Simplifying Mortgage Interest Tax Deductions

By: Cathy Strini

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This week we wanted to delve into the murky world of taxes and provide a little insight into how buying a home vs. renting could save you money! Take a look at current interest rates:

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To put it simply, this graph is showing us that mortgage rates are near record lows after the 2008 financial crisis – making homeownership  attractive because it decreases the amount you, as a buyer, pay on your loan. Furthermore, interest paid on a mortgage is tax deductible if itemized on the tax return.

The combination of these two factors means that buying in the current market is more beneficial than renting.

However, there is often a lot of confusion surrounding writing off tax savings from mortgage interests. This money-saving perk is often not factored into the “pro side” of purchasing a home. It is easy to solely compare your monthly rent to your monthly mortgage payments when deciding which option makes sense financially…BUT that does not give you the complete, long-term picture. If done correctly, writing off your mortgage interest could save you a large sum of money  – making up more than the difference between paying rent and making a mortgage payment!  As stated by the  Law Dictionary :”In California, the state revenue service’s Mortgage Interest Tax Deduction allowance is equal to the federal government’s  allowance. In other words, taxpayers in California can effectively double the size of their annual mortgage-related deductions.”

There are a few basic requirements that are good to know  when it comes to determining how much of your mortgage interest will (or will not) qualify for the deduction.

First of all, according to Fox Business, you can “only deduct mortgage interest if the loan is a secured debt that has been recorded and your home is the collateral”.  Next, the home must be either your primary or secondary residence.  Also, the proceeds from the loan must be applied towards the principal debt incurred in acquiring or improving the property.

It is important to remember that each situation is different! Here a few tips/tools that are useful for calculating your unique circumstance:

1. Remember, the standard deduction amount is based on your tax filing status. Know your tax bracket (the rate at which an individual is taxed). Tax brackets are determined based on income levels. The chart below is a great one to reference – accurate and easy to read.

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2.    Calculate the potential tax savings generated by your mortgage interest here.  While this calculator offers a reliable estimation, it should not be construed as sound tax advice. Always seek additional sources of information!

3. If you are filing your taxes in California, be sure to  include a copy of your itemized federal deduction sheet with your state tax return.

4. Using  Rent Vs. Buy comparison calculator can provide you with a more detailed, personalized financial comparison of renting vs. buying over a specific amount of time.

Another factor that is hard to quantify is equity. As a renter, you are essentially paying your landlord’s mortgage or adding equity to his or her bank account. However, when you are paying off your own home mortgage, you increase your degree of ownership in your home with every payment. A general rule is that if you are staying in your home for at least five to seven years, the cost of buying the house is more likely to be bypassed by accrued equity and increased home value. *

<< While we wrote this article in the hopes of assisting and educating our readers, we always encourage you to consult an accountant in order to best maximize your profits and tax savings. 🙂 >>

 

 

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Los Angeles Rent Control

By: Lauren Weber

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We have been getting a lot of questions about rent control lately so we thought we’d share some information on the different areas that are effected by it and what it means to landlords/investors that need to abide by LA City’s rent control guidelines.

First, let’s start with the question: What is rent control?
Rent control, or the Rent Stabilization Ordinance (RSO), was designed to protect tenants from excessive rent increases and limits the reasons for evictions while allowing landlords a reasonable return on their investments. The RSO has been passed by the Los Angeles City Council on May 1, 1979 and has maintained it ever since. The RSO covers allowable rent increases, registration of rental units, legal reasons for evictions, and types of evictions requiring payment of tenant relocation assistance.

Subject rental units include: apartments, condominiums, town houses, duplexes, two or more dwelling units on a single lot, mobile homes, mobile home parks, and rooms in a hotel, motel, rooming house or board house occupied by the same tenant for 30 or more consecutive days.

