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An Overview of Filial Responsibility Laws
Taking care of aging parents is something you may need to plan for, especially if you think one or both of them might need long-term care. One thing you may not know is that some states have filial responsibility laws that require adult children to help financially with the cost of nursing home care. Whether these laws affect you or not depends largely on where you live and what financial resources your parents have to cover long-term care. But itâs important to understand how these laws work to avoid any financial surprises as your parents age.
Filial Responsibility Laws, Definition
Filial responsibility laws are legal rules that hold adult children financially responsible for their parentsâ medical care when parents are unable to pay. More than half of U.S. states have some type of filial support or responsibility law, including:
- Alaska
- Arkansas
- California
- Connecticut
- Delaware
- Georgia
- Indiana
- Iowa
- Kentucky
- Louisiana
- Massachusetts
- Mississippi
- Montana
- Nevada
- New Jersey
- North Carolina
- North Dakota
- Ohio
- Oregon
- Pennsylvania
- Rhode Island
- South Dakota
- Tennessee
- Utah
- Vermont
- Virginia
- West Virginia
Puerto Rico also has laws regarding filial responsibility. Broadly speaking, these laws require adult children to help pay for things like medical care and basic needs when a parent is impoverished. But the way the laws are applied can vary from state to state. For example, some states may include mental health treatment as a situation requiring children to pay while others donât. States can also place time limitations on how long adult children are required to pay.
When Do Filial Responsibility Laws Apply?
If you live in a state that has filial responsibility guidelines on the books, itâs important to understand when those laws can be applied.
Generally, you may have an obligation to pay for your parentsâ medical care if all of the following apply:
- One or both parents are receiving some type of state government-sponsored financial support to help pay for food, housing, utilities or other expenses
- One or both parents has nursing home bills they canât pay
- One or both parents qualifies for indigent status, which means their Social Security benefits donât cover their expenses
- One or both parents are ineligible for Medicaid help to pay for long-term care
- Itâs established that you have the ability to pay outstanding nursing home bills
If you live in a state with filial responsibility laws, itâs possible that the nursing home providing care to one or both of your parents could come after you personally to collect on any outstanding bills owed. This means the nursing home would have to sue you in small claims court.
If the lawsuit is successful, the nursing home would then be able to take additional collection actions against you. That might include garnishing your wages or levying your bank account, depending on what your state allows.
Whether youâre actually subject to any of those actions or a lawsuit depends on whether the nursing home or care provider believes that you have the ability to pay. If youâre sued by a nursing home, you may be able to avoid further collection actions if you can show that because of your income, liabilities or other circumstances, youâre not able to pay any medical bills owed by your parents.
Filial Responsibility Laws and Medicaid
While Medicare does not pay for long-term care expenses, Medicaid can. Medicaid eligibility guidelines vary from state to state but generally, aging seniors need to be income- and asset-eligible to qualify. If your aging parents are able to get Medicaid to help pay for long-term care, then filial responsibility laws donât apply. Instead, Medicaid can paid for long-term care costs.
There is, however, a potential wrinkle to be aware of. Medicaid estate recovery laws allow nursing homes and long-term care providers to seek reimbursement for long-term care costs from the deceased personâs estate. Specifically, if your parents transferred assets to a trust then your stateâs Medicaid program may be able to recover funds from the trust.
You wouldnât have to worry about being sued personally in that case. But if your parents used a trust as part of their estate plan, any Medicaid recovery efforts could shrink the pool of assets you stand to inherit.
Talk to Your Parents About Estate Planning and Long-Term Care
If you live in a state with filial responsibility laws (or even if you donât), itâs important to have an ongoing conversation with your parents about estate planning, end-of-life care and where that fits into your financial plans.
You can start with the basics and discuss what kind of care your parents expect to need and who they want to provide it. For example, they may want or expect you to care for them in your home or be allowed to stay in their own home with the help of a nursing aide. If thatâs the case, itâs important to discuss whether thatâs feasible financially.
If you believe that a nursing home stay is likely then you may want to talk to them about purchasing long-term care insurance or a hybrid life insurance policy that includes long-term care coverage. A hybrid policy can help pay for long-term care if needed and leave a death benefit for you (and your siblings if you have them) if your parents donât require nursing home care.
Speaking of siblings, you may also want to discuss shared responsibility for caregiving, financial or otherwise, if you have brothers and sisters. This can help prevent resentment from arising later if one of you is taking on more of the financial or emotional burdens associated with caring for aging parents.
If your parents took out a reverse mortgage to provide income in retirement, itâs also important to discuss the implications of moving to a nursing home. Reverse mortgages generally must be repaid in full if long-term care means moving out of the home. In that instance, you may have to sell the home to repay a reverse mortgage.
The Bottom Line
Filial responsibility laws could hold you responsible for your parentsâ medical bills if theyâre unable to pay whatâs owed. If you live in a state that has these laws, itâs important to know when you may be subject to them. Helping your parents to plan ahead financially for long-term needs can help reduce the possibility of you being on the hook for nursing care costs unexpectedly.
