Friday, April 1, 2011
Saturday, April 10, 2010
The Happening with the Real Estate Market?
When, when it comes to the Real Estate Market, the theme has been change.
Right now mortgage rates are historically low. Our interest rates have been hovering at the lower rate of 5% for almost a year now, and once again, change will be coming. The Federal Government very quietly have been warning the Realtors that the rates are artificially low, and the rates cannot be at this level for very much longer at all. As prices and the market start to stabilize, we believe the rates will increase. The expectation is that prices will not be affected by the interest rate increase. The market will remain tilted in favor of the buyer over the next year, but that power will gradually be reduced as conditions in the housing market improve.
So, can I say Now, is a Great Time to take advantage of the housing market by locking in your rate and home. Affordability is better than ever and you have a large inventory to choose from. Our current inventory, with the presence of short sales and foreclosures, will dry up, and then very slowly we hope to regain some of the equity we have previously lost in the 2007-2009 eras.
Change is in the air, higher interest rates, and a start to the stabilization of the market, both should force a buyer to wonder, when will the buyer's market be ending? I don't have a prediction, but experience tells me that the buyer's market will not be as strong as it has been.
Buyers Make your Move Now. Have you been on the sidelines waiting for prices to go lower before house shopping and bidding in earnest? Don't hold off much longer.
The market will remain tilted in favor of the buyer over the next year, but that power will gradually be reduced as conditions in the housing market improve. Keep a close eye on mortgage rates. If they rise sharply as the Fed's mortgage buyback program draws to a close, act quickly to lock in a low fixed rate.
Right now mortgage rates are historically low. Our interest rates have been hovering at the lower rate of 5% for almost a year now, and once again, change will be coming. The Federal Government very quietly have been warning the Realtors that the rates are artificially low, and the rates cannot be at this level for very much longer at all. As prices and the market start to stabilize, we believe the rates will increase. The expectation is that prices will not be affected by the interest rate increase. The market will remain tilted in favor of the buyer over the next year, but that power will gradually be reduced as conditions in the housing market improve.
So, can I say Now, is a Great Time to take advantage of the housing market by locking in your rate and home. Affordability is better than ever and you have a large inventory to choose from. Our current inventory, with the presence of short sales and foreclosures, will dry up, and then very slowly we hope to regain some of the equity we have previously lost in the 2007-2009 eras.
Change is in the air, higher interest rates, and a start to the stabilization of the market, both should force a buyer to wonder, when will the buyer's market be ending? I don't have a prediction, but experience tells me that the buyer's market will not be as strong as it has been.
Buyers Make your Move Now. Have you been on the sidelines waiting for prices to go lower before house shopping and bidding in earnest? Don't hold off much longer.
The market will remain tilted in favor of the buyer over the next year, but that power will gradually be reduced as conditions in the housing market improve. Keep a close eye on mortgage rates. If they rise sharply as the Fed's mortgage buyback program draws to a close, act quickly to lock in a low fixed rate.
Sunday, January 17, 2010
Ulster County must pay $22 million to school districts to cover delinquent taxes - The Daily Freeman News: Serving the Hudson Valley since 1871(DailyFreeman.com)
Thursday, April 2, 2009
Daily Real Estate News March 30, 2009
Share
6 Reasons - Why It's Still a Good Time to Buy
The housing market is looking healthier. Here are six reasons why now is the time to jump into the market.
1. Uncle Sam is willing to help. First-time buyers (defined as anyone who hasn’t owned a home in the last three years) are entitled to a maximum $8,000 tax credit; interest rates are at record lows; and the Federal Reserve is doing its best to make mortgage loans available. (Sign up for a Webinar to learn more about the home buyer tax credit)
2. People have to live somewhere. About 800,000 new households are formed each year in this country, ensuring that the housing market will tighten, even if the economy doesn’t soar.
3. Borrowers leverage their investment. If you put $10,000 into the stock market and it earns 10 percent, you’ve earned $1,000. If you put $10,000 down on a home and its values increases 10 percent, you’ve made $10,000.
4. When prices come back up, you’ll have instant equity. In parts of the country where foreclosures have driven down prices, better times will mean the price of the home you buy will rise rapidly.
5. Mortgage costs stay the same. If you get a fixed-rate mortgage, the monthly payment stays the same – while everything else, including rent, goes upward.
6. You own it. There is something comforting in the notion that your home is your own. You can paint it any color you want, let the dog run in the back yard and hang a swing for the kids in the front.Source: The Wall Street Journal, June Fletcher (03/27/2009)
Daily Real Estate News March 30, 2009 Share
NAR: Outlook Favorable for Second-Home Market Despite weakening second home purchases in 2008, the long-term demand looks favorable for the second-home market because there are large numbers of people in the prime years for buying a second home. Currently, 39.2 million people in the United States are ages 50 to 59—a group that dominated sales in the first part of this decade. An additional 44.8 million people are between 40 and 49, and another 40.7 million are 30 to 39.“While economic factors can affect sales from one year to the next, the fundamental demand from these large population groups will remain,” says Lawrence Yun, NAR chief economist. “Given that most people become interested in buying a second home in their 40s, the bulge of population approaching middle age should drive the second-home market over the next decade.”The median price of a vacation home was $150,000 in 2008, down 23.1 percent from $195,000 in 2007. The typical investment property cost $108,000 last year, which is 28 percent below the 2007 median of $150,000. “As in the market for primary residences, it appears that many sales of deeply discounted distressed homes are pulling down the median price in the second-home market as well,” Yun says. Yun says lifestyle considerations are the single most important factor in the vacation home market. “People are buying weekend homes or recreational property to use themselves or for a family retreat—investment considerations are secondary for most vacation-home buyers with relatively modest interest in renting,” he says.2008 Second-Home Market DeclinesThe combination of vacation- and investment-home sales slipped to 30 percent of all existing- and new-home transactions in 2008, according to the NATIONAL ASSOCIATION OF REALTORS ®' latest report.However, more than four out of 10 investment buyers and more than three in 10 vacation-home buyers paid cash for their properties, with large percentages indicating that portfolio diversification was a factor in their purchase decision.The market share of homes purchased for investment was 21 percent last year, unchanged from 2007, while another 9 percent were vacation homes, compared with a 12 percent market share in 2007. The total share of second homes declined from 33 percent of all transactions in 2007. In 2005, the peak year for home speculation, 40 percent of sales were second homes.NAR’s 2008 Investment and Vacation Home Buyers Survey shows vacation-home sales dropped 30.8 percent to 512,000 last year from 740,000 in 2007. Meanwhile, investment-home sales fell 17.2 percent to 1.12 million in 2008 from 1.35 million in 2007. Primary residence sales declined 13.2 percent to 3.77 million in 2008 from 4.34 million in 2007.Yun says the findings are understandable given the economic backdrop. “We expected vacation-home sales to fall given the impact of a declining economy on discretionary purchases,” he says. “A steady share of investment-home sales results from buyers taking advantage of deeply discounted prices in many areas, with a smaller portion of new homes in the sales mix.”Vacation Home Market SnapshotThe typical vacation-home buyer in 2008 was 46 years old, had a median household income of $97,200, and purchased a property that was a median of 316 miles from their primary residence; 35 percent were within 100 miles and 36 percent were 500 miles or more.When asked about their reasons for purchasing a vacation home, 89 percent of buyers wanted to use the home for vacation or as a family retreat; 27 percent to diversify investments; 27 percent to rent to others; 26 percent to use as a primary residence in the future; and 17 percent for use by a family member, friend or relative.Some other findings on this market:
In terms of location, 26 percent of vacation homes were purchased in small towns, 23 percent in a rural area, 23 percent in resorts, 20 percent in a suburb, and 8 percent in an urban area or central city.
