Lower Your 2009 Tax Debt

As a Top 5 in Real Estate Member, I counsel many clients on a wide range of financial concerns, not just their real estate investments. As we move closer to tax day, I wanted to alert you to some important information that could save you money come tax time.

In addition to the $8,000 tax break for first-time home buyers and the newly expanded tax credit that includes move-up buyers, new tax-relief bills passed in 2008 provide for a number of other tax breaks that may lower your 2009 tax debt. Plan now and review these breaks with your accountant to see if they could help reduce your tax liability in 2009 and beyond:

• Payroll Tax Credit. For 2009 and 2010, Congress gave workers a 6.2% credit on earned income, applied as lower income tax withholding (there are caps based on income). Recipients of Social Security, Railroad Retirement benefits or Supplemental Security Income, some federal workers, and veterans with disability pensions will get a one-time $250 check. Self-employed workers may be able to reduce quarterly estimated payments to get advance benefits.

• Larger Personal Exemptions. For 2009, each personal exemption you can claim is worth $3,650—up by $150 over 2008.

• Higher Standard Deductions. The standard deduction for married couples filing jointly rises to $11,400 up by $500 from 2008. For singles, the amount increases to $5,700—up by $250 over last year, and heads of households can claim $8,350, a jump of $350.

• Tax Credit for College Tuition. For 2009 and 2010, the Hope credit is replaced by a new credit of up to $2,500 per student a year for four years of college, not just the first two years. It now also covers the cost of books, but begins to phase out based on higher incomes.

• Child Tax Credit. If the credit exceeds the filer’s tax liability, all or part of the credit will be refunded if the filer earns more than $3,000 – down from $12,550 in 2008. (Also, for families with three or more children, the maximum earned income tax credit for 2009 and 2010 rises by $628.50)

Other changes that could affect you include higher income limits for deductible IRAs and Roth IRAs, higher estate tax and gift tax exemptions, credit for energy-saving home improvements, and partial exclusion of unemployment benefits.

To understand how the new tax breaks could save you money, consult with your financial advisor or e-mail me for more information. Be sure to pass this email along to your family and friends—in these tough economic times, we could all use a tax break!

In today’s tumultuous economy, it’s no surprise that there are foreclosure properties to be found in just about every community across America—even in South Orange County. While a terrible hardship for homeowners to endure, foreclosures can present a unique opportunity for first-time home buyers and investors looking to purchase a “bargain-priced home” with the potential for building instant equity.

As an experienced real estate professional, I want to advise you to tread carefully when it comes to foreclosures—they might not be quite the bargain you expect. Here are some important facts you need to know before venturing out into the foreclosure market:

- Homeowners faced with foreclosure are understandably stressed and resentful, which can often lead to neglecting routine maintenance on a home. Sometimes, even deliberate damage is done. Assessing the home’s condition, therefore, is a must.

- Foreclosure properties have often been vacant for an extended period of time. Look for problems caused by damp conditions, such as mold.

- Get a thorough home inspection before bidding on the property. Once the damage/disrepair of the home is assessed, factor this in when bidding on the home.

- Contact a real estate professional—like me, a Member of the Top 5 in Real Estate Network®—who is well steeped in the community and can provide information about pre-foreclosure properties, that is, homes that have been scheduled for foreclosure but have not yet gone to auction or been sold off. These homes need to be sold quickly as owners are trying to avoid foreclosure and its impact on their credit.

-Last but not least, go to www.hud.gov for information on how to buy homes acquired by the U.S Department of Housing and Urban Development as a result of foreclosure action on an FHA-insured mortgage. The site also has information on special programs and opportunities for teachers, law enforcement officers and others.

While buying a foreclosure property takes patience and research, the results can be well worth your time and effort. For more information, please e-mail me, and please pass this on to anyone you know who might be interested in exploring a foreclosure purchase.

As a Member of the Top 5 in Real Estate Network®, home buying clients often ask for advice on the best ways to manage and save money. As the credit card bills from holiday spending start to roll in, here are 10 New Year’s resolutions from bills.com for the year ahead…and beyond:

1. Make a plan. Create a straightforward budget for the year and monitor it monthly or weekly. Each month, review your progress and revise where necessary.

2. Use cash. Move away from credit cards and avoid going into debt, especially for daily, routine and ongoing purchases. Write checks or use automatic bill payments for bills, and withdraw enough cash or use a debit card for other expenses. Track withdrawals diligently to avoid going into overdraft.

3. Pay bills on time. The most important element of good credit is paying bills on time. Keep bills in one location and check that spot weekly. Set up online payments or write due dates on a calendar to stay on track.

4. Save. Your goal should be to save 10% or more of your income, but starting with even a few dollars a week is a great way to develop the habit of saving. You can always add more to your savings at any time. For example, after you pay off a bill, add the amount you would normally pay toward the bill to your savings instead. If you get a raise, bonus, cash gift or other one-time monetary receipt, save it—or at least a portion of it.

5. Practice preventative health. Money cannot buy good health, but in today’s world of skyrocketing medical and insurance costs, getting sick can cost you. Exercise and eat well, get enough sleep and, in these stressful times, take time to pursue relaxation practices, whether that means spiritual practices, meditation, a workout or coffee with a friend.

6. Think twice before spending. Find creative ways to cut back on expenses—take care of household maintenance, barter services or goods with friends or neighbors, and fix up old belongings rather than rushing to buy new ones. Some statistics say that people buy 30% more when shopping with a larger cart, so even a small change like avoiding the store cart when possible could save you money.

7. Participate in a retirement plan. Many believe now is a great time to invest for the long term. Especially if your employer matches contributions, contribute to a business retirement plan. If you are on your own for retirement savings, invest in an Individual IRA, Roth IRA and/or plan for self-employed persons.

8. Have the right insurance. Insurance protects against expenses you cannot cover yourself. Be sure you have life insurance to protect your family, auto insurance to cover your car, health insurance to provide for at least major medical incidents, and home or renter’s insurance to protect possessions from theft or disaster.

9. Pay taxes on time. File your income tax return on or before April 15, with any tax due, to avoid penalties. At the same time, adjust withholding if needed to account for changes in income. That step might be especially important this year for those with lost or reduced work. If your refund was large, have fewer taxes withheld so you are not giving an interest-free loan to the government.

10. Get help if you need it. If you lose your job, file for unemployment quickly. If you are worried that you will be unable to pay rent, mortgage or other obligations, talk to your bank or a reputable debt resolution company to learn about your options.

Remember that today’s attractive housing prices, combined with the government’s expanded and extended home buyer tax credit, make investing in a home one of the best ways to secure your financial well being. If you would like more information, e-mail me, and please forward these sound financial tips to your family and friends.