Tips for Estate Planning
- Consider talking to a financial advisor about what filial responsibility laws could mean for you if you live in a state that enforces them. If you donât have a financial advisor yet, finding one doesnât have to be a complicated process. SmartAssetâs financial advisor matching tool can help you connect, in just minutes, with professional advisors in your local area. If youâre ready, get started now.
- When discussing financial planning with your parents, there are other things you may want to cover in addition to long-term care. For example, you might ask whether theyâve drafted a will yet or if they think they may need a trust for Medicaid planning. Helping them to draft an advance healthcare directive and a power of attorney can ensure that you or another family member has the authority to make medical and financial decisions on your parentsâ behalf if theyâre unable to do so.
Photo credit: ©iStock.com/Halfpoint, ©iStock.com/byryo, ©iStock.com/Halfpoint
The post An Overview of Filial Responsibility Laws appeared first on SmartAsset Blog.
Source: smartasset.com
What’s a Good Credit Score?
Your credit score is incredibly important. In fact, this number is so influential on various financial aspects of life that it can determine your eligibility to be approved for credit cards, car loans, home mortgages, apartment rentals, and even certain jobs. Knowing what your credit score is, and what range it falls under, is important so you can decide what loans you can to apply for, and if necessary, if steps need to be taken to improve your score.
So what constitutes a good credit score?
The Credit Score Range Scale
The most common credit score used by lenders and other business entities is the FICO score, which ranges from 300 to 850. The bigger the number, the better. To create credit scores, FICO uses information from one of the three major credit bureau agencies – Equifax, Experian or TransUnion. Knowing this range is important because it will help you understand where your specific number fits in.
As far as lenders are concerned, the lower a consumer’s number on this scale, the higher the risk. Lenders will often deny a loan application for those with a lower credit score because of this risk. If they do approve a loan application, they’ll make consumers pay for such risk by means of a much higher interest rate.
Understand Your Credit Score
Within the credit score range are different categories, ranging from bad to excellent. Here is how credit score ranges are broken down:
Bad credit: 630 or Lower
Lenders generally consider a credit score of 630 or lower as bad credit. A number of past activities could have landed you in this category, including a string of late or missed credit card payments, maxed out credit cards, or even bankruptcy. Younger people who have no credit history will probably find themselves in this category until they have had time to develop their credit. If you’re in this bracket, you’ll be faced with higher interest rates and fees, and your selection of credit cards will be restricted.
Fair Credit: 630-689
This is considered an average score. Lingering within this range is most likely the result of having too much “bad” debt, such as high credit card debt that’s grazing the limit. Within this bracket, lenders will have a harder time trusting you with their loan.
Good Credit: 690-719
Having a credit score within this range will afford you more choices when it comes to credit cards, an easier time getting approved for various loans, and being charged much lower interest rates on such loans.
Excellent Credit: 720-850
Consider your credit score excellent if your number falls within this bracket. You’ll be able to take advantage of all the fringe benefits that come with credit cards, and will almost certainly be approved for loans at the lowest interest rates possible.
What’s Your Credit Score?
Federal law allows consumers to check their credit score for free once every 12 months. But if you want to check more often than this, a fee is typically charged. Luckily, there are other avenues to take to check your credit score.
Mint has recently launched an online tool that allows you to check your credit score for free without the need for a credit card. Here you’ll be able to learn the different components that affect your score, and how you can improve it.
You’ll be able to see your score with your other accounts to give you a complete picture of your finances. Knowing what your credit score is can help determine if you need to improve it to help you get the things you need or want. Visit Mint.com to find out more about how you can access your credit score – for free.
Lisa Simonelli Rennie is a freelance web content creator who enjoys writing on all sorts of topics, including personal finance, investing in stocks, mortgages, real estate investments, and anything else to do with the world of economics.
The post What’s a Good Credit Score? appeared first on MintLife Blog.
Source: mint.intuit.com
Tom Brady and Gisele Bundchen Finally Sell Their Massachusetts Mansion
realtor.com, John Shearer/Getty Images
NFL great Tom Brady has finally offloaded his Massachusetts mansion. The quarterback and his wife, supermodel Gisele Bündchen, have sold their luxe Brookline estate, according to the Boston Globe.
The transaction appears to have been an off-market deal, with no price information disclosed for the transaction. Sources told the Globe that the property was offered for $32.5 million.
The custom-built,12,000-square-foot estate outside of Boston initially debuted at $39.5 million in 2019, then quickly dropped to $33.9 million.
The mansion built in 2015 came off the market in May, when luxury home sales were stalled by the coronavirus pandemic. But a buyer surfaced at the end of 2020.
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Brookline abode
In 2013, the couple picked up a prime 5-acre plot from the local cash-strapped Pine Manor College for $4.5 million.