Seventy percent of vacation homes purchased in 2008 were detached single-family homes, 18 percent condos, 5 percent townhouses or rowhouses, and 7 percent other.
Sixty-nine percent of vacation home buyers and 84 percent of investment home buyers purchased existing homes; the rest purchased new homes.
Investment-home buyers in 2008 had a median age of 47, earned $85,000, and bought a home that was fairly close to their primary residence – a median distance of 19 miles.
When asked about the most important reasons for purchasing an investment home, 58 percent said to provide rental income; 38 percent to diversify investments; 19 percent for use by a family member, friend or relative; and 15 percent to use for vacations or as a family retreat.
Twenty-eight percent of investment homes were purchased in a suburb and another 20 percent in an urban or central city area, 23 percent in a rural area, 22 percent in a small town, and 6 percent in a resort area.
Sixty-four percent of investment homes purchased in 2008 were detached single-family homes, 22 percent condos, 8 percent townhouses or rowhouses, and 6 percent other.
Vacation-home buyers plan to keep their property for a median of 12 years; 58 percent plan to keep their vacation home for 11 years or more. Investment buyers plan to hold their property for a median of five years.
Eight in 10 second-home buyers consider it a good time to invest in real estate, compared with 71 percent of primary residence buyers.The size of the second-home market is significant. NAR’s analysis of U.S. Census Bureau data shows there are 8.1 million vacation homes and 40.5 million investment units in the United States, compared with 75.5 million owner-occupied homes.NAR’s 2008 Investment and Vacation Home Buyers Survey, conducted in March 2009, is based on 1,924 responses. The survey controlled for age and income, based on information from the larger 2008 NAR Profile of Home Buyers and Sellers, to limit any biases in the characteristics of respondents.
Share
6 Reasons - Why It's Still a Good Time to Buy
The housing market is looking healthier. Here are six reasons why now is the time to jump into the market.
1. Uncle Sam is willing to help. First-time buyers (defined as anyone who hasn’t owned a home in the last three years) are entitled to a maximum $8,000 tax credit; interest rates are at record lows; and the Federal Reserve is doing its best to make mortgage loans available. (Sign up for a Webinar to learn more about the home buyer tax credit)
2. People have to live somewhere. About 800,000 new households are formed each year in this country, ensuring that the housing market will tighten, even if the economy doesn’t soar.
3. Borrowers leverage their investment. If you put $10,000 into the stock market and it earns 10 percent, you’ve earned $1,000. If you put $10,000 down on a home and its values increases 10 percent, you’ve made $10,000.
4. When prices come back up, you’ll have instant equity. In parts of the country where foreclosures have driven down prices, better times will mean the price of the home you buy will rise rapidly.
5. Mortgage costs stay the same. If you get a fixed-rate mortgage, the monthly payment stays the same – while everything else, including rent, goes upward.
6. You own it. There is something comforting in the notion that your home is your own. You can paint it any color you want, let the dog run in the back yard and hang a swing for the kids in the front.Source: The Wall Street Journal, June Fletcher (03/27/2009)
Daily Real Estate News March 30, 2009 Share
NAR: Outlook Favorable for Second-Home Market Despite weakening second home purchases in 2008, the long-term demand looks favorable for the second-home market because there are large numbers of people in the prime years for buying a second home. Currently, 39.2 million people in the United States are ages 50 to 59—a group that dominated sales in the first part of this decade. An additional 44.8 million people are between 40 and 49, and another 40.7 million are 30 to 39.“While economic factors can affect sales from one year to the next, the fundamental demand from these large population groups will remain,” says Lawrence Yun, NAR chief economist. “Given that most people become interested in buying a second home in their 40s, the bulge of population approaching middle age should drive the second-home market over the next decade.”The median price of a vacation home was $150,000 in 2008, down 23.1 percent from $195,000 in 2007. The typical investment property cost $108,000 last year, which is 28 percent below the 2007 median of $150,000. “As in the market for primary residences, it appears that many sales of deeply discounted distressed homes are pulling down the median price in the second-home market as well,” Yun says. Yun says lifestyle considerations are the single most important factor in the vacation home market. “People are buying weekend homes or recreational property to use themselves or for a family retreat—investment considerations are secondary for most vacation-home buyers with relatively modest interest in renting,” he says.2008 Second-Home Market DeclinesThe combination of vacation- and investment-home sales slipped to 30 percent of all existing- and new-home transactions in 2008, according to the NATIONAL ASSOCIATION OF REALTORS ®' latest report.However, more than four out of 10 investment buyers and more than three in 10 vacation-home buyers paid cash for their properties, with large percentages indicating that portfolio diversification was a factor in their purchase decision.The market share of homes purchased for investment was 21 percent last year, unchanged from 2007, while another 9 percent were vacation homes, compared with a 12 percent market share in 2007. The total share of second homes declined from 33 percent of all transactions in 2007. In 2005, the peak year for home speculation, 40 percent of sales were second homes.NAR’s 2008 Investment and Vacation Home Buyers Survey shows vacation-home sales dropped 30.8 percent to 512,000 last year from 740,000 in 2007. Meanwhile, investment-home sales fell 17.2 percent to 1.12 million in 2008 from 1.35 million in 2007. Primary residence sales declined 13.2 percent to 3.77 million in 2008 from 4.34 million in 2007.Yun says the findings are understandable given the economic backdrop. “We expected vacation-home sales to fall given the impact of a declining economy on discretionary purchases,” he says. “A steady share of investment-home sales results from buyers taking advantage of deeply discounted prices in many areas, with a smaller portion of new homes in the sales mix.”Vacation Home Market SnapshotThe typical vacation-home buyer in 2008 was 46 years old, had a median household income of $97,200, and purchased a property that was a median of 316 miles from their primary residence; 35 percent were within 100 miles and 36 percent were 500 miles or more.When asked about their reasons for purchasing a vacation home, 89 percent of buyers wanted to use the home for vacation or as a family retreat; 27 percent to diversify investments; 27 percent to rent to others; 26 percent to use as a primary residence in the future; and 17 percent for use by a family member, friend or relative.Some other findings on this market:
In terms of location, 26 percent of vacation homes were purchased in small towns, 23 percent in a rural area, 23 percent in resorts, 20 percent in a suburb, and 8 percent in an urban area or central city.
