Understanding Real Estate Tax Breaks: A Guide for First-Time Owners

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First-time Homeowner IRS Tax Breaks

As a first-time homeowner you should be aware of the additional tax breaks you may be eligible to claim.

For first-time home owners, it can be confusing trying to understand what kind of tax deductions and benefits you get the first time Tax Day rolls around after buying your home. If you are used to renting, you’re likely used to having few deductions on your tax form aside from those set aside for dependents. Once you make the leap into home ownership everything changes, and a whole new set of deductions is available to you. As a new owner, it is important that you familiarize yourself with these new deductions to make sure you take full advantage of them when filing each year in the future. Additionally, it is important to refrain from getting carried away with deductions and educate yourself in what kind of expenses are nondeductible. These are some of the most common deductions (and nondeductions) available to homeowners currently.

Deductible: Mortgage Interest

Typically, the biggest tax deduction for owning a home comes from deducting interest on your mortgage. You are allowed to deduct interest on up to $1 million of debt used to purchase your home. In January, you will receive a Form 1098 from your lender listing the amount of interest you paid on your mortgage during the previous year, and that is the amount you deduct on Schedule A. For homeowners in the 25% tax bracket, deducting the interest basically means the government is paying 25%. For example, a $2,000 deduction will reduce your tax bill by $500.

Deductible: Points

The IRS allows you to deduct points in the year you paid them if, among other things, the loan is to purchase or build your primary home, payment of points is an established business practice in your area and the points were within the usual range. Make sure your loan meets all these qualifications so that you can take advantage of all of the deductions for points at the same time.

Deductible: Property Taxes

A tax break for paying taxes? That’s right. When you make your loan payment each month, it’s likely that a huge part of the payment goes to taxes, which go into an escrow account for payment once a year. This amount should be included on the Form 1098 you get from your lender, along with your loan interest information. As long as you own your home, you can take a deduction for these taxes.

If you are a new owner, it is important to also check out the settlement sheet you got when you closed on the house to find additional tax payment data. When the property became your’s, the year’s tax payments were divided so that you only paid taxes for the portion of the tax year that you owned the home. Those taxes you paid are deductible.

Not Deductible: Some Insurance, Dues and Repairs

If you have private mortgage insurance because you weren’t able to offer a large enough down payment on your home, you probably won’t be able to deduct those expenses. Property hazard insurance premiums are also nondeductible, even though property hazard coverage is typically required as part of a home loan. Other nondeductible expenses include homeowners association dues/fees, depreciation of your home, general closing costs and local assessments to increase the value of the neighborhood you live in. Home repairs are also nondeductible.

Meeting Your Neighbors – Forming Connections in the Neighborhood

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Perhaps one of the greatest emotional advantages to owning a home is the ability it provides to make lasting, meaningful connections with your neighbors. While you can certainly meet and befriend neighbors while renting, it is unlikely you will live near your neighbors long-term in the way you will once you switch to homeownership. In rental situations, particularly in apartments, neighbors seem to come and go as soon as a lease term comes to an end. When owning, it is likely you will live next door to the same people for years to come. However, you may feel slightly awkward about introducing yourself to your neighbors and may be unsure of how to go about attempting to form friendships with the people who live only a few steps away. These tips and ideas will make meeting your neighbors easy and simple, and will hopefully help you form some friendships that last a lifetime.

Neighbors Having Party

When you buy a home, you’ll likely have the same neighbors for many years to come. So take the time to introduce yourself!

Throw a Meet and Greet Get Together

Throwing a get together once you’re situated in your new home is an excellent way to introduce yourself to your neighbors and potentially make some lifelong friends. The party doesn’t need to be anything fancy, and you can even consider organizing it as a backyard barbecue or potluck. Pick a date and take an invitation to each of your neighbors inviting them to come over and meet you and your family, and extend the invitation to their families as well. If you have kids, this can be a great way to help them make friends in a new neighborhood by giving them the chance to meet other children in nearby houses.