They tapped architect Richard Landry, of Landry Design Group, to create their East Coast estate. Landry has also worked on the couple’s Los Angeles mansion, which was featured in Architectural Digest.
Landry’s design sits adjacent to the ninth hole of the Country Club in Brookline, with serene views and plenty of privacy.
The five-bedroom main house features a dining room, living room, home office, chef’s eat-in kitchen, and family room. A grand stairwell leads to the bedrooms on the second floor.
The lower level includes a rec room, playroom, wine room, gym, and spa.
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Watch: QB Drew Brees Looks to Unload His Amazing Kauai Condo
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The sprawling grounds include gardens, a pool, and a âbarn-inspiredâ guesthouse with a yoga studio, full bathroom, and sleeping loft. The property comes with a three-car garage, carport, and circular drive with ample parking.
Brady’s mansion sits just down the road from Reebok founder Paul Fireman‘s lavish property, which was finally sold in 2020 after four years on the market. That 27,000-square-foot mansion had been priced at as much as $90 million, before finally selling for $23 million. George and Manny Sarkis of Douglas Elliman represented Fireman.
The agents also sold Fireman’s adjacent 7 acres for $18 million to developer C. Stumpo Development, which plans to build luxury homes on the land.
âAfter closing on both 150 Woodland Road [the Fireman home] and the five adjacent lots, we are very excited about the current and future Brookline market,” says Manny. “Buyers continue to trend to the suburbs, seeking more land and bigger homes.”
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Manhattan move
The jet-setting duo received another Christmas gift of good news in 2020, with a reported sale of their Tribeca loft. The two had made the penthouse available for just under $40 million last November. If they got their asking price, they’ll stroll away with a large profit.
The couple had picked up the place in 2018 for $25.46 million. The five-bedroom, 5.5-bath unit features a 1,900-square-foot terrace and Hudson River views. Building amenities include an 82-foot lap pool and a private drive-in entrance.
The couple still own a lower-floor unit in the same 14-floor building.
New year, new homes
Brady left Brookline after he signed with the Buccaneers. The QB has since put roots down in South Florida. In October, Brady and Bundchen were reportedly circling a waterfront property in Clearwater.
And then Brady made a move on Florida’s other coast in December, with a reported $17 million purchase of a home on Miamiâs Indian Creek Island, known as the Billionaires Bunker.
The couple plan to raze the current house on the land in Miami and build anew. They’re reportedly looking to emulate the L.A. home they sold to Dr. Dre for $40 million in 2014. Sounds like the services of their favorite architect may once again be required.
The post Tom Brady and Gisele Bundchen Finally Sell Their Massachusetts Mansion appeared first on Real Estate News & Insights | realtor.com®.
Source: realtor.com
Inside Supernatural Star Jensen Ackles’ ‘Very Hip’ Lake House in Austin
If you’re a die-hard Supernatural fan like us, you’re probably still reeling from the show’s finale and coping with the fact that there won’t be any new Winchester adventures for us to follow. But weâre not here to talk about that, but rather snoop into the private life of one of the series’ leading men. More specifically, Jensen Acklesâ house — which we actually think Dean Winchester would approve of.
The actor starring in CWâs longest running show and his wife Danneel opened up their 7,500-square-foot home in Austin, Texas to Architectural Digest, giving us a rare glimpse into the heartthrob’s home and personal life.
As the story goes, the couple was relocating from Los Angeles and initially considered buying a house down the road when they noticed this property (that wasnât even for sale). But since they fell in love with it, the couple went ahead and asked the previous owners if they’d be willing to sell. And since it’s not easy resisting Jensen Ackles’ charms, they managed to convince the owners so the Acklesâ moved on to the next step â- redecorating the house.
To help out, they hired architect Paul Lamb and interior designer Fern Santini and together they came up with some brilliant ideas on how to best revamp their already-stunning new house.
âIt was imperative that the house express the Ackleses — young, bold, and irreverent,â Lamb told AD.
Jensen Acklesâ house, which boasts five bedrooms, revolves around Danneelâs decorating outlook of âmore is more is more!â There is a lot of color, texture, a lot of wood work going on to make it look like a lake house and endless decorations with some of the coolest background stories.
Let there be music
In Supernatural, Jensen loves music. Remember his spontaneous Eye of a Tiger outtake? Still fun to watch! Thereâs definitely more of where that came from in real life, since Jensen did his best to create an amazing acoustic sound in his house.
The living room is scattered with guitars and all across the shag rug lie comfy and colored floor pillows. All this because the couple loves having friends over, sitting on the floor, singing and playing the guitar.
Jensen was excited to talk about one of his favorite features of the house: âThe hand-scraped wood floors undulate quite heavily, and weâve got these giant beams and wood all around that feel like youâre in the hull of a giant ship.â âWhat that does is it creates an amazing acoustic sound,â he continues. âWeâve always had music in our lives, and we wanted to pass on that tradition.â
Jensen’s kick-ass bar
Theyâve taken care of the music, and to complete the ambiance they got rid of the formal dining room (that nobody used anyway) and replaced it with a kick-ass bar.