Seventy percent of vacation homes purchased in 2008 were detached single-family homes, 18 percent condos, 5 percent townhouses or rowhouses, and 7 percent other.
Sixty-nine percent of vacation home buyers and 84 percent of investment home buyers purchased existing homes; the rest purchased new homes.
Investment-home buyers in 2008 had a median age of 47, earned $85,000, and bought a home that was fairly close to their primary residence – a median distance of 19 miles.
When asked about the most important reasons for purchasing an investment home, 58 percent said to provide rental income; 38 percent to diversify investments; 19 percent for use by a family member, friend or relative; and 15 percent to use for vacations or as a family retreat.
Twenty-eight percent of investment homes were purchased in a suburb and another 20 percent in an urban or central city area, 23 percent in a rural area, 22 percent in a small town, and 6 percent in a resort area.
Sixty-four percent of investment homes purchased in 2008 were detached single-family homes, 22 percent condos, 8 percent townhouses or rowhouses, and 6 percent other.
Vacation-home buyers plan to keep their property for a median of 12 years; 58 percent plan to keep their vacation home for 11 years or more. Investment buyers plan to hold their property for a median of five years.
Eight in 10 second-home buyers consider it a good time to invest in real estate, compared with 71 percent of primary residence buyers.The size of the second-home market is significant. NAR’s analysis of U.S. Census Bureau data shows there are 8.1 million vacation homes and 40.5 million investment units in the United States, compared with 75.5 million owner-occupied homes.NAR’s 2008 Investment and Vacation Home Buyers Survey, conducted in March 2009, is based on 1,924 responses. The survey controlled for age and income, based on information from the larger 2008 NAR Profile of Home Buyers and Sellers, to limit any biases in the characteristics of respondents.
Monday, January 26, 2009
What will it take to get out of the housing mess?
Many experts don't see a real-estate recovery happening for another two years. Here are the key things they say are needed to turn things around.
By Melinda Fulmer of MSN Real Estate
A deepening foreclosure crisis has many economists and real-estate experts predicting two more years of a real-estate slump unless more action is taken by government and private industry.
Lenders' unwillingness or inability to effectively modify loans is leading the country into a downward spiral of job loss and foreclosures — one that is getting harder and harder to correct, experts say.
"It's been almost a backward cycle," says Rick Sharga, vice president of foreclosure data firm RealtyTrac. "Usually you have an economic downturn followed by unemployment, which leads to foreclosure. In this case, foreclosures ... have led to an economic downturn, which has led to joblessness, which will lead to more foreclosures."
Foreclosure filings were reported on more than 2.3 million properties — or one in 54 homes — in 2008. That's an 81% increase from 2007 and a 225% increase from 2006, according to RealtyTrac. (RealtyTrac is an MSN Real Estate partner.)
Sharga and other real-estate watchers expect that number to jump substantially in 2009, as stated-income loans (also called "liars' loans") begin resetting and a 16-year high in unemployment starts to cause defaults even in fixed-rate prime loans.
Obama's proposed solution. One solution the administration of President Barack Obama is seeking is a change to federal bankruptcy laws that would allow federal judges to restructure mortgages of struggling borrowers.
Senate Democrats are advancing legislation that would allow judges to reduce the principal or "cram down" the amount owed for the primary residences of borrowers who have sought Chapter 13 bankruptcy protection. Chapter 13 is a bankruptcy status that allows debtors to retain assets and pay back their debts over three to five years.
Judges can currently modify the terms of credit-card and other debt, including vacation homes, but haven't been able to modify primary residences since 1979, when the U.S. bankruptcy code was enacted.
Giving judges the ability to restructure mortgages would help borrowers who have been unable to get their loans modified because the loans have been packaged into securities and sold to multiple investors, who won't agree on a solution.
One sign that this may be inevitable: Giant lender Citigroup recently supported this bill, much to the dismay of rival lenders. Rod Dubitsky, Credit Suisse managing director and lead housing analyst, also would like to see money from the government's Troubled Asset Relief Program being used to buy up loan portfolios and modify them as part of a national government program.
"We have outsourced the housing recovery to loan servicers who are inadequately staffed and don't have the freedom to do what is needed to minimize housing costs," Dubitsky says.Ron Faris, president of Ocwen Financial, a publicly traded servicer of subprime loans, says there is no financial incentive for most servicers to help strapped borrowers stay in their homes.
"Mostly it's 50 basis points to the servicer whether (the borrower) is paying or not paying," Faris says.
Writedowns and rewards for helpful servicers. That's part of the reason why we've seen such a dismal success rate with loan modifications to-date, Faris says. The other reason is that many servicers lack the know-how or staff to carefully study a borrower's total financial picture and tailor a solution.
Most of the loan modifications done to date, analysts say, do not involve reductions in principal, rate or term, but rather forestall the inevitable by rolling delinquent payments into a new and still unaffordable loan.
According to the comptroller of the currency, 52% of the loans modified in the first quarter of last year fell delinquent again in six months.
"Something is wrong if you are getting that kind of default rate," Faris says.
With these kinds of inefficient solutions, and with prices continuing their downward slide, more borrowers are simply choosing to walk away from their homes, says Mark Zandi, chief economist of Moody's Economy.com.
"Millions of homeowners are underwater, deeply underwater on their house and with any increase in expenses they are stepping away from their home," Zandi says. "I think the only way to mitigate the surge in foreclosures is to have a government plan to have mortgage write-downs.
"It's costly, but at the end of the day, not doing that and allowing these millions of dollars to go into foreclosure will cost more people their jobs."
Faris, whose firm has received some attention for its successful foreclosure mitigation efforts for subprime loans, would like to see government get more involved in monitoring the performance of servicers and allocating work to those companies that are returning calls and helping borrowers keep their homes.