Spend Time Outside

Whether you’re tending to your garden or going for a job around the block, going outside is by far the easiest way to meet other people in your neighborhood. Take time to say “hello” to each neighbor you pass, or take a few seconds to ask how their day is going or to strike up a friendly conversation. If it’s your first encounter, you can simply introduce yourself and tell them you just moved in. If you have kids, ask if they do as well and tell them about yours. Taking just a few minutes a day to be polite and friendly can help pave the way to lasting friendships and connections with your neighbors.

Offer a Helping Hand

If you see a neighbor working in their yard or struggling with groceries, offer to help out! This is a great way to establish yourself as a friendly and helpful member of the neighborhood, and can help break the ice when meeting someone for the first time. If your neighbors have kids, you can offer babysitting should they ever need it. If you see them working on a home improvement project you have expertise in, offer assistance or a professional opinion. The number of ways you can offer help in your neighborhood are endless, and you never know what type of help your neighbors may be able to offer you in return.

Throw Holiday Parties

Once you’ve formed acquaintanceships with your neighbors, throwing holiday parties can help you stay connected with the neighbors. You can throw a backyard barbecue for the Fourth of July or a costume party each Halloween. Invite all of the neighbors on your block to attend and be sure to include their families in the invitation. Like throwing a meet and greet after you first move in, this can be an excellent way to help your kids make friends and feel comfortable around other children in the neighborhood.

Keeping Your Home Safe While On Vacation

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Your bags are packed, your airline tickets are booked and you’re well on your way to a highly anticipated vacation. However, before you jet out the door to and onto the freedom of a much deserved trip away, take a minute or two to assess whether or not your home will be safe while you’re gone. A sad but true reality is that unattended homes are a prime target for burglars and other undesirables, and the last thing you want to come home to after vacation is to find your prized belongings are gone or expensive damage has been done to your doors or windows. These helpful tips will ensure your home and belongings remain safe while you’re gone, allowing you to rest easy on your time off without the stress of worrying.

House Locked Up Securely

Burglars often target homes suspected that the owners are on vacation, but that doesn’t mean your house has to be vulnerable.

Hire a House-Sitter

Hiring someone you know and trust to house-sit for you is perhaps the easiest way to make sure your property remains safe while you’re on vacation. This is an especially good idea if you have pets who need caring for or a lawn or garden that needs tending too. You can hire an extended family member or a neighbor you trust, or you can hire a professional from a house- or pet-sitting agency. Having a house-sitter will also ensure your mail is picked up and brought inside each day, preventing thieves from stealing documents that contain important information from out of your mailbox.

Make Sure Your House Doesn’t Look Unoccupied

If you can’t swing the cost of a house-sitter or feel like it isn’t necessary, at least ask a neighbor to help keep your house looking maintained and lived in while you’re away. Have your neighbor collect and hold your mail, pick up your newspapers and remove any fliers from your front door for the duration of your vacation. If you have a grassy front lawn, consider also asking them to water it periodically if you will be gone for more than a few days. A dead lawn, a pile of newspapers and a porch filled with fliers are all indicators of temporary vacancy burglars and squatters will be on the lookout for. Removing these items from your home will help keep your home protected and your mind at ease while you’re gone.

Invest in Light Timers

Like an unkempt lawn, a house that is dark around the clock is a like a neon vacancy sign for undesirables. To keep up the appearance of a lived-in house, purchase some timers for a few different lights in your house. Set the timers to turn on around dusk and turn off around midnight, or whatever time you normally go to sleep. This will discourage break ins and can be effective in keeping your home safe.

Disable Your Garage Door

With the invention of universal remotes comes the worry about thieves breaking in through your garage door. To prevent this from happening, temporarily disable your garage door while you’re planning to be gone. You can easily connect it again upon your arrival back home.

Invest in a Home Security System

If your budget allows, a home security system can be one of the most effective ways to keep your home safe while you’re gone. New, high-tech models can even sense for carbon dioxide and other hazards, and can alert security personnel in the event of a fire. Some models, such as those offered by Xfininity, include cameras that you can access on your smart phone or computer to keep an eye on things no matter how far away you are. These models even include commands to control the lighting in your home, so you can easily click your lights on and off with ease as you see fit.