Placed on one end of the large living room, the bar is made out of black walnut with black and white veined marble. The cabinets were specially made to light the expensive bourbons it holds inside.
The master suite
Thereâs a master bedroom swaddled in Trove wallpaper bearing vintage photography of 1920s opera boxes. The wallpaper is covered in sections by Japanese-inspired barn door panels âbecause sometimes you need an audience and sometimes you donâtâ.
The master bathroom has a beautiful
bathtub sitting in front of a large window that provides a stunning view to the
lake.
The Mr. and Mrs. own two separate counters, because, you know, it just makes things easier in the mornings; and the inspiration for their master bathroom shower came from an Architectural Digest story featuring a steel and glass shower in the home of Neil Patrick Harris.
Jensen Ackles’ bright, wood-framed home
Thanks to exposed beams, larger expanses of windows, and rich wooden ceilings, the architect managed to simplify and open the spaces. They simply tore down walls to let more natural light into the home.
Jensenâs favorite space is the breezy two-story screened porch that transformed the entire profile of the house; and his favorite piece â a custom long table made using a 2,000-year-old cypress log.
Parents of three
Jensen and Danneel have three beautiful children, so they had to choose the decor and furniture according to their needs as well. It appears that the coupleâs eldest daughter would make a great interior designer once she grows up. The six-year-old girl, JJ, helped pick out all her own bedroom decor.
Unsurprisingly, the kidsâ favorite toy is a rolling acrylic table from the â50s, placed in the kitchen. Everybody loves a happy kitchen!
Jensen Ackles’ home is full of hidden gems
The actorâs house is a personalized, eccentric, yet highly livable place. It was designed to resemble the Laurel Canyon bungalow the couple had once lived in and itâs a testament to the old school, Austin-style lake house.
The space is filled with all kinds of eccentric and eclectic objectsâsome useful, some decorative, some both. The decorations could be found in abundance in Austin during its bohemian period (the Acklesâ are active supporters of local art), as well as in late-60s California.
More beautiful celebrity homes
Rob Loweâs Gorgeous House in Montecito is Back on the Market for $42.5 Million
Luxurious Malibu Estate Previously Owned by Kelsey Grammer On the Market for $20M
âHunger Gamesâ Actor Josh Hutcherson is Selling His Celebrity-Magnet âTree Houseâ in Hollywood Hills
Jessica Albaâs Los Angeles House is a Pinterest-Perfect Dream Home
The post Inside Supernatural Star Jensen Ackles’ ‘Very Hip’ Lake House in Austin appeared first on Fancy Pants Homes.
Source: fancypantshomes.com
15-Year Fixed vs. 30-Year Fixed: The Pros and Cons
It’s that time again, where I take a look at a pair of popular mortgage programs to determine which may better suit certain situations. Today’s match-up: “15-year fixed mortgage vs. 30-year fixed mortgage.” As always, there is no one-size-fits-all solution because everyone is different and may have varying real estate and financial goals. For example, [&hellip
The post 15-Year Fixed vs. 30-Year Fixed: The Pros and Cons first appeared on The Truth About Mortgage.
Source: thetruthaboutmortgage.com
‘I Lost My Jobâand My Dream House’: How This First-Time Home Buyer Bounced Back
Katerina Rieckel
Imagine finding your dream home, then, a week before closing the deal, losing your jobâand the house. House hunting during the coronavirus pandemic is no picnic.
COVID-19 has caused seismic changes not only to real estate markets, but also to the lives of home buyers hit with layoffs, furloughs, and other financial challenges. Just ask Katerina Rieckel, a digital strategist, knitwear designer, and first-time home buyer who, with her husband, was set to close on a glorious farmhouse in upstate New York in March.
But about a week before sealing the deal, Rieckel was laid off, which meant that she and her husband, a claims adjuster, could no longer afford the place.
As a part of our new series, “First-Time Home Buyer Confessions,” we asked Rieckel to share her story, and the hard-won lessons she wants to share with other first-timers.
Let her experiences show that even unemployment doesn’t need to spell the end of a house huntâalthough it may require you to dust yourself off after a loss and try, try again.
Katerina Rieckel
Location: Troy, NY
House specs: 1,544 square feet, 3 bedrooms, 2 bathrooms
List price: $249,900
Price paid: $245,500
2020 has been a wild one. How did you end up buying a home in the middle of a pandemic?
We started looking for a house a year ago, about halfway through the summer. At the time, both my husband and I had recently got new jobs, so the first issue we ran into was getting pre-qualified for the mortgage without a long track record at those companies. We also both felt pressure, as our jobs were very new.
What were you looking for in a house, and what was your budget?
We were looking for a house in the country that was move-in ready, private with at least 5 acres. We started off with a small budget, max $200,000, which made our choices more narrow.