Jobs and incentives. However, the two biggest drivers needed to set a real-estate recovery in motion are jobs and sales. Economists are hoping that Obama's economic stimulus plan will jump-start the former.
But with real-estate values continuing to slide, buyer incentives may be the only way to resurrect sales.
Economists and industry analysts are urging government to back low, incentive mortgage rates that lenders can offer to qualified buyers, especially those in high-foreclosure areas such as California, Nevada, Florida, Arizona, Ohio and Michigan.
To be sure, rates are already historically low, with the benchmark 30-year fixed-rate mortgage falling 5 basis points, to 5.28%, the week ending Jan. 16, according to the Bankrate.com national survey of large lenders.
The Treasury is working on a plan to get rates down to 4.5%. But rates as low as 3.5% would help offset declining values, getting more people off the fence and improving the character of communities, Dubitsky adds.
"It basically allows you to run the numbers and say, 'I'm getting 2% lower mortgage rates; the home price would have to drop another 20% before I would break even' " on the deal. A drop less than that and you'd still be in the black, he explains.
A slow recovery. However, even with these loan-modification programs and concessions in place, a real stabilization in the market probably wouldn't be seen until sometime in 2010, Zandi says.
"(Foreclosures) will rise for another six months no matter what the government does," he says. So, extending state moratoriums until new government programs are in place might make sense.
Credit Suisse, for one, expects home prices to drop 10% nationwide over the next 12 months and an additional 5% in the following year, and grow 3% annually thereafter.
And that's if Obama's economic stimulus plan works and unemployment doesn't continue to ramp up, as it has in the past month.
"I don't think we'll see any real rebound in the housing market over the next two years," Faris says.
By Melinda Fulmer of MSN Real Estate
A deepening foreclosure crisis has many economists and real-estate experts predicting two more years of a real-estate slump unless more action is taken by government and private industry.
Lenders' unwillingness or inability to effectively modify loans is leading the country into a downward spiral of job loss and foreclosures — one that is getting harder and harder to correct, experts say.
"It's been almost a backward cycle," says Rick Sharga, vice president of foreclosure data firm RealtyTrac. "Usually you have an economic downturn followed by unemployment, which leads to foreclosure. In this case, foreclosures ... have led to an economic downturn, which has led to joblessness, which will lead to more foreclosures."
Foreclosure filings were reported on more than 2.3 million properties — or one in 54 homes — in 2008. That's an 81% increase from 2007 and a 225% increase from 2006, according to RealtyTrac. (RealtyTrac is an MSN Real Estate partner.)
Sharga and other real-estate watchers expect that number to jump substantially in 2009, as stated-income loans (also called "liars' loans") begin resetting and a 16-year high in unemployment starts to cause defaults even in fixed-rate prime loans.
Obama's proposed solution. One solution the administration of President Barack Obama is seeking is a change to federal bankruptcy laws that would allow federal judges to restructure mortgages of struggling borrowers.
Senate Democrats are advancing legislation that would allow judges to reduce the principal or "cram down" the amount owed for the primary residences of borrowers who have sought Chapter 13 bankruptcy protection. Chapter 13 is a bankruptcy status that allows debtors to retain assets and pay back their debts over three to five years.
Judges can currently modify the terms of credit-card and other debt, including vacation homes, but haven't been able to modify primary residences since 1979, when the U.S. bankruptcy code was enacted.
Giving judges the ability to restructure mortgages would help borrowers who have been unable to get their loans modified because the loans have been packaged into securities and sold to multiple investors, who won't agree on a solution.
One sign that this may be inevitable: Giant lender Citigroup recently supported this bill, much to the dismay of rival lenders. Rod Dubitsky, Credit Suisse managing director and lead housing analyst, also would like to see money from the government's Troubled Asset Relief Program being used to buy up loan portfolios and modify them as part of a national government program.
"We have outsourced the housing recovery to loan servicers who are inadequately staffed and don't have the freedom to do what is needed to minimize housing costs," Dubitsky says.Ron Faris, president of Ocwen Financial, a publicly traded servicer of subprime loans, says there is no financial incentive for most servicers to help strapped borrowers stay in their homes.
"Mostly it's 50 basis points to the servicer whether (the borrower) is paying or not paying," Faris says.
Writedowns and rewards for helpful servicers. That's part of the reason why we've seen such a dismal success rate with loan modifications to-date, Faris says. The other reason is that many servicers lack the know-how or staff to carefully study a borrower's total financial picture and tailor a solution.
Most of the loan modifications done to date, analysts say, do not involve reductions in principal, rate or term, but rather forestall the inevitable by rolling delinquent payments into a new and still unaffordable loan.
According to the comptroller of the currency, 52% of the loans modified in the first quarter of last year fell delinquent again in six months.
"Something is wrong if you are getting that kind of default rate," Faris says.
With these kinds of inefficient solutions, and with prices continuing their downward slide, more borrowers are simply choosing to walk away from their homes, says Mark Zandi, chief economist of Moody's Economy.com.
"Millions of homeowners are underwater, deeply underwater on their house and with any increase in expenses they are stepping away from their home," Zandi says. "I think the only way to mitigate the surge in foreclosures is to have a government plan to have mortgage write-downs.
"It's costly, but at the end of the day, not doing that and allowing these millions of dollars to go into foreclosure will cost more people their jobs."
Faris, whose firm has received some attention for its successful foreclosure mitigation efforts for subprime loans, would like to see government get more involved in monitoring the performance of servicers and allocating work to those companies that are returning calls and helping borrowers keep their homes.
Jobs and incentives. However, the two biggest drivers needed to set a real-estate recovery in motion are jobs and sales. Economists are hoping that Obama's economic stimulus plan will jump-start the former.
But with real-estate values continuing to slide, buyer incentives may be the only way to resurrect sales.
Economists and industry analysts are urging government to back low, incentive mortgage rates that lenders can offer to qualified buyers, especially those in high-foreclosure areas such as California, Nevada, Florida, Arizona, Ohio and Michigan.
To be sure, rates are already historically low, with the benchmark 30-year fixed-rate mortgage falling 5 basis points, to 5.28%, the week ending Jan. 16, according to the Bankrate.com national survey of large lenders.
The Treasury is working on a plan to get rates down to 4.5%. But rates as low as 3.5% would help offset declining values, getting more people off the fence and improving the character of communities, Dubitsky adds.
"It basically allows you to run the numbers and say, 'I'm getting 2% lower mortgage rates; the home price would have to drop another 20% before I would break even' " on the deal. A drop less than that and you'd still be in the black, he explains.
