HOMEOWNERS GET A LITTLE EXTRA CREDIT

Mortgages do provide homeowners with a little credit – Mortgage Interest Credit to be exact.? Check out Form 8396, Mortgage Interest Credit.? According to the IRS:

Mortgage Interest Credit

The mortgage interest credit is intended to help lower income individuals afford home ownership. If you qualify, you can claim the credit each year for part of the home mortgage interest you pay on Form 8396. Who qualifies. You may be eligible for the credit if you were issued a qualified Mortgage Credit Certificate (MCC) from your state or local government. Generally, an MCC is issued only in connection with a new mortgage for the purchase of your main home. The MCC will show the certificate credit rate you will use to figure your credit. It also will show the certified indebtedness amount. Only the interest on that amount qualifies for the credit. You must contact the appropriate government agency about getting an MCC before you get a mortgage and buy your home. Contact your state or local housing finance agency for information about the availability of MCCs in your area.

How to claim the credit:

To claim the credit, complete Form 8396 and attach it to your Form 1040 or Form 1040NR. Include the credit in your total for Form 1040, line 53, or Form 1040NR, line 50; be sure to check box c and write ?Form 8396? on that line.

Questions about Mortgages:

If you have any questions about refinancing your current mortgage or getting a new mortgage in connection with purchasing a home, feel free to reach out to Bob Cahill, Senior Mortgage Banker at Leader Bank, N.A. at rcahill@leaderbank.com. At my firm, we frequently refer our clients with mortgage needs to Bob.

NEW YEAR’S RESOLUTIONS – PT 1

There might be a lot of uncertainty surrounding the tax rules these days. Don’t use that uncertainty as an excuse to avoid trying to improve your personal finances. What better time to make some resolutions for 2013 than New Year’s Day?

Last January 1st, did you make any resolutions concerning your personal finances? If so, how’d you do? Did you attain your financial goals, or was 2012 a total financial washout?

The good news about New Year’s resolutions is that you get to make new ones each year. Below are some New Year’s resolutions to improve your finances.

Pay Some Extra Principal With Your Mortgage Payment Each Month

Looking for a risk-free return on your money? By paying extra toward your mortgage each month, you’ll get a risk-free return on that money equal to your mortgage interest rate. Plus, you’ll cut down on the number of years it will take to pay off your mortgage. As a rule of thumb, try to pay extra principal each month equal to at least 10% of your total mortgage payment.

If You Don’t Own A Home, Try to Qualify For the Home Office Deduction

If you’re a renter, the rent you pay generally isn’t deductible on your federal tax return. By claiming the home office deduction, you make a portion of your rent tax deductible. To qualify, you need to use a portion of your home regularly and exclusively in connection with your trade or business. Using your office for managerial and administrative tasks qualifies. You’ll claim the home office either directly against your self-employment income on the Schedule C or as a miscellaneous itemized deduction on the Schedule A.

Save A Set Amount Of Money Each Month

Did you know that if you deposit $81.50 into your savings account each month, the account would be worth $1,000 at the end of the year? To help you reach your goal, make sure to transfer the money out of your checking account into a separate savings or investment account. By doing so, it’s more difficult to spend the money that you have managed to save.

Download our (Microsoft Excel) debt/savings calculator to calculate how much you need to set aside each month to reach a certain savings goal.

We’ll post more Resolutions in Part 2 of this series – stay tuned!

HOW LONG DO YOU NEED TO KEEP YOUR TAX RECORDS?

At my firm, we get this question all the time: “How long do I need to keep my tax records?”

Here is the IRS answer to this question:

Well organized records make it easier to prepare a tax return and help provide answers if your return is selected for examination, or to prepare a response if you receive an IRS notice.

  • What to Keep – Individuals. In most cases, keep records that support items on ???? your tax return for at least three years after that tax return has been?filed. Returns filed before the due date are treated as filed on the due date. Examples include bills, credit card and other receipts, invoices, mileage logs, canceled, imaged or substitute checks or other proof of payment and any other records to support deductions or credits claimed.? You should typically keep records relating to property at least three? years after you’ve sold or otherwise disposed of the property. Examples?include a home purchase or improvement, stocks and other investments,?Individual Retirement Account transactions and rental property records.
  • What to Keep – Small Business Owners. Typically, keep all your employment tax records for?at least four years after the tax becomes due or is paid, whichever is ???? later. Also, keep records documenting gross receipts, proof of purchases,?expenses, and assets. Examples include cash register tapes, bank deposit?slips, receipt books, purchase and sales invoices, credit card charges and?sales slips. Forms 1099-Misc, canceled checks, accounts statements, petty?cash slips and real estate closing statements. Electronic records can?included databases, saved files, e-mails, instant messages, faxes and?voice messages.

There is no period of limitations to assess tax when a return is fraudulent or when no return is filed. If income that you should have reported is not reported, and it is more than 25% of the gross income shown on the return, the time to assess is 6 years from when the return is filed. For filing a claim for credit or refund, the period to make the claim generally is 3 years from the date the original return was filed, or 2 years from the date the tax was paid, whichever is later. For filing a claim for a loss from worthless securities the time to make the claim is 7 years from when the return was due.

For more information from the IRS, check out:

  • Publication 552,? Recordkeeping for Individuals, provides?more information on recordkeeping requirements for individuals.
  • Publication 583,?Starting?a Business and Keeping Records
  • Publication 463,?Travel,?Entertainment, Gift, and Car Expenses, provide additional information on required documentation for taxpayers with business expenses

For a more complete listing, please check out this Record Retention Guide Compiled by the Massachusetts Society of CPAs.