Our search continued well into the winter, and around January 2020, we finally saw a house that was all we ever dreamed of and more. It was over our budget, at $229,000, but it had been listed for over a year, so we felt there was a good chance we could get it for less than the asking price.
What did you love about this house?
It was a beautiful, slate-blue farmhouse sitting on top of a hill, surrounded by woods. The house was warm and inviting, with chickens running around, as well as a big diving pool, and a workshop in the basement connected with a two-car garage. We got along with the owners really well, and we were going to keep the chickens. Everything went very smoothly, until just over a week before closing.
Global MLS
So what went wrong?
It was March, and COVID-19 hit hard. The digital marketing agency I worked for had clients pause their work for unknown time. I was laid off, which meant we couldn’t afford the house anymore, and had to back out of the deal.
I was crushed. We didn’t know what was going to happen, and the country was under a lockdown. We had plans for my parents to come visit us in our new house, but instead, I ended up with no job, no house, and I couldn’t see my family, since they live in Europe.
In the summer, I was very fortunate to get my job back. So we resumed our house hunt and began to search for a new contender.
When you started the search again, how had COVID-19 changed the market?
The housing market in upstate New York got totally crazy. I heard there were houses being sold within hours. The market was just incredibly competitive, and not many houses were being listed, as a lot of people didn’t want to let strangers in their house during the pandemic.
We saw about seven to 10 houses in person, but they usually ended up disappointing us, with some strange arrangements. For example, one house had around 25 acres, but half of that acreage was on the other side of the road, behind other people’s houses, which made it almost impossible to use.
Katerina Rieckel
With such a competitive market, how did you end up finding the right house?
Finally, around halfway through the summer, I saw a house listed that I hadn’t noticed before. I called on it right away and set up a showing that evening.
The real estate agent told me we were really fast, as he had just relisted this house. Someone had been buying it, but backed out of the process because of personal reasons.
Katarina Rieckel
How did you know this house was the one?
The house had over 10 acres, it was in the country, and about 35 minutes to Troy. It was move-in ready, but definitely needed upgrades, as it looked like it got stuck in the ’80s.
Even though we didn’t like the style that much, we felt instantly comfortable and decided to put in an offer that same evening. It was partly due to the pressure of the market, but in the end, we are really happy we made this decision.
Katerina Rieckel
What surprised you most about the home-buying process?
Nothing prepares you for the amount of aggravation you have to go through. Buying a house is like getting a second job for about three months.
Katerina Rieckel
What’s your advice for aspiring first-time home buyers?
Don’t trust the photos! The photos got me a few times. For example, a lot of times, the photos of the house are taken so that you can’t see the neighboring houses.
You think, “Wow, that looks so private!” Then you drive there, and you realize there’s a house sitting right next to it. Since privacy was very important to us, we got disappointed a few times by this. We started doing drive-bys first, before going in with a real estate agent, whenever possible.
Katerina Rieckel
Anything else home buyers should look out for?
Call the real estate agent and ask a lot of questions before you even go see the house, like what the property and school taxes areâvery important around here.
You also want to know what kind of heating the house has, as electric bills can really add up over the winter.
The driveway can also be a huge issue, which is why I think the first house we were buying was for sale for such a long time. It had a pretty steep driveway, which was definitely an all-wheel drive kind of thing in the winter.
We also changed who we were financing with while we were going through closing. We needed someone well-informed about the economy, who knew what they were doing and was ready to act fast.
Our first mortgage broker didn’t tell us as soon as interest rates started to go upâand basically sat on the information for a while. This is when we stopped trusting this person and went to work with a bank instead.
Maybe the best advice is not to fall in love with a house too quickly, since there can be so many setbacks that you will not see coming.
Katerina Rieckel
The post ‘I Lost My Jobâand My Dream House’: How This First-Time Home Buyer Bounced Back appeared first on Real Estate News & Insights | realtor.com®.
Source: realtor.com
Standard vs. Itemized Deduction: Which One Should You Take?
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Standard versus itemized deduction: Which one should you claim? If this question is weighing heavily on your mind as you file your taxes, now that all the new tax reforms have taken effect, let this guide help you decide.
Itemizing your deductionsâparticularly if you’ve bought a home recentlyâcould save you major bucks when you file. But, more than ever, you need to understand what you can and can’t do. We’ll break it down to help you make the decision on whether to select a standard or an itemized deduction.
What is the standard deduction?
The standard deduction is essentially a flat-dollar, no-questions-asked reduction to your adjusted gross income. When you file your tax return, you can deduct a certain amount right off the bat from your taxable income.
For 2019, the standard deduction is $12,000 for single filers and $24,000 for married couples filing jointly. (The standard deduction nearly doubled as a result of the Tax Cuts and Jobs Act, which went into effect in 2018.)
Here are some of the benefits to taking a standard deduction:
- It allows you a deduction even if you have no expenses that qualify as itemized deductions.
- It eliminates the need to keep records and receipts of your expenses in case youâre audited by the IRS.
