Friday, November 7, 2008

The New Tax LawsA Quick Heads-Up for April 15th
April 15th may be months away, but you know what they say about time flying by. And, considering that most of us will file our returns before the actual deadline, tax season is pretty much right around the corner. In the tradition of keeping our readers one step ahead of things, we thought it would be a good idea to inform you of some of the new tax laws.
Returning for his yearly tax advice is Trevor Rice, a certified public accountant and shareholder with Stern, Kory, Sreden and Morgan in Santa Clarita, California. According to Mr. Rice, there are a few new laws designed to benefit individuals, as well as businesses.
New Tax Laws for Individuals Rice says, "Due to the recent housing crisis, some relief has been provided." In the past, if you were to have lost your principal residence due to either foreclosure or a short sale, you could have paid taxes on the difference of what you owed on the loan.
For houses lost in 2008 and extending through 2012, Rice says that a forgiven debt up to $2,000,000 will generally be tax-free. While it may not completely ease the pain of losing a home, this new tax law will allow people to move on with their lives much more quickly.
Another new tax law that will benefit individuals applies to first-time home buyers, or anyone who has not owned a home within the last 3 years. According to Rice, if you fall into either of these categories, you may be eligible to receive a refundable tax credit for ten percent of the price of the home, up to a maximum credit of $7,500. There is a catch however.
Starting in 2010 and over the 15 years that follow, you will have to repay this credit to the government. Before you start shaking your head, understand that, at most, this would mean $500 a year would be deducted from your tax refund, or added to the taxes you owe.
New Tax Laws for BusinessesThe first law, says Rice, came about with the Economic Stimulus Act of 2008. It carries two main benefits in the form of deductions for any equipment that was purchased for a business in 2008.
In the past, if you purchased business equipment, there was the possibility of deducting up to $125,000 of the total cost for that year. You could then deduct a prorated portion of the assets' worth in the years that followed. The amount of years you could do this was based on the type of equipment purchased.
Rice says, "The first bit of good news is that the deduction has been increased to $250,000," adding that it makes 2008 an optimal year for reinvesting in your business in the form of equipment and related assets. He went on to say, however, that the real benefit of this new law is in the flexibility it provides.
If the $250,000 deduction doesn't make good tax sense, Rice suggests looking into "Bonus Depreciation", a portion of the new tax law that allows you to deduct up to 50 percent of the cost of any equipment purchased in 2008. The remainder would then become deductions over the course of the predetermined "life" of the equipment.
Adding that in some cases it may be possible to use both tax laws simultaneously, Rice urges that you consult with a qualified tax professional about the possibilities for taking advantage of them while they are still here - they each expire at the end of 2008.
Another change has to do with the amount you can deduct for the purchase of a luxury car for business purposes. According to tax law, a luxury car constitutes any passenger car that was purchased for around $15,000 and up. In the past, you could deduct $3,060 in the year it was purchased. Rice says that for this year only, the amount of the deduction will jump to $11,060!
Parting ShotsWhen asked if he had any advice for next year's tax planning, or for finances in general, Rice offered up a few suggestions.
"Start your tax planning with a professional now," he says. Tax laws frequently change. Some laws expire and need to be taken advantage of this year, while other credits and deductions are better to be deferred. Rice maintains that by acting now, a qualified tax professional can give you the best advice for your situation and more importantly, give you a head start for next April.
In terms of one's personal finances, Mr. Rice says that since the stock market is down, it's traditionally thought of as a good time to buy. Understanding that the market will eventually turn around, Rice is in line with this thought, but says there's a little more to the picture. He suggests that you stay very much on top of your portfolio, with a focus on keeping it diversified. This, he says, is the best way to successfully ride out a volatile market.
Due to this volatility, Rice also suggests that anyone nearing retirement should look at how they are invested and consider the prospect of moving their money into more conservative investments. A qualified financial planner would be a good person to talk to about this.
Lastly, Rice cautions all of us that in terms of taxes, state law does not have to conform to federal law. What this means is that you cannot necessarily count on these new credits also applying to your state taxes. He says, "Check your state laws, or better yet, ask your accountant what he or she has to say."
Trevor Rice has been a practicing CPA for the past eleven years. A graduate of California State University at Northridge, Trevor also holds the title of CVA (Certified Valuation Analyst.) He currently practices at Stern, Kory, Sreden and Morgan in Santa Clarita, California where he is also a shareholder. Trevor specializes in both individual and business taxation. He can be contacted via email at Trevor@SKSM.com.

Tuesday, October 14, 2008

House Bill HR3221 Summery

House Bill HR3221 Summary
Limits subject to change without notice. Subject to FHA qualifications.

(Source: Mortgage Bankers Association Press Release 7/28/2008)
This week, President Bush signed Federal Housing Bill HR3221.
This is a summary of some of the items included in that bill and how it will affect consumers.

LOW INCOME AND AFFORDABLE HOUSING: Encourages
the development of low-income and affordable housing by
harmonizing multi-family FHA mortgage insurance programs
with the low income housing tax credit. Allowing these two
programs to work together will result in more effective uses of
both programs.

GOVERNMENT SPONSORED ENTERPRISE BACKSTOP: Authorizes
the Treasury Secretary to temporarily increase the GSEs’ line
of credit and to, if necessary, buy equity in the GSEs in order to
provide confidence to credit markets. Also provides a role for
Treasury and the Federal Reserve in GSE oversight to ensure safety
and soundness.