What areas fall under rent control?
Predominately, any property within Los Angeles City is considered in a rent controlled area. These include areas such as Westchester, San Pedro, Torrance P.O., Hollywood, Northridge, Encino, Woodland Hills, Van Nuys, Sunland, Eagle Rock, Santa Monica, Beverly Hills, etc. However, there are some exceptions that would exempt properties for falling under rent control. Some of these exceptions include buildings completed after 1978, one house on a lot, government funded units, and luxury units. To find out if your property or property of interest falls under rent control you can follow these instrutions HERE and look up the property address HERE.

What are the landlords rights?
-Increase rent every 12 months by the allowable increase. Every year this figure is subject to change, however it has been 3% for the last several years and is the allowable rent increase from the time period of July 1, 2015 to June 30, 2016.
-Increase rent by an additional 1% for gas and/or 1% of electricity when landlord pays for either or both of these utilities.
-Increase security deposit and last month’s by the allowable percentage at the same time rent is increased.
-Increase rent by 10% for an additional tenant, except if landlord had previous notice of the additional tenant for more than 60 consecutive days and failed to notify the tenant of rent increase.
-Evict tenants for legal reasons as stated HERE.
-Apply for special rent increases base on an application for Primary Renovation, Capital Improvements, Rehabilitation, or a “Just and Reasonable” rent adjustment.
-Pass through current year Systematic Code Enforcement Program (SCEP) fees of $43.32 to the tenants at the rate of $3.6/month for 12 months, if the owner has paid them in full. Owner must give tenant 30 day written notice of increase prior to collection of fees and provide the tenant a copy of the Registration Certificate.

What are the tenants rights?
-Tenant may receive a copy of the Registration Certification of their rented units with Rent Stabilization Division from landlord.
-File a complaint with the Rent Stabilization Division, if the landlord:
-Imposes an illegal rent increase
-Is not registered in compliance with the Ordinance
-Provides a Notice to Quit that does not fall within the guidelines of legal reason           for eviction.
-Dose not pay relocation assistance as required by RSO.
-Fails to post an RSO notice on the property.
-Receive relocation assistance for certain no-fault evictions.
-File a complaint with Code Enforcement Division, if there are suspected code violations.

Are there any exceptions to rent control?
The major exceptions are buildings completed after 1978, single family residence, government funded units, and luxury units.

*For more information please contact your local city directly. You may also visit the City of Los Angeles’s website HERE for more rent control info or call The Los Angeles Housing and Community Investment Department at www.HCIDLA.LACITY.org or 866-557-7368

Neighborhood Spotlight: Cat Landry

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As your local REALTOR’s, our goal is to connect the South Bay community. Each month we support and connect neighbors by sharing what they are up to! This month we were privileged to get to know Cat Landry, independent graphic designer and owner of Cat Landry Design. After meeting Cat while out in the neighborhood, we were immediately captivated by her vibrant personality and were excited to get to know her better over a coffee date.

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Shout out to Two Guns Espresso for their consistent deliciousness!

Originally hailing from Lafayette, Louisiana, Cat now has several decades of California living under her belt (and even convinced her parents to make the move out West)! While Cat has scores of clients around the country, she also works for and supports companies right here in the South Bay.

With a Communication Design degree from OTIS, as well as experience as both a marketing director and an art director, Cat has the expertise to supplement her natural talent as a graphic designer. Beyond her impressive resume, however, Cat has also honed a skill set that helps her to evaluate and determine not just the needs of her clients, but also their personal style. As she explains, “There is no cookie-cutter formula, it is a personalized experience.” What stood out to us about Cat was her dedication to truly getting to know her clients and creating work that embodies who they are.

Beyond being an entrepreneur, Cat is a dedicated mother and member of the South Bay community! Read on to learn more about Cat and what makes her great at what she does…

 

What inspired you to start your business?