- It lets you avoid having to track medical expenses, charitable donations, and other itemizable deductions throughout the year.
- It saves you the trouble of needing to understand the fine nuances of tax law.
What are itemized deductions?
Although claiming the standard deduction is easy and convenient, choosing to itemize can potentially save you thousands of dollars, says Mark Steber, chief tax officer at the Jackson Hewitt tax service.
âDonât be lulled into thinking the standard deduction is always a better answer,â Steber says. That advice especially applies to homeowners.
âBuying a home has the single largest impact on your tax return,â he adds, noting that a home purchase is âan anchor item that can move someone into the itemized taxpayer category.â
Itemizing your deductions may enable you to deduct these expenses:
- Home mortgage interest (note the exceptions below)
- Real estate and personal property taxes (note the cap below)
- State and local income taxes or sales taxes (but not both)
- Gifts to charities
- Casualty or theft losses
- Unreimbursed medical and dental expenses
- Unreimbursed employee business expenses
Why itemizing often makes sense for homeowners
Under the new law, current homeowners can continue to deduct interest on a total of $1 million of mortgage debt for a first and second home. But new buyers can deduct interest on only $750,000 for a first and second home.
It’s still possible that if you own a home, your mortgage interest alone might exceed the standard deduction, says Steve Albert, director of tax services at the CPA wealth management firm Glass Jacobson. In this case, it’s a no-brainer to itemize your deductions.
This is particularly true if you bought a house recently, since most mortgages are front-loaded to pay mortgage interest rather than whittle down the principal (which is the amount you borrowed).
For instance: If you have a 30-year loan for $400,000 at a fixed 5% interest rate, in the first year of your mortgage, you’ll pay off only $5,901 in principal and a whopping $19,866 in interest.
That alone exceeds an individual’s standard deduction of $12,000 deduction for 2019. So if you’re filing taxes this year, itemizing would make total sense.
Plus: If you bought your house in 2019 and paid pointsâwhich are essentially a way to prepay interest upfront to lower your monthly mortgage billsâthese points count as mortgage interest, too, amounting to more tax savings.
On the other hand, if you’ve owned your home for a while, then your mortgage interest may not amount to much. By the 25th year of that same $400,000 loan, you’ll pay only $6,223 in interest.
However, keep in mind that your property taxes of up to $10,000 are an itemized deduction, tooâand combined with mortgage interest and other deductions, could push you over the top into itemizing territory.
Itemized vs. standard deduction: Which is right for you?
Not sure how much you paid in mortgage interest and property taxes last year? To get a ballpark, you can punch your info into an online mortgage calculator.
Also, early in the new year, your mortgage lender should have mailed you a mortgage interest statement (Form 1098) showing the total you paid during the previous year.
âAnd if you had your property taxes impounded in your loan, your taxes will appear on your 1098 as well,” says Lisa Greene-Lewis, a CPA and tax expert at TurboTax.
Another DIY approach for seeing whether your combined itemized tax deductions are higher than your standard tax deduction is to fill out the IRS Schedule A form, which outlines all federal itemized deductions line by line.
You can also consult an accountant (you can search for a tax professional in your area using the IRS directory of tax return preparers). But as a general rule, if you bought a home recently, you could be a prime candidate for itemizing, so don’t let these potential savings pass you by without checking!
The post Standard vs. Itemized Deduction: Which One Should You Take? appeared first on Real Estate News & Insights | realtor.com®.
Source: realtor.com
Home Buyer’s Guide: How to Purchase a Property, From Start to Finish [Free Download]
Purchasing a home is both exciting and a major milestone in your life, so you’ll want to be prepared for what to expect to avoid a stressful process. Having an in-depth look at the buyer’s journey can help you make informed and confident decisions.
From finding a real estate agent, negotiating offers to getting your keys on closing day, we’ve outlined all the steps of a home buyer’s journey in our free Buyer’s Guide, which you can download here.
The Buyer’s Guide will cover the buyer’s timeline from meeting an agent to preparing for closing day. We’ve outlined the 8 steps in a home buyer’s journey below.
1. Working With An Agent
Every city is filled with thousands of agents, but not all are equal. We believe it is important to choose an agent that you feel confident with. Before you commit to working with an agent, make sure you have a good understanding of the knowledge and experience they offer. It’s important that you ask your questions before making the decision to work with them.
2. Financing Your Purchase
Before you set a budget and start looking for a home, you’ll have to understand what costs to expect when purchasing a home. Here are some of the major costs involved:
- Deposits
- Down payments
- Mortgage insurance
- Closing costs
You’ll also want to calculate a rough estimate of the down payment that you will be expected to pay. Depending on the price of your home, your minimum down payment can range from 5% to 20%. If you’re interested in learning more about how to finance your home, you can get our free Financing Your Purchase guide here.
3. Searching For A Home
An important part of searching for a home is understanding how the home will fit with your needs and your lifestyle. You’ll want to consider home ownership as well as different types of properties and features.