A slow recovery. However, even with these loan-modification programs and concessions in place, a real stabilization in the market probably wouldn't be seen until sometime in 2010, Zandi says.
"(Foreclosures) will rise for another six months no matter what the government does," he says. So, extending state moratoriums until new government programs are in place might make sense.
Credit Suisse, for one, expects home prices to drop 10% nationwide over the next 12 months and an additional 5% in the following year, and grow 3% annually thereafter.
And that's if Obama's economic stimulus plan works and unemployment doesn't continue to ramp up, as it has in the past month.
"I don't think we'll see any real rebound in the housing market over the next two years," Faris says.
Tuesday, December 2, 2008
Property Taxes, Appeal the Assessment
Are you Paying Too Much in Property Taxes?
More than half of homeowners pay too much because their property has been wrongly assessed. Here's how to research and correct mistakes, and how to navigate the appeals process.
By Bankrate.com
You could be paying more than you owe in property taxes.
In a hot market, owners often find themselves facing double, sometimes triple, increases in property taxes, according to the National Taxpayers Union, a Washington, D.C., advocacy group whose goal is to lower taxes. Now, with home values decreasing in many areas, owners may be stuck with a property assessment that's too high.
There is a remedy: Appeal the assessment.
How it works
Property-tax increases largely are based on rising home values, not the increase of taxes by local governments. Different formulas are used to figure property taxes, but all depend on a home's assessed value. Some jurisdictions use a home's actual market value, while others use a percentage of a property's worth.
Whatever value is used, it's multiplied by the local tax rate to compute the property's bill. As home values increase, so do their assessed values. Homeowners end up paying more, even though the tax rate stays the same.
The National Taxpayers Union estimates that as much as 60% of taxable property in the United States is overassessed. But only half of homeowners protest their assessments. This means many may be paying more in property taxes than necessary."A property owner really should monitor his assessment every year, with a particular emphasis in a reassessment year, if applicable," says Franco A. Coladipietro of the law firm of Amari & Locallo in Chicago.
Many taxpayers fail to fight because they don't understand the process, or because they can't stomach doing the research and providing evidence to prove the assessment is wrong. Instead, they opt for what Glenn Straus, president of Straus & Co., a Dallas property-tax consulting firm, calls the cuss-and-pay system.
"They cuss the bill, and then they pay it," Straus says.
Swear aloud, then swing into action
That's too bad, because the appeal work isn't as difficult as homeowners fear. In fact, it's something most can do themselves. Sure, the process is tedious and bureaucratic, says Peter J. Sepp, the National Taxpayers Union's vice president of communications, but it's no more difficult than representing yourself in traffic or small-claims court.
If you really don't have the time, hire a property-tax consultant or attorney to do the work. Many of these consultants charge on a contingency basis, meaning they'll take a percentage of the tax savings if they succeed in lowering your assessment.
"Fees are charged various ways," says Les Abrams, a property-tax analyst with Nearhood Law Offices in Scottsdale, Ariz. "Some will work on contingency, others will charge flat fees, and some will do work by the hour."
Know the appeals process
If you decide on a do-it-yourself appeal, you first need to establish your timeline. When do assessments go out? When is the deadline for appealing? Call your local assessor's office for this information.
The appeals process varies from locality to locality. So does the amount of time permitted for an appeal. In some cases, a homeowner might have only 30 days to appeal. In other jurisdictions, it could be 120 days.
If your request for an appeal arrives at the assessor's office even a day after the protest deadline, you're out of luck. You'll have to wait until the following year (or sometimes the next assessment, which could be longer) before you can appeal. Straus says you might want to send your request for an appeal by certified mail, so you'll have proof that it was received before the deadline.
Once you receive your assessment, it's time to build your case. It's not enough to bemoan how high your taxes are. Complaining about how those tax dollars are spent won't work, either. You need cold, hard facts.
Assessments can be appealed on two grounds: a mistake in the assessment of your house, or an assessment at a higher rate than comparable homes.
Correcting the mistakes
Mistakes happen more often than you think. Many assessors don't even come onto your property to inspect it. They simply compare a written description of your home with that of similar properties in your neighborhood.
Appraisers also may use historical information that's wrong. A home's square footage, for example, might have been incorrectly calculated on original construction documents.
Or the assessor may have a slightly different view than you do of your home. "The assessor may be counting a screened in porch as year-round living space, and you only use it in the summer," says Sepp.
Obvious mistakes aren't difficult to spot. Is the inhabitable-square-footage figure correct? Does the assessment say your home has four bedrooms when it has only three? But you also should consider comparing the assessment with a recent appraisal of your property. If you don't have one, hire an appraiser for a new evaluation.
Make sure that any property changes, particularly those that would negatively affect the value of your home, are part of the assessment. For example, maybe a bridge has gone out near your home, making your house less accessible (and less valuable).
Don't forget any modifications you've made. If you've torn down a garage to increase garden space, your home's value likely would decrease.
Look closely at your neighbors
The other way to challenge an assessment is to see how your home stacks up to comparable houses in your neighborhood. "Comparable" means homes of the same size, age and general location.
For example, Straus lives in a 550-home subdivision in Texas. But even within the subdivision, there are differences that affect value. Homes near a busy road in the community are valued less than those abutting a quiet creek.
You can find information on comparable homes and their worth at the assessor's office, or start with property-value sites like Zillow.com, Domania.com and Trulia.com. If you don't want to do the legwork yourself, hire a Realtor or an appraiser to collect the data. Straus recommends getting comparisons on five to 10 homes.Once you have your comparative data, go over the figures and decide whether you have a case. If you think your assessment is too high, contact your assessor's office and try to arrange a one-on-one, informal meeting. Sometimes simply pointing out the facts can be enough for the assessor to lower an assessment.
Straus says 95% of his commercial cases are settled informally without the need of a hearing. Just be aware that when you meet with your assessor, it's a negotiation. You may still end up with a higher valuation than you'd like, but one that is lower than the assessor's original appraisal.
Prepare to protest
If the assessor won't meet with you (and some counties won't permit informal meetings), or if you meet but fail to reach an agreement, the next step is to protest the assessment.
Ask the assessor about the procedures and deadlines for filing a protest. Follow the guidelines to the letter to ensure that your appeal isn't thrown out on a technicality.
Before your hearing, gather all of your evidence and put it in order. For example, you may want to collect photos of comparable properties or put the market data into a spreadsheet that makes it easy for the hearing officials to see the basis of your argument. Your presentation doesn't have to be as polished as Perry Mason's, but being organized will help you make the strongest possible case.