TRUTH IN LENDING ACT REFORM: Requires TILA disclosures
to be delivered seven days prior to loan closing, requires that
disclosures include examples of how payments would change
based on rate adjustments in addition to disclosing the maximum
possible payment under the loan terms and mandates that the
consumer receive early disclosures before paying anything more
than a nominal fee that covers the cost of a credit report.
EMPOWERING STATES: Raises the cap by $11 billion on tax-free
bonds that state housing finance agencies may use to help at-risk
homeowners by refinancing troubled loans and appropriates
$4 billion for states to purchase and renovate abandoned and
foreclosed properties.

LICENSING: Encourages state officials to create a national
licensing system for residential loan originators, allows HUD
to create its own national licensing system if the states fail,
establishes minimum qualifications for all loan originators and
requires federal regulators to create a registry for banks and thrift
employees who originate loans.

FHA CHANGES INCLUDE: Modernization: $25 million
appropriation to improve technology, processes, program
performance, eliminate fraud and provide appropriate staffing.
LOAN LIMITS: Effective January 1, 2009, it also increases the
FHA loan limit to the lesser of 115 percent of the local median
home price or $625,500 with a floor for lower priced markets
of $271,000, establishes a 12-month stay on FHA’s proposal for
risk-based premiums, sets the down payment requirement at 3.5
percent and prohibits seller-funded down payment assistance
(both direct or through a third party).

GSE (Government Sponsored Enterprise) OVERSIGHT REFORM: A
new regulatory position is created (five-year term, appointed by
the President, confirmed by the Senate) with oversight authority
similar to that of bank regulators. This person establishes a new
affordable housing fund and capital magnet fund to be funded
by a 4.2 basis point fee on all new loans, significantly changes the
affordable housing goals and raises the conforming loan limit to
the higher of $417,000 or 115% of the local median home price,
not to exceed $625,500 (effective January 1, 2009).

FHA RESCUE: Creates a voluntary program for lenders to lower
the loan balance in exchange for an FHA guaranteed loan not
to exceed 90 percent of the newly appraised value of home. The
lender pays a 3 percent FHA loan origination fee. To qualify, the
borrower must have a debt-to-income ratio above 31 percent on
the original loan. Program is capped at $300 billion.

TAX INCENTIVES: Creates a $7,500 refundable tax credit for firsttime
homebuyers. Expands the volume cap for the low-income
housing tax credit. Allows for tax-exempt treatment of bonds
guaranteed by the Federal Home Loan Banks and exempts the
low income housing tax credit from the alternative minimum tax.
Ask Your Axiom Mortgage Consultant about this information and other
government sponsored lending programs for your clients.

What is happening with loans in the market?

As you may have heard, the Federal Reserve cut their key lending rates by ½%. This was done in conjunction with other world banks in an effort to bolster the world economy. The Fed cut their Funds Rate from 2.0 to 1.5 percent. They also cut their Discount Rate from 2.25% to 1.75%.

What does this mean for you?
The Funds Rate is the rate which affects short term borrowing – like credit card rates, home equity line rates, the Prime rate. These are short-term variable rates. The Discount Rate is the rate which banks borrow money from the Fed on an overnight basis to meet their cash reserve requirements. The Federal Reserve hopes that by lowering both of these rates, spending and consumer confidence will increase and lend strength to the economy.

So will mortgage rates change?
Here is a simple summary: Mortgage rates are long-term rates. They are not directly influenced by the Fed changing their short-term rates like they did last night. They are tied to the trading of mortgage-backed securities. Demand for those types of securities is lower right now due to the persistent weakness in the mortgage sector. Lower demand for these securities doesn’t help long-term rates go lower. For example, mortgage-backed securities (FNMA’s and GNMA’s) are trading about 11/32 worse this morning than yesterday (as of 8:10 this morning). What that means is that you would pay between ¼ and 3/8 points more today to get the same rate as yesterday. For example, on a $200,000 loan, you might pay $400-600 more in one-time fees (“points”) at closing for whatever rate you locked today, vs. if you locked yesterday.

What does the future hold?
Concerns about the mortgage market continue to minimize downward pressure on interest rates. My opinion: if you have a property picked out and loan in process right now and you are locked in, you are in a good position; that’s where I would be. If you are shopping for a home, as soon as you have an offer accepted on one, let’s talk about locking in. Rates don’t seem to be shooting up, but they aren’t going down either. That could obviously change. I’m not an expert but my feeling is that until some stability is restored, we may see continued weakening in the stock market and a lack of downward pressure on rates. If something changes and rates go lower, then we will take advantage of that wherever possible.

Buying a House

All of America seems to be going though a time a fear and waiting when it comes to buying a house. Will the market go down? Will the economy get worse? One thing about a house is, it is one investment that will over your life time, will continue to gain value and be something of service to your life and family while it gains value for you.
The best advice right now is buy something you can afford and will be comfortable in for a minimum of 4 years. Use a fixed rate loan, or at least be educated in the kinds of loans available and feel comfortable that you can make the payments.
Interest rates are on the low end of what they have been over the last 20 years. A fixed rate loan will keep your interest and principal payment the same over the life of your loan. A house is a security, that along with being affordable, can give you peace of mind for the short term and long term investment. Even if the market dips a little more, interest rates are slowly rising and for most people the payment can even be higher on a less expensive home then a higher priced home if the interest rate is higher. Every day there is a good deal out there, and everyday there is a good house that would be a nice place to live. It is a good time to buy.

Thursday, October 9, 2008

is this working

Real Estate in Salt Lake City Utah and Surrounding areas