Why Couples Without Children Should Buy Single-Family Homes

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While you may think that homeownership is exclusively for families seeking the white picket fence lifestyle, an increasing number of childless couples are deciding to make the switch from renting to buying. Couples without children are actually in the prime position for buying a home, as they do not face the same monthly costs for food, clothing, school and other expenses that come along with having kids. If you and your partner are accustomed to renting but are considering taking the plunge into buying your first home, consider these benefits of buying a single-family home that apply directing to couples without children.

Modern New Home - Designer Bedroom

Real estate experts have noted that in most markets across the country, it is more beneficial to buy, rather than rent.

Owning is Cost-effective for Childless Couples

In today’s market, and with the presence of affordable home builders such as LGI Homes, it is often far cheaper to purchase a home than it is to rent. In fact, in March 2012 Trulia reported that owning was cheaper than renting in 98% of all housing markets nationwide. Because so many people are opting to rent instead of buy, rental costs are at an all-time high while mortgage costs are sitting at a historic low. Chances are, homeownership will be most cost-effective during this time in your life since you and your partner only have yourselves to care for. If your future plans include having children, consider whether or not you want to come up with a down payment for a home now or after you are also trying to juggle groceries for a family, school clothes and supplies, medical bills and other regular costs associated with having kids.

Owning is an Investment

When you choose to rent, you are only investing in one thing; the wallet of your landlord. While you may benefit from having a space to house your belongings and a roof over your head, there is no long-term benefit in renting. Homeownership comes with a variety of benefits you and your partner may have never considered, including tax deductions, credit score improvement when you make your payments on time, price appreciation, capital gain exclusion and the pride of owning your own place. When you decide to purchase a home, the money you spend each month is going toward a day you no longer have to make monthly mortgage payments. When renting, you will spend money every month for the rest of your time living there, with your rates often going up with each lease renewal. If you do plan on having children in the future, owning a home can provide something that can be handed down to them when they become adults. Many houses stay in families for generations. This is not the case with rental properties. If you do not plan on having children, your home can be an investment in your retirement and you may be able to sell it for far more than you paid once you reach your golden years.

Owning Provides More Space

If you have spent your relationship living in a cramped apartment, it’s likely you have had to make more than your fair share of compromises when it comes to space. When you buy a house, you will suddenly have far more space to share between you. You can dedicate a room to your own personal library or office, while your significant other can have the art studio or game room of their dreams.

Owning Provides Flexibility for the Future

While it’s true that owning doesn’t provide the ability for you to just up and move if your plans change, homeownership provides a lot of flexibility in other areas related to changes that may occur in the future. If you do decide to have children, you will already have the space you need for a nursery and will have established yourself in the neighborhood. If a close friend or family member falls ill or has some other unfortunate event happen to them, you will have the space to provide a temporary or long-term home for them. If you decide to change careers and pursue self-employment, you will have the room you need to set up a home office. And, if the desire to move to a new location does occur, you can always rent out your home for profit and use it as a source of income.

Home Style & Design When it Comes to Lighting

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One of the most perplexing aisles in a hardware store for many consumers and home designers store is often the light bulb aisle. For all the work we’ve put into our homes and the attention to detail we give to make our living spaces stand out, lighting can leave us scratching our heads.

Home Interior Light Fixtures

There are many great options for how to use lighting and light fixtures to accentuate your home’s decor.

Although most consumers focus on architectural lighting as opposed to how people will look in a space, its important to remember that as in photography the subject/person is most important. Here are a few must knows about lighting to help you make a decision that is most suitable to your space:

Incandescent bulbs are becoming a thing of the past, so what alternatives are there? Many prefer LEDs, which provide a warm feel and can be dimmable if you get the right type. Halogens are another good option.

Fluorescent bulbs, however, provide unflattering light due to the pulsating effect it causes as it emits light.

We usually think of wattage when it comes to bulbs; kelvin, however, is more important. Kelvin is the color temperature of light. Ranging from 2,700 to 5,000 kelvin, optimal for, say, a table lamp is 2,400 k.

Dimmers are great for virtually every light in a space, be it lamp or overhead light. A dimmer can be placed at the light switch, wall, or even on the cord. A dimmer placed on a lamp cord can be done for as little as $2. Or purchase a dimmer attachment that screws into the bulb mount, which enables you to control light without an electricians visit, this will run you less than $10.

