News & Tech Tips

What Does the Fed’s Interest Rate Cut Mean For Mortgages?

Kathleen Hargrove on March 5, 2020

Mortgage rates fell to their lowest level on record today, pulled down by fears that the spread of coronavirus could weigh on the U.S. economy.

The average rate on a 30-year fixed-rate mortgage fell to 3.29% from 3.45% last week. Mortgage rates are closely linked to yields on the 10-year Treasury, which this week dropped below 1% for the first time following an emergency Federal Reserve rate cut.

A decline in mortgage rates typically boosts home sales, but worsening coronavirus epidemic and the efforts to contain it could keep would-be home buyers on the sidelines during what is usually a busy spring selling season.

The decline in rates is likely to continue to fuel a refinancing frenzy that pushed mortgage lending to its highest level since 2006 last year. About 14.5 million homeowners would benefit from refinancing if 30-year rates hit 3.25%, just below their current level, according to mortgage-data firm Black Knight Inc.

Refinancing applications were up 26% from the previous week and more than 200% from the same time last year, according to Mortgage Bankers Association data released Wednesday.

The jump in refinancings poses a challenge for banks and other mortgage lenders, which often hire staff when the housing market picks up each spring.

 

Thinking about refinancing or have questions on how this rate cut could benefit you? Contact us for help!

 

SOURCE: Wall Street Journal

Home is where the tax breaks might be

Kathleen Hargrove on March 4, 2020

If you own a home, the interest you pay on your home mortgage may provide a tax break. However, many people believe that any interest paid on their home mortgage loans and home equity loans is deductible. Unfortunately, that’s not true.

First, keep in mind that you must itemize deductions in order to take advantage of the mortgage interest deduction.

Deduction and limits for “acquisition debt”

A personal interest deduction generally isn’t allowed, but one kind of interest that is deductible is interest on mortgage “acquisition debt.” This means debt that’s: 1) secured by your principal home and/or a second home, and 2) incurred in acquiring, constructing or substantially improving the home. You can deduct interest on acquisition debt on up to two qualified residences: your primary home and one vacation home or similar property.

The deduction for acquisition debt comes with a stipulation. From 2018 through 2025, you can’t deduct the interest for acquisition debt greater than $750,000 ($375,000 for married filing separately taxpayers). So if you buy a $2 million house with a $1.5 million mortgage, only the interest you pay on the first $750,000 in debt is deductible. The rest is nondeductible personal interest.

Higher limit before 2018 and after 2025

Beginning in 2026, you’ll be able to deduct the interest for acquisition debt up to $1 million ($500,000 for married filing separately). This was the limit that applied before 2018.

The higher $1 million limit applies to acquisition debt incurred before Dec. 15, 2017, and to debt arising from the refinancing of pre-Dec. 15, 2017 acquisition debt, to the extent the debt resulting from the refinancing doesn’t exceed the original debt amount. Thus, taxpayers can refinance up to $1 million of pre-Dec. 15, 2017 acquisition debt, and that refinanced debt amount won’t be subject to the $750,000 limitation.

The limit on home mortgage debt for which interest is deductible includes both your primary residence and your second home, combined. Some taxpayers believe they can deduct the interest on $750,000 for each mortgage. But if you have a $700,000 mortgage on your primary home and a $500,000 mortgage on your vacation place, the interest on $450,000 of the total debt will be nondeductible personal interest.

“Home equity loan” interest

“Home equity debt,” as specially defined for purposes of the mortgage interest deduction, means debt that: is secured by the taxpayer’s home, and isn’t “acquisition indebtedness” (meaning it wasn’t incurred to acquire, construct or substantially improve the home). From 2018 through 2025, there’s no deduction for home equity debt interest. Note that interest may be deductible on a “home equity loan,” or a “home equity line of credit,” if that loan fits the tax law’s definition of “acquisition debt” because the proceeds are used to substantially improve or construct the home.