Types of Home Ownership
- Freehold Ownership
- You purchase the home and directly own the lot of land it sits on
- Condominium Ownership
- For condos, you own specific parts of one building: titled ownership of your unit, along with shared ownership in the condo corporation that owns the common spaces and amenities
- Co-Op Ownership
- You own an exact portion of the building as a whole and also have exclusive use of your unit
Types of Properties
- Detached houses
- Semi-detached houses
- Attached houses
- Condos and apartments
- Multi-unit
Tip: Depending on your budget and desired location, you may need to be flexible to find a home that meets your needs. By being willing to trade some features for others, you’ll have more options to choose from.
4. Negotiating An Offer
When you are making an offer to purchase a home, the purchase agreement should include the essential components listed below. Your agent can help put together an offer that is compelling, while safeguarding your interests and puts you in a competitive position to secure your new home.
You’ll also have the opportunity to choose the conditions that you’ll want in your offer. Some of these may include a home inspection or a status certificate review.
5. Financial Due Diligence
Whenever you make an offer on a house, you need to provide a deposit to secure the offer. The deposit is in the form of a certified cheque, bank draft, or wire transfer; it’s held in trust by the selling brokerage and is applied towards your down payment if your offer is successful.
There are two types of deposits:
- Upon acceptance
- The deposit is provided within 24 hours of the seller choosing your offer
- Herewith
- The deposit is provided when the offer is made
6. Property Due Diligence
To firm up a deal or educate yourself more on the state of the property, you’ll likely want to have a home inspection if you’re purchasing a house. If you’re purchasing a condo, then your lawyer will review the building’s status certificate.
Home Inspection
A home inspector will assess elements of the home such as the walls, windows, plumbing, heating and roof to judge the condition of the home. This process is non-invasive and is essential to help provide buyers with a good idea of the home’s current condition and the confidence of putting in an offer.
Tip: The home inspector will provide a summary of suggested work along with a minimum budget estimate for the repairs needed.
Status Certificates
If you’re purchasing a condominium, you’ll need to obtain a status certificate from the condo board or management for your lawyer’s review. This document will include valuable information about the condo’s budget, legal issues, reserve fund, maintenance fees and future fees increases – and the lawyer can help identify potential red flags
7. Preparing For Closing
Before the big day, you’ll want to keep a checklist of what to do ahead of time. Some of these include:
- Review your contract
- Complete a final walkthrough of the home
- Purchase home insurance
- Meet with your lawyer
- Know how much cash you’ll need
- Secure cash required for closing
8. Closing Day
Closing Day is when you’ll finally get the keys to your new home! In addition to bringing the cash required for closing, you’ll have to sign a few more documents which will include:
- Mortgage loan
- Title transfer
- Statement of adjustments
- Tax certificates
For the full details on the home buyer’s journey including examples, advice, pictures and sample calculations, download a copy of our free Buyer’s Guide here.
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Money Moves to Make in Your 20s, 30s, and 40s
Reaching your twenties is an exciting milestone for most as it means youâve officially entered adulthood. Along with that milestone comes new responsibilities and worries that we didnât picture when our teenage selves dreamed of turning 21. We imagined our college graduation, moving into our first apartment, and launching our new career. That vision didnât include dealing with student loan debt, taking on a low paying entry-level job, or having to confront that despite spending 4 years in college, youâre still unsure how the world of personal finance actually works.
Itâs easy to dismiss it all because well youâre a 20 something, and youâll have plenty of time to play catch up. The reality is that each decade plays an important role in our future financial health. Take the time now to learn about your money and follow the money moves outlined below to put yourself on a path of lifelong financial success and eventual freedom.
Money Moves to Make in Your 20âs:
Learn How To Budget
Building a budget doesnât have to be overly complicated or time-consuming. Itâs actually the first step in putting yourself in control of your finances because it means you know where your money goes each month. The good news is that there are lots of apps and online tools that can make the process a breeze. Consider a system like Mint that will connect to your accounts and automatically categorize your spending for you. The right budgeting tool is simply the one youâll stick with long term.
Pay Off Debt
Debt isnât all bad. It may be the reason you were able to earn your degree, and a mortgage may help you one day buy a home. It can also quickly overrun your life if you arenât careful. Nowâs the perfect time before life gets more hectic with family commitments to buckle down and tackle any loans or credit card balances so you can be debt-free going into your 30âs.
Build a Cash Cushion
The financial downturn caused by the pandemic has reminded the whole world of the importance of having an emergency fund. We donât know what life is going to throw at us and having a cushion can help you navigate the uncertain times. Though itâs not all about having a secret stash of cash to deal with the bad news of life (medical bills, car repair, layoff), it can also be about having the cash to seize an exciting opportunity. Having savings gives you the freedom and security to deal with whatever life brings your way – good or bad.