Consider sitting in on somebody else's hearing before your appeals date. You'll see how the board operates. You can also get a sense of which arguments do and don't work.
What if the board doesn't rule in your favor, despite your compelling presentation? You can go to court, but in most cases it will cost you more than the amount of tax money you might save. But you may not need to take such drastic action. Many states have a state appeals board, Straus says, where you can take your case if the local panel rejects your petition.
Just remember to stay composed and professional throughout the process.
"Calling them SOBs is not a good negotiation tactic," Straus says. "The appeal hearing is an emotional thing because it goes straight to your wallet, but you have to stay calm."
Published June 13, 2007
More than half of homeowners pay too much because their property has been wrongly assessed. Here's how to research and correct mistakes, and how to navigate the appeals process.
By Bankrate.com
You could be paying more than you owe in property taxes.
In a hot market, owners often find themselves facing double, sometimes triple, increases in property taxes, according to the National Taxpayers Union, a Washington, D.C., advocacy group whose goal is to lower taxes. Now, with home values decreasing in many areas, owners may be stuck with a property assessment that's too high.
There is a remedy: Appeal the assessment.
How it works
Property-tax increases largely are based on rising home values, not the increase of taxes by local governments. Different formulas are used to figure property taxes, but all depend on a home's assessed value. Some jurisdictions use a home's actual market value, while others use a percentage of a property's worth.
Whatever value is used, it's multiplied by the local tax rate to compute the property's bill. As home values increase, so do their assessed values. Homeowners end up paying more, even though the tax rate stays the same.
The National Taxpayers Union estimates that as much as 60% of taxable property in the United States is overassessed. But only half of homeowners protest their assessments. This means many may be paying more in property taxes than necessary."A property owner really should monitor his assessment every year, with a particular emphasis in a reassessment year, if applicable," says Franco A. Coladipietro of the law firm of Amari & Locallo in Chicago.
Many taxpayers fail to fight because they don't understand the process, or because they can't stomach doing the research and providing evidence to prove the assessment is wrong. Instead, they opt for what Glenn Straus, president of Straus & Co., a Dallas property-tax consulting firm, calls the cuss-and-pay system.
"They cuss the bill, and then they pay it," Straus says.
Swear aloud, then swing into action
That's too bad, because the appeal work isn't as difficult as homeowners fear. In fact, it's something most can do themselves. Sure, the process is tedious and bureaucratic, says Peter J. Sepp, the National Taxpayers Union's vice president of communications, but it's no more difficult than representing yourself in traffic or small-claims court.
If you really don't have the time, hire a property-tax consultant or attorney to do the work. Many of these consultants charge on a contingency basis, meaning they'll take a percentage of the tax savings if they succeed in lowering your assessment.
"Fees are charged various ways," says Les Abrams, a property-tax analyst with Nearhood Law Offices in Scottsdale, Ariz. "Some will work on contingency, others will charge flat fees, and some will do work by the hour."
Know the appeals process
If you decide on a do-it-yourself appeal, you first need to establish your timeline. When do assessments go out? When is the deadline for appealing? Call your local assessor's office for this information.
The appeals process varies from locality to locality. So does the amount of time permitted for an appeal. In some cases, a homeowner might have only 30 days to appeal. In other jurisdictions, it could be 120 days.
If your request for an appeal arrives at the assessor's office even a day after the protest deadline, you're out of luck. You'll have to wait until the following year (or sometimes the next assessment, which could be longer) before you can appeal. Straus says you might want to send your request for an appeal by certified mail, so you'll have proof that it was received before the deadline.
Once you receive your assessment, it's time to build your case. It's not enough to bemoan how high your taxes are. Complaining about how those tax dollars are spent won't work, either. You need cold, hard facts.
Assessments can be appealed on two grounds: a mistake in the assessment of your house, or an assessment at a higher rate than comparable homes.
Correcting the mistakes
Mistakes happen more often than you think. Many assessors don't even come onto your property to inspect it. They simply compare a written description of your home with that of similar properties in your neighborhood.
Appraisers also may use historical information that's wrong. A home's square footage, for example, might have been incorrectly calculated on original construction documents.
Or the assessor may have a slightly different view than you do of your home. "The assessor may be counting a screened in porch as year-round living space, and you only use it in the summer," says Sepp.
Obvious mistakes aren't difficult to spot. Is the inhabitable-square-footage figure correct? Does the assessment say your home has four bedrooms when it has only three? But you also should consider comparing the assessment with a recent appraisal of your property. If you don't have one, hire an appraiser for a new evaluation.
Make sure that any property changes, particularly those that would negatively affect the value of your home, are part of the assessment. For example, maybe a bridge has gone out near your home, making your house less accessible (and less valuable).
Don't forget any modifications you've made. If you've torn down a garage to increase garden space, your home's value likely would decrease.
Look closely at your neighbors
The other way to challenge an assessment is to see how your home stacks up to comparable houses in your neighborhood. "Comparable" means homes of the same size, age and general location.
For example, Straus lives in a 550-home subdivision in Texas. But even within the subdivision, there are differences that affect value. Homes near a busy road in the community are valued less than those abutting a quiet creek.
You can find information on comparable homes and their worth at the assessor's office, or start with property-value sites like Zillow.com, Domania.com and Trulia.com. If you don't want to do the legwork yourself, hire a Realtor or an appraiser to collect the data. Straus recommends getting comparisons on five to 10 homes.Once you have your comparative data, go over the figures and decide whether you have a case. If you think your assessment is too high, contact your assessor's office and try to arrange a one-on-one, informal meeting. Sometimes simply pointing out the facts can be enough for the assessor to lower an assessment.
Straus says 95% of his commercial cases are settled informally without the need of a hearing. Just be aware that when you meet with your assessor, it's a negotiation. You may still end up with a higher valuation than you'd like, but one that is lower than the assessor's original appraisal.
Prepare to protest
If the assessor won't meet with you (and some counties won't permit informal meetings), or if you meet but fail to reach an agreement, the next step is to protest the assessment.
Ask the assessor about the procedures and deadlines for filing a protest. Follow the guidelines to the letter to ensure that your appeal isn't thrown out on a technicality.
Before your hearing, gather all of your evidence and put it in order. For example, you may want to collect photos of comparable properties or put the market data into a spreadsheet that makes it easy for the hearing officials to see the basis of your argument. Your presentation doesn't have to be as polished as Perry Mason's, but being organized will help you make the strongest possible case.
Consider sitting in on somebody else's hearing before your appeals date. You'll see how the board operates. You can also get a sense of which arguments do and don't work.
