There’s a saying that Americans love to quote, “The only thing I have to do is die and pay taxes.”
Well, with tax season coming up, it’s time to focus on the more positive part of that short list.
One area that everyone likes to review is the deductibles, and it’s worth knowing as much as you can before you file your income taxes.
If you haven’t heard about the American Taxpayer Relief Act of 2012, you may want to pay attention.
The act declared that borrower-paid premiums on mortgage insurance are tax deductible through the end of 2013.
Like any deductible, there are a variety of facts you should know before claiming this deduction.
The loans that qualify for this deduction are referred to as “acquisition indebtedness.” In layman’s terms that’s money borrowed to buy, build or substantially improve your residence. The same residence must secure the loan.
Purchase loans and refinance loans are included under this heading and can be as high as the original acquisition indebtedness.
This deductible is the same among all loan types and the money used must be for a qualified residence. The IRS code defines residence and it usually includes the primary, and secondary nonrental home.
Finally, in order to qualify for this deduction, households must have an adjusted gross income of $100,000 or less to deduct 100% of their mortgage insurance premiums. For each additional $1,000 of adjusted gross income above $100,000, the deduction decreases by 10%.
In the case of married individuals filing separate returns, each must have adjusted gross incomes of $50,000 or less to deduct 50% off of their separate returns. For each additional $500 of adjusted gross income over $50,000, the deduction decreases by 5%.
Whenever you take a deduction on your personal income tax, it’s wise to be very careful and thoroughly review the guidelines. In the case that you take a deduction by accident, you might be penalized or audited.
Hiring a licensed tax preparer, or consulting with an experienced and knowledgeable tax attorney can help you avoid penalties and audits, and file a tax return that’s correct and processed quickly.
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Monday, February 18, 2013
Thursday, February 7, 2013
Debt’s Impact On Your Mortgage
When you apply for a mortgage, the lending institution will conduct research on the debt that you currently carry. This could be anything from a loan for a car to how much you owe on your credit cards.
The credit card debt that you carry can have an enormous impact on the amount of interest you’ll pay on your mortgage, and if it’s too high, you may not even be able to qualify for the mortgage.
Credit cards provide people with the chance to purchase products they need, along with products they want. Whatever you purchase should be paid off within an acceptable period of time.
Companies who issue credit cards report your debt and payments to regulated agencies that in turn create your credit rating. Failure to pay off a credit card, missing payments, or having too many cards can negatively impact your credit card score.
When you apply for a loan, the institution runs a credit report and looks at several different parts of the report.
The first is the debt to income ratio, or DTI. This measurement shows how much of your debt you pay each month in comparison to your monthly income.
A low DTI is a positive sign that you are meeting your debt every month, and a high DTI might dissuade a lender from granting you a loan. Remember that lenders like to see a DTI of below 43% typically, so it’s wise to pay down your debt if it’s currently high.
A second area of the credit score is debt utilization, which measures the ratio of your credit card balance to the card’s actual spending limit. Cards that are maxed out, or near their limit, drag down your credit score.
Obviously, a bad credit rating isn’t what you want. If you’re faced with this dilemma, meet with a financial advisor or planner and to determine the best route to take. You may need to consolidate debt, or halt spending until you can successfully pay off the bulk of your credit card debt.
Remember that you don’t want to get rid of all your credit cards! Banks and lending institutions need to see some record of experience managing debt. Once you’ve cleaned up your credit rating, use the card each month but be sure and pay off most of the debt.
Using credit cards to obtain certain products and services is a way of life, and they provide a resource that should be used wisely. If you think your credit rating could impact your opportunity to get a mortgage, consider finding a reliable financial advisor.
Many times, this advisor works with you to consolidate the debt, while still keeping one or two credit cards open and active. The secret is maintaining the right type of balance that shows lenders you can safely borrow money, and still pay it back on a regular basis.
The credit card debt that you carry can have an enormous impact on the amount of interest you’ll pay on your mortgage, and if it’s too high, you may not even be able to qualify for the mortgage.
Credit cards provide people with the chance to purchase products they need, along with products they want. Whatever you purchase should be paid off within an acceptable period of time.
Companies who issue credit cards report your debt and payments to regulated agencies that in turn create your credit rating. Failure to pay off a credit card, missing payments, or having too many cards can negatively impact your credit card score.
When you apply for a loan, the institution runs a credit report and looks at several different parts of the report.
The first is the debt to income ratio, or DTI. This measurement shows how much of your debt you pay each month in comparison to your monthly income.
A low DTI is a positive sign that you are meeting your debt every month, and a high DTI might dissuade a lender from granting you a loan. Remember that lenders like to see a DTI of below 43% typically, so it’s wise to pay down your debt if it’s currently high.
A second area of the credit score is debt utilization, which measures the ratio of your credit card balance to the card’s actual spending limit. Cards that are maxed out, or near their limit, drag down your credit score.
Obviously, a bad credit rating isn’t what you want. If you’re faced with this dilemma, meet with a financial advisor or planner and to determine the best route to take. You may need to consolidate debt, or halt spending until you can successfully pay off the bulk of your credit card debt.
Remember that you don’t want to get rid of all your credit cards! Banks and lending institutions need to see some record of experience managing debt. Once you’ve cleaned up your credit rating, use the card each month but be sure and pay off most of the debt.
Using credit cards to obtain certain products and services is a way of life, and they provide a resource that should be used wisely. If you think your credit rating could impact your opportunity to get a mortgage, consider finding a reliable financial advisor.
Many times, this advisor works with you to consolidate the debt, while still keeping one or two credit cards open and active. The secret is maintaining the right type of balance that shows lenders you can safely borrow money, and still pay it back on a regular basis.
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