After attending The Otis Art Institute of Parsons School of Design (it’s now simply called OTIS), I worked my way up in the corporate world starting with screen print design, then digital design and production for print advertising. My print experience led me to an art director position with a Santa Monica ad agency where I built my portfolio working with clients in luxury travel, cosmetics, gourmet foods, etc. I broadened my scope of work when I was recruited by a national marketing firm. There, my focus was product design for clients in pharmaceuticals, heath & beauty, wine & spirits, sports & fitness, and more.

Although I enjoyed the creative work very much, I felt that something was missing in each of these corporate businesses. It took some time for me to identify what didn’t feel right. One day I realized that there was a shortage of happy people in the work place. There were so many people who were unhappy, unsatisfied, bitter, hated being in the office, and resented their clients and coworkers. It seemed that I was the only one having fun. I love design and felt that I learned so much from each new client and project, and I craved a more positive environment.

In 1999, I decided that the best way for me to continue to enjoy my work was to do it my way… with a smile. I put in my two-weeks notice and left the corporate world to start my own business. Cat Landry Design was “born” on my birthday in July 1999. Although freelance design has its ups and downs (financially and logistically), I’ve never regretted the choice to enjoy my work every single day.

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What sort of graphic design do you specialize in? 

I work with clients in many different industries, including but not limited to: real estate, home furnishings, travel, corporate coaching, medical equipment, fitness, entertainment, elder care, automotive, apparel, churches, and health & beauty. My specialty, is corporate identity (logo design), branding, and marketing for print or web. I love working with new businesses and helping them along the path to success.
Example: I have clients who started their business, BioDesigns, in their garage in the South Bay over 15 years ago. I branded their company, created marketing materials, helped them develop a clear identity for their business, and stuck with them every step of the way. Now, their garage is where they park their luxury cars after successful days in their 6,000 square foot clinical facility in Westlake Village. They’re helping amputees all over the world live active, more comfortable lives. It’s a wonderful feeling to see a client’s business grow and flourish and it’s very satisfying to see good people succeed.
My clients love their work, I love making their businesses look great, and we all enjoy the process together. That’s what it’s all about.

 

What are some of the perks of a client working with a local graphic designer?

I love working with local businesses and supporting my community. The “South Bay Bubble” is a special area with it’s own unique culture. What could be better than working with a designer who really knows the community your business serves and the audience you’re trying to reach? Sure, a designer who lives in the heart of New York City may do stellar work, but they aren’t likely to fully grasp the vibe of our little pocket of the west coast.

 

Local / South Bay Clients:
  • Inner Glimmer – Manhattan Beach
  • Bionic Body/Kim Lyons – Hermosa Beach
  • St. Cross Episcopal Church – Hermosa Beach
  • Cass the Fix-It Lass – Torrance
  • Blue Water Realty Advisors – Redondo Beach
  • Elite Resorts & Spas – Redondo Beach
  • VIP Consulting – Redondo Beach
  • South Bay Pony Baseball – Manhattan Beach

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What makes you great at graphic design?

I am a collaborative designer. I want to work WITH you to make your business look amazing. I want to get to know you and hear your ideas. I want you to share/show me what you love so that I can create a designs that represent you and that speak to your audience in the way that you feel is important. I want you to feel proud and excited to show off your logo, marketing materials, and website. If your business needs a modern, clean and corporate look, great. If you want a fun, funky look that shows people that your approach is a little different, perfect. If you have absolutely no idea what you want or like and need some guidance, I’ve got you covered. Need related marketing professionals who do things that I don’t cover? I have referrals for you.

What do you hope to be known for in your community?

As a designer, I hope to be known as someone who is versatile and professional… but even more importantly; friendly, caring, easy to work with.

 

What is your favorite thing to do in the South Bay?

Walking the Strand. Leisurely strolls and browsing the shops on Pier Ave or Riviera Village. Sunshine drives up and around Palos Verdes to hike and enjoy the sunset. Romantic dinners with my honey. Family dinners with our three kids.
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 *To schedule a complimentary 15 minute phone consultation for logo and marketing design, email studio@catlandrydesign.com and be sure to mention Weber Accetta Group