What if the board doesn't rule in your favor, despite your compelling presentation? You can go to court, but in most cases it will cost you more than the amount of tax money you might save. But you may not need to take such drastic action. Many states have a state appeals board, Straus says, where you can take your case if the local panel rejects your petition.
Just remember to stay composed and professional throughout the process.
"Calling them SOBs is not a good negotiation tactic," Straus says. "The appeal hearing is an emotional thing because it goes straight to your wallet, but you have to stay calm."
Published June 13, 2007
Wednesday, November 12, 2008
Year-end moves to trim your tax bill
The holidays -- a season of giving and joy -- are almost here. It's also your last chance to cut your 2008 taxes. (Keep those receipts when you give to charities!)
By Jeff Schnepper
Yes, it's November. The holidays are nearly here. And my gift to readers is a gentle reminder to make those last-minute tax moves.
I say this every year: Your tax planning for your 2008 return should have started last December. Still, there are things you can and should do before Dec. 31 to trim your 2008 tax bill.
Let's start with the simple things.
The easy stuff
Charitable donations. If you contribute to your church, your college, the local dog pound, United Way, organizations that help with disaster relief or whatever, make these donations before Dec. 31.
And make sure, before you file your tax return, that you have a receipt from the organizations that benefited from your generosity. Picture dead presidents on the receipt. It represents real money in your pocket.
If you don't have the cash, find out whether the organization can process a donation via credit card. As long as the donation is made by Dec. 31, it's valid as a 2008 deduction, even if you don't pay the bill until next year.
Separately, any contributions of clothes or household goods must be in good condition or better to qualify for a deduction. If a single item has a value of $500 or more, an appraisal is now required. The Internal Revenue Service can deny a deduction for items of minimal value.
Complicating any deductions are new requirements on record keeping. This is important.
To deduct a cash donation, regardless of the amount, you must have a bank record or a written communication from a charity that shows the charity's name and the date and amount of the contribution. Acceptable bank records include canceled checks or bank or credit union statements.
So, if you're just putting cash in the collection plate, you're making a donation, but it's not deductible. Use either a check or an envelope where you can get a receipt later.
Talk back: What money moves do you plan to make by Dec. 31?
Your flexible spending account, or FSA. This isn't exactly a tax savings, but if you don't use the dollars you contribute to a flex plan, you lose them.
The IRS allows purchases made up through March 15, 2009, to count. Your employer can give you a debit card for your FSA spending. You can even pay for nonprescription drugs through an FSA. That eliminates a whole lot of paperwork.
Be careful, however. Unless your employer's plan also is amended to allow the March 15 extension, you won't qualify.
Mortgage interest. Make your Jan. 1 mortgage payment by Dec. 31. Remember to add the extra interest paid to what your bank reports on its Form 1098 -- it'll get your payment in 2009 and won't report it for 2008. But you paid it then, so it adds to your deduction this year. (The downside is that you won't be able to deduct the payment from your 2009 return.)
Jared Bernstein of the Economic Policy Institute and Republican strategist Jack Burkman discuss the effect of the economy on the president-elect's tax plans.
Real-estate taxes. If you pay your own real-estate taxes, make any payments due in the beginning of 2009 by Dec. 31. My fourth-quarter real-estate tax is due Feb. 1. By paying before the end of 2008, I can get the deduction a year earlier. (Again, you can't deduct payments made in 2008 from your 2009 return.)
A friendly warning: Taxes aren't allowed as a deduction under the alternative-minimum-tax computation. If you think you will be hit by the AMT, don't prepay.
A happy note: Beginning this year, you can increase your standard deduction by as much as $500 ($1,000 on a joint return) in property taxes paid.
Medical and miscellaneous deductions. These have "floors." For medical expenses, only those in excess of 7.5% of your adjusted gross income count. Miscellaneous itemized expenses have to exceed 2% of your AGI to qualify.
Your health insurance premiums count so long as you're not paying them out of a flexible spending account.
If you're going to exceed the floor, accelerate your expenses. Prepay your orthodontist or your tax preparer. Mail your checks on or before Dec. 31. Alternatively, if you're not going to exceed your floors, defer the deductions to 2009. You may exceed your floors then.
Pension or IRA contributions. These are especially important if you are self-employed. Unless you expect tax rates to shoot up, you want to pay your tax "tomorrow" rather than today.
If you're contributing to a retirement plan such as a 401(k) or a 403(b), you can put in $15,500 this year and $16,500 in 2009. If you're 50 or older, you can put in an additional $5,000 ($5,500 for 2009) as a catch-up contribution.
Cash gifts. If you might ever be subject to the estate tax, make your $12,000 tax-free gift ($13,000 for 2009) before the end of the year.
Capital gains and losses. 2008 has been a wacky, volatile year for investors. "Volatile" is a technical term for "Oh, my God! What happened to my money?!"
If you have capital gains, remember that any net capital losses over the $3,000 allowed on your 2007 tax return should be carried forward to offset those 2008 gains. If you still have net losses, up to $3,000 may be used to offset ordinary income for 2008.
All net long-term gains are subject to a maximum 15% rate. If you're in the 15% or lower tax bracket, your tax hit this year is now zero!
Talk back: What money moves do you plan to make by Dec. 31?
If you're single with taxable income of $32,550 or less, you get the 0% rate. With a standard deduction of $5,450 and a $3,500 personal exemption, you can have as much as $41,500 in gross income and still qualify.
If you have net capital gains, sell losers to offset those gains. If you have more losers, sell at least enough to get the $3,000 offset against ordinary income. If you have shares of stock pregnant with gains and you don't expect them to appreciate further, sell those shares and shelter the gains with the losses on your losers. Worst case: Pay the maximum 15% tax. You can't go broke taking profits.
I fully expect some relief on the alternative minimum tax. Then again, I also believe in Santa Claus and the tooth fairy. And if we don't get AMT relief, I encourage you to really yell at your representative and senators for not getting the job done.
More and more middle-income taxpayers are being hit with the AMT each year, which is basically a parallel tax system designed to ensure that everyone pays some tax. It is, however, forcing too many people to pay more tax than they should.
Last year, Congress extended the AMT exemption, increasing the exemption to $69,950 in taxable income for married couples filing jointly and $46,200 for single taxpayers.
Jared Bernstein of the Economic Policy Institute and Republican strategist Jack Burkman discuss the effect of the economy on the president-elect's tax plans.