Understand Credit
Your credit score can dictate so much of your life. That little number can play a big role in the home you buy, the car you drive, and even the job you hold as some employers (especially in the finance world) will pull your credit. Itâs important that you check your credit report and score (also available through Mint), learn how itâs calculated, and work to improve it.
Money Moves to Make in Your 30âs:
Invest For Retirement
Now that youâve spent your 20âs building the foundation for your financial life, itâs time to make sure youâre also tackling the big picture goals like saving and investing for retirement. I typically recommend that clients save 10% to 15% of their annual income towards retirement. That may seem like an insurmountable goal, but starting small by saving even 1 to 3% of your salary can make a big difference in the future. Also, make sure to take advantage of any matching contributions that your employer may provide in your retirement plan. If, for example, they offer to match contributions up to 6%, I would try hard to work towards contributing at least 6%.
Buying Your First Home
Buying your first home is a top goal for many, but it also seems to be getting increasingly more difficult especially if you live in a major city. The most important steps you can take is to improve your credit score, pay down high-interest debt, and be aggressive about saving for a down payment. Saving 20% down will help you qualify for the best loan terms and interest rate, but there are still home loans available even if you arenât able to save that much. Just be realistic with your budget and what you can afford. Donât let a lender or real estate agent determine what payment will fit into your budget.
Be Covered Under These Must-Have Insurances
Youâve spent the last several years building your savings and growing your family. Itâs now crucial that you have the proper insurance coverage in place to protect your assets and your loved ones. Life and disability insurance are top of the list. Life insurance doesnât have to be expensive or complex. Get a quote for term-life that will last a set number of years and protect your partner and children during those crucial years that they depend on you. Disability insurance protects your income if you become sick or injured and are unable to work. Your earning ability is one of your biggest assets during this time, and you should protect it. This coverage may be offered through your employer, or you can request a quote for an individual policy.
Invest in Self-Care and Well Being
Mental health is part of self-care and wealth. Most people donât talk about how financial stress and worry affect their overall health. When you can take care of yourself on all levels, you will feel healthier and wealthier, and happier. But it is not easy. It takes work, effort, awareness, and consciousness to learn how to detach the value in your bank account or financial account from your self-worth and value as a human being. When you feel emotional about your money, investments, or the stock market, learn ways to process them and take care of yourself by hiring licensed professionals and experts to help you.
Money Moves to Make in Your 40âs:
Revisit Your College Savings Goal
As your kids get older and prepare to enter their own journey into adulthood, paying for college is likely a major goal on your list. Consider opening a 529 plan (if you havenât already) to save for their education. 529 plans offer tax advantages when it comes to saving for college. There are lots of online resources that can help you understand and pick the right plan for you. Visit https://www.savingforcollege.com. This is also a great time to make sure you’re talking to your kids about money. Give them the benefit of a financial education that you may not have had.
Get Aggressive with Retirement Planning
Your 40âs likely mark peak earning years. Youâll want to take advantage of your higher earnings to maximize your retirement savings especially if you werenât able to save as much in your 20âs and 30âs. Revisit your retirement plan to crunch the numbers so you’ll be clear on what you need to save to reach your goal.
Build More Wealth
Youâve arrived at mid-life probably feeling younger than you are and wondering how the heck that big 4-0 got on your birthday cake. We typically associate being 20 with being free, but I think weâve got it wrong. There is something incredibly freeing about the wisdom and self-assurance that comes with getting older. Youâve proved yourself. People see you as an adult. Your kids are getting older and your finances are more settled. Nowâs the time to kick it up to the next level. Look for ways to build additional wealth. This may mean tapping into your entrepreneurial side to launch the business youâve dreamed of or buying real estate to increase passive income. Nowâs also a great time to find a trusted financial advisor who can help guide your next steps and help you plan the best ways to build your wealth.
Revisit Your Insurance Coverage
Insurance was crucial before, but itâs time to revisit your coverage and make sure youâre protected especially if you decide to launch a business or buy additional real estate. This is also where a financial advisor can help you analyze your coverage needs and find the policies that will work for you.
Consider Estate Planning
Estate planning (think wills, trusts, power of attorney) isnât the most fun / exciting topic. It involves imagining your gone and creating a plan for the loved ones you leave behind. It is also often overlooked by adults in their younger years. Itâs easy to assume estate planning is something the wealthy need to do. It really comes down to whether you want to decide how your life savings will be managed or if you want a court to decide. Itâs also crucial for parents with children who are minors to select a guardian and have those uncomfortable conversations with their family members about who would care for the children if the worst were to happen. Itâs also a good time to visit this topic with your own aging parents and make sure they have the proper documents and plans in place.
Whether you’re in your 20âs, 30âs or 40âs, it can be easy to put off planning your finances especially in the middle of a pandemic. Most of us are busy, and itâs easy to tell yourself that youâll have time to work on a goal in the future. Commit to setting aside one hour each week or even each month to have a money date and review your finances. Donât let yourself reach a milestone birthday (30, 40) and regret not being farther ahead. Follow these money moves now to seize control of your financial future.
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