Be sure to account for the purpose of your lighting. Hard lighting accentuates objects arid architecture. Soft lighting, on the other hand, is flattering to people. Therefore, all lamps are preferable for human faces, in general, than track or recessed lighting. Position table lamps at eye level to reduce shadows and textures, it will soften the appearance.

Building Community

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Studies have shown that most buyers want the kind of residential housing that LGI Homes builds, free standing single family structures in designed communities, close but slightly removed from city centers. Those designs offer both privacy and the opportunity for “community.”

Community Playground and Trail System

Nearly all of LGI Homes’ communities feature a similar playground as this one located at Presidential Glen in the Greater Austin area.
Click to visit Presidential Glen

You may be perfectly happy to come home at the end of a long workday and use your fenced backyard as a retreat. You might wave to your neighbor, but you don’t have the energy or inclination to socialize. An LGI Homes’ design lets you do just that. Other members of the community, however, may desire to get to know each better and spend some time together. If you are one of the latter, how would you go about enhancing the “community” aspect of your LGI Homes neighborhood?

1. Communicating. Obviously, when you’re outside your home or making use of one the LGI Homes’ walking trails or playgrounds, you can introduce yourself to other residents. If you want a broader, more consistent opportunity for communication, consider starting a Yahoo Group. These moderated listservs provide a prompt, regular and easy way for everyone who wishes to join to stay in touch.

2. Swap Meets. How about the occasional (maybe spring and fall) swap meet where neighbors gather to exchange unwanted items (clothes, tools, books, household goods) and donate the rest to charity?

3. Book Clubs. Books clubs are very popular. Amazon has lists of recommended books for reading. Some book clubs restrict themselves to biographies, mystery or bestseller fiction. Sometimes one book (think Proust or Dante) is the focus of a club. Starting a book club is a way to find a community of readers near you.

4. Discussion Clubs. Related to book clubs, these groups usually pick a general topic of interest and meet periodically (maybe once a month) to discuss. Topics range from questions or concerns about spirituality to the economy.

5. Meetup. You can also use Google’s Meetup. These groups are usually organized around member interest. If you enjoy bike riding or plein air painting, likely there’s a Meetup group near you. If not, you can start one. You mind find members in your own LGI Homes’ community.

LGI Homes Offer Young Buyers an Affordable Alternative

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Information gleaned from the most recent United States census has identified the 10 youngest cities as Provo, UT; Gainesville, FL; Athens, GA; Tallahassee, FL; Columbia, MO; Killeen, TX; Denton, TX; Ann Arbor, MI; Laredo, TX; and Tempe, AZ. With an average age of 26.5, these cities—most of which are home to major universities—would seem to have a leg up in attracting young, first-time home buyers. But most home builders have failed to attract this important segment.

The reluctance of many consumers to buy homes has put rentals in high demand, driving up the cost of apartments and long term leases—the housing that young people traditionally gravitate toward. That’s where a builder like LGI Homes can buck the national trend and attract young buyers by offering them an affordable alternative.

Denton Texas New Home Community - Quail Run

Quail Run is a new home community in Denton, Texas featuring new homes from LGI Homes starting as low as $629 per month.
Click on image to learn more.

LGI Homes’ Quail Run community in Denton, Texas, and the grand opening of Sonterra near Killeen, both offer custom homes starting at just $629 a month—less than most apartment rents. While it’s true that some banks are stingier giving out mortgage loans, LGI Homes offers mortgage assistance to help first time buyers get the loan they need.

Each LGI Homes property includes $10,000 worth of free upgrades including state of the art appliances, granite countertops, brushed nickel hardware and fixtures, rounded corners, custom built cabinets, vaulted ceilings fenced in yards, two car garages, and landscaping. Every community features a variety of amenities such as family parks, neighborhood playgrounds, walking trails and greenbelt areas—and no homeowners’ fees.

Even with a slow growing economy and sluggish job market, LGI Homes makes homeownership the smartest financial move a young buyer can make. So instead of throwing money away on rent, talk to an LGI Homes professional to see how you can start building equity today.