Tax-free IRA distributions to charities
If you're 70 1/2 or older and looking to make a donation to a favorite cause by using funds from your individual retirement account, this may be the year to do it. For 2008 and 2009, you can still distribute as much as $100,000 directly from your IRA without recognizing any income.
You don't get a charitable-donation deduction (unless the distribution was from a Roth IRA), but the distribution does count toward your minimum-distribution amount.
Published Nov. 12, 2008
The holidays -- a season of giving and joy -- are almost here. It's also your last chance to cut your 2008 taxes. (Keep those receipts when you give to charities!)
By Jeff Schnepper
Yes, it's November. The holidays are nearly here. And my gift to readers is a gentle reminder to make those last-minute tax moves.
I say this every year: Your tax planning for your 2008 return should have started last December. Still, there are things you can and should do before Dec. 31 to trim your 2008 tax bill.
Let's start with the simple things.
The easy stuff
Charitable donations. If you contribute to your church, your college, the local dog pound, United Way, organizations that help with disaster relief or whatever, make these donations before Dec. 31.
And make sure, before you file your tax return, that you have a receipt from the organizations that benefited from your generosity. Picture dead presidents on the receipt. It represents real money in your pocket.
If you don't have the cash, find out whether the organization can process a donation via credit card. As long as the donation is made by Dec. 31, it's valid as a 2008 deduction, even if you don't pay the bill until next year.
Separately, any contributions of clothes or household goods must be in good condition or better to qualify for a deduction. If a single item has a value of $500 or more, an appraisal is now required. The Internal Revenue Service can deny a deduction for items of minimal value.
Complicating any deductions are new requirements on record keeping. This is important.
To deduct a cash donation, regardless of the amount, you must have a bank record or a written communication from a charity that shows the charity's name and the date and amount of the contribution. Acceptable bank records include canceled checks or bank or credit union statements.
So, if you're just putting cash in the collection plate, you're making a donation, but it's not deductible. Use either a check or an envelope where you can get a receipt later.
Talk back: What money moves do you plan to make by Dec. 31?
Your flexible spending account, or FSA. This isn't exactly a tax savings, but if you don't use the dollars you contribute to a flex plan, you lose them.
The IRS allows purchases made up through March 15, 2009, to count. Your employer can give you a debit card for your FSA spending. You can even pay for nonprescription drugs through an FSA. That eliminates a whole lot of paperwork.
Be careful, however. Unless your employer's plan also is amended to allow the March 15 extension, you won't qualify.
Mortgage interest. Make your Jan. 1 mortgage payment by Dec. 31. Remember to add the extra interest paid to what your bank reports on its Form 1098 -- it'll get your payment in 2009 and won't report it for 2008. But you paid it then, so it adds to your deduction this year. (The downside is that you won't be able to deduct the payment from your 2009 return.)
Jared Bernstein of the Economic Policy Institute and Republican strategist Jack Burkman discuss the effect of the economy on the president-elect's tax plans.
Real-estate taxes. If you pay your own real-estate taxes, make any payments due in the beginning of 2009 by Dec. 31. My fourth-quarter real-estate tax is due Feb. 1. By paying before the end of 2008, I can get the deduction a year earlier. (Again, you can't deduct payments made in 2008 from your 2009 return.)
A friendly warning: Taxes aren't allowed as a deduction under the alternative-minimum-tax computation. If you think you will be hit by the AMT, don't prepay.
A happy note: Beginning this year, you can increase your standard deduction by as much as $500 ($1,000 on a joint return) in property taxes paid.
Medical and miscellaneous deductions. These have "floors." For medical expenses, only those in excess of 7.5% of your adjusted gross income count. Miscellaneous itemized expenses have to exceed 2% of your AGI to qualify.
Your health insurance premiums count so long as you're not paying them out of a flexible spending account.
If you're going to exceed the floor, accelerate your expenses. Prepay your orthodontist or your tax preparer. Mail your checks on or before Dec. 31. Alternatively, if you're not going to exceed your floors, defer the deductions to 2009. You may exceed your floors then.
Pension or IRA contributions. These are especially important if you are self-employed. Unless you expect tax rates to shoot up, you want to pay your tax "tomorrow" rather than today.
If you're contributing to a retirement plan such as a 401(k) or a 403(b), you can put in $15,500 this year and $16,500 in 2009. If you're 50 or older, you can put in an additional $5,000 ($5,500 for 2009) as a catch-up contribution.
Cash gifts. If you might ever be subject to the estate tax, make your $12,000 tax-free gift ($13,000 for 2009) before the end of the year.
Capital gains and losses. 2008 has been a wacky, volatile year for investors. "Volatile" is a technical term for "Oh, my God! What happened to my money?!"
If you have capital gains, remember that any net capital losses over the $3,000 allowed on your 2007 tax return should be carried forward to offset those 2008 gains. If you still have net losses, up to $3,000 may be used to offset ordinary income for 2008.
All net long-term gains are subject to a maximum 15% rate. If you're in the 15% or lower tax bracket, your tax hit this year is now zero!
Talk back: What money moves do you plan to make by Dec. 31?
If you're single with taxable income of $32,550 or less, you get the 0% rate. With a standard deduction of $5,450 and a $3,500 personal exemption, you can have as much as $41,500 in gross income and still qualify.
If you have net capital gains, sell losers to offset those gains. If you have more losers, sell at least enough to get the $3,000 offset against ordinary income. If you have shares of stock pregnant with gains and you don't expect them to appreciate further, sell those shares and shelter the gains with the losses on your losers. Worst case: Pay the maximum 15% tax. You can't go broke taking profits.
I fully expect some relief on the alternative minimum tax. Then again, I also believe in Santa Claus and the tooth fairy. And if we don't get AMT relief, I encourage you to really yell at your representative and senators for not getting the job done.
More and more middle-income taxpayers are being hit with the AMT each year, which is basically a parallel tax system designed to ensure that everyone pays some tax. It is, however, forcing too many people to pay more tax than they should.
Last year, Congress extended the AMT exemption, increasing the exemption to $69,950 in taxable income for married couples filing jointly and $46,200 for single taxpayers.
Jared Bernstein of the Economic Policy Institute and Republican strategist Jack Burkman discuss the effect of the economy on the president-elect's tax plans.
Tax-free IRA distributions to charities
If you're 70 1/2 or older and looking to make a donation to a favorite cause by using funds from your individual retirement account, this may be the year to do it. For 2008 and 2009, you can still distribute as much as $100,000 directly from your IRA without recognizing any income.
You don't get a charitable-donation deduction (unless the distribution was from a Roth IRA), but the distribution does count toward your minimum-distribution amount.
Published Nov. 12, 2008
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