed up to $417,000 3.50% to 3.875% 30 Year Fixed “Agency” up to $625,500 3.75% to 4.0% 30 Year Fixed FHA up to $417,000 3.50% to 3.75% 30 Year Fixed FHA “Jumbo” up to $729,500 3.75% to 4.0%

BROKER PREVIEW! 4/12/12 from 11 AM - 2 PM

 

Come visit the Broker Preview at 7929 Michigan, Whittier!

Thurday April 12, 2012 11 AM - 2 PM

Leave your business card to win a $50 Nordstrom Gift Card!!!!!!!!!!