Home equity interest after 2025

Beginning with 2026, home equity debt up to certain limits will be deductible (as it was before 2018). The interest on a home equity loan will generally be deductible regardless of how you use the loan proceeds.

Thus, taxpayers considering taking out a home equity loan— one that’s not incurred to acquire, construct or substantially improve the home — should be aware that interest on the loan won’t be deductible. Further, taxpayers with outstanding home equity debt (again, meaning debt that’s not incurred to acquire, construct or substantially improve the home) will currently lose the interest deduction for interest on that debt.

Contact us with questions or if you would like more information about the mortgage interest deduction.

Rental car insurance – do you really need it?

Kathleen Hargrove on February 18, 2020

Did you know that your own auto insurance policy most likely covers rental car damage and liability up to the same limits as for your own vehicle? In addition, the credit card used to rent the car can fill in the gaps.

All Visa, Discover, American Ex­press, and some MasterCards, provide rental car coverage. To qualify, you must reserve the rental car with the same credit card you use to pay for it. You must also decline the rental company’s supplemental insurance and collision damage waiver. The card company may limit coverage to 15 or 31 days. Most, however, do not cover trucks.

2020 Census: What You Need To Know

Kathleen Hargrove on February 13, 2020

We recently had Mark Boyd, a partnership specialist with the U.S. Census Bureau, in to present some key information to our staff regarding the upcoming decennial survey. He made us aware of the importance of the data that is collected and what all this is used for, as well as provided pointers on keeping this information safe and protected from fraudsters.
The census provides critical data that lawmakers, business owners, teachers, and many others use to provide daily services, products, and support for you and your community. Every year, billions of dollars in federal funding go to hospitals, fire departments, schools, roads, and other resources based on census data. In addition, the results of the census also determine the number of seats each state will have in the U.S. House of Representatives, and they are used to draw congressional and state legislative districts.
With any sharing of data and personal information, there is always concern over privacy and security. Here are some helpful tips we learned that we wanted to share with you to help keep your information safe:
Avoiding Scams Online
Phishing emails often direct you to a website that looks real but is fake-and may be infected with malware.
It is important to know that the Census Bureau will not send unsolicited emails to request your participation in the 2020 Census. Further, during the 2020 Census, the Census Bureau will never ask for:
  • Your Social Security number
  • Your bank account or credit card numbers
  • Money or donations
In addition, the Census Bureau will not contact you on behalf of a political party.
Staying Safe at Home
If someone visits your home to collect a response for the 2020 Census, you can do the following to verify their identity:
  • First, check to make sure that they have a valid ID badge, with their photograph, a U.S. Department of Commerce watermark, and an expiration date.
  • If you still have questions about their identity, you can call 800-923-8282 to speak with a local Census Bureau representative.

 

Reporting Suspected Fraud
If you suspect fraud, call 800-923-8282 to speak with a local Census Bureau representative. If it is determined that the visitor who came to your door does not work for the Census Bureau, contact your local police department.

Governor signs reciprocity bill for military members, spouses

Kathleen Hargrove on February 6, 2020

Last week, Governor Mike DeWine signed a bill that eliminates certain employment barriers for military families stationed in Ohio.

 

Senate Bill 7, sponsored by Sens. Bob Hackett, R-London, and Peggy Lehner, R-Kettering, gives military members and their spouses better employment opportunities by simplifying the process to transfer their occupational licenses to Ohio. The bill mandates state licensing agencies to issue licenses or certificates to military members and spouses who already hold a valid license to practice a trade or profession in another state.

 

“Military service is a high calling that brings with it many benefits, however, frequent relocations can place a burden on military families – particularly on the spouses whose jobs require a license or certificate such as teachers, nurses, dental assistants and home health aides,” DeWine said. “Military families are vital to our state and nation, and this new law will eliminate the red tape they encounter when relocating to Ohio and resuming their careers here.”

 

The law requires licenses to be issued in a timely manner and at no cost to military members and their spouses who hold valid credentials in another state.

 

The new law becomes effective on April 26.

 

 

 

SOURCE:

Ohio Society of CPAs

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