The Tax Goddess Blog

Next Short Sale Myth: Lenders lose more on foreclosures than short sales.

Since the lender may be protected by mortgage insurance or may have sold a loan into pools, the investor may receive more sales proceeds through a foreclosure at a lower sale price than through a short sale. In a foreclosure, the senior note holder (investor) gets paid before junior tranch holders are paid. This could result in a better payout for the senior note holder as a result of foreclosure (the senior note holder carries the majority vote on decisions related to this loan). Lenders also use NPV (Net Present Value) calculations to determine their best option. This takes into consideration many factors that consider the econimic interests only of the lender/investor. Hence, the reason that lenders/investors will sometimes make decisions to foreclose that seem on the surface not to make sense is often the result of the NPV test.

Short Sale Myth: Arizona is a non-recourse state.

While there are laws that protect the homeowner from deficiency in a foreclosure or deed-in-lieu, these laws do not apply in a short sale. Only an experienced real estate attorney, after reviewing all loan documents, deeds-of-trust and short sale documents can properly ascertain that liability. A Realtor should NEVER give advice as to the homeowner's potential for deficiency liability. Even if that advice is technically correct, some lenders may file lawsuits regardless of the merits of the case, knowing that a certain percentage of borrowers will pay just to avoid going to court. Additionally, homeowners will often make incorrect statements as to the nature of their loans. Currently, we find about 60% of our clients are incorrect as to the nature of their loans which affects the potential for anti-deficiency protection. If a borrower is sued by their lender, there is a reasonable chance they will file a suit against the Realtor that handled the short sale. These suits can be difficult to defend, even if the Realtor made no representations as to the homeowners potential liability resulting from a short sale.

More short sales myths coming...

Energy Effecient Tax Incentives

The American Recovery and Reinvestment Act (ARRA) provides numerous tax incentives for individuals to invest in energy-efficient products.

Some of the more useful ones are:

1) Residential Energy Property Credit (Section 1121):

if you are adding insulation, energy efficient exterior windows and energy-efficient heating and air conditioning systems you can receive up to a 30% CREDIT (dollar for dollar) (maximum of $1500) of all the costs!

A similar credit was available for 2007, but was not available in 2008. Homeowners should be aware that the standards in the new law are higher than the standards for the credit that was available in 2007 and that The IRS has issued guidance that will allow manufacturers to certify that their products meet these new standards.

Until the guidance is released, homeowners generally may continue to rely on manufacturers' certifications that were provided under the old guidance.

For exterior windows and skylights, homeowners may continue to rely on Energy Star labels in determining whether property purchased before June 1, 2009, qualifies for the credit.

2) Residential Energy Efficient Property Credit (Section 1122):

This nonrefundable energy tax credit will help individual taxpayers pay for qualified residential alternative energy equipment, such as solar hot water heaters, geothermal heat pumps and wind turbines.

The new law allows for a credit equal to 30 percent of the cost of qualified property.

3) Plug-in Electric Drive Vehicle Credit (Section 1141):

The new law modifies the credit for qualified plug-in electric drive vehicles purchased after Dec. 31, 2009.

To qualify, vehicles must be newly purchased, have four or more wheels, have a gross vehicle weight rating of less than 14,000 pounds, and draw propulsion using a battery with at least four kilowatt hours that can be recharged from an external source of electricity.

The minimum amount of the credit for qualified plug-in electric drive vehicles is $2,500 and the credit tops out at $7,500, depending on the battery capacity.

4) Plug-In Electric Vehicle Credit (Section 1142):

The new law also creates a special tax credit for two types of plug-in vehicles - certain low-speed electric vehicles and two- or three-wheeled vehicles. (Like Golf Carts!)

The amount of the credit is 10 percent of the cost of the vehicle, up to a maximum credit of $2,500 for purchases made after Feb. 17, 2009, and before Jan. 1, 2012.

To qualify, a vehicle must be either a low speed vehicle propelled by an electric motor that draws electricity from a battery with a capacity of 4 kilowatt hours or more or be a two- or three-wheeled vehicle propelled by an electric motor that draws electricity from a battery with the capacity of 2.5 kilowatt hours.

A taxpayer may not claim this credit if the plug-in electric drive vehicle credit is allowable.

More information can be found at the IRS website along with additional information on the ARRA.

If you have any questions on how these new credits could apply to you PLEASE speak with your CPA to get more information (our Tax Goddess can be found here if you have any questions)!

Looking our for your best interests,

Your Tax Goddess~
Shauna~

Get your income on your 2008 tax return or get hit with Higher Tax Rates!

So, Obama, once he is in office, is going to raise taxes

 - Capital Gains Rates are going to increase
 - Income tax rates for those over $250k are going to raise

It is important then to do year end planning.  Try and get as much income as possible into the 2008 tax year (where it is most likely that the rates will not change) if your adjusted gross income is more than $200k.

So, just an FYI - if you are making money - PLAN IN ADVANCE!!!!

Tax Planning - the best idea yet!

So, I will make it brief,...

most people like to budget, know when their $ is going to be needed.

Wouldn't you also want to do that with your taxes?  Be prepared - be ready to pay the amount owed on April 15th rather than wait until April 15th to know?

So - the idea is to "plan" for your taxes, thus the year end taxes planning meeting.  You figure out what you want to owe by figuring out what you would hypothetically owe and then make decisions to alter your final tax outcome (like contributing to a retirement plan, etc.)

Point is - if you haven't done your planning, you are playing into the government's taxing hands.  Do you want that?

No?  Then Setup a planning meeting with your CPA (or with me!  I can always help you in this area!) by sending them an email asking for some planning.

Always yours,

Your Tax Goddess.

Well, the Corporate Deadline is Over! Now, on to some business

Well, now that the corporate deadline is over (March 17th this year!) we are on to the race for the personal returns. 

The biggest questions that I've received so far are as follows (with answers):

Q1:  Do I HAVE to file by April 15th, 2008 to get the economic stimulus package payment?
A1:  No, as long as you have a valid extension, you will still receive the stimulus payment, just later :)

Q2:  Should I make a Roth, IRA, or SEP contribution?
A2:  My personal opinion, YES!  I don't believe that Social Security is going to be around for any of us, so YES!!!  Max out everything you can!  :)

That's it for now - more to come, I am thinking that Q&A might be the best way to get the information out!

Hope everyone is still alive!

Shauna, Your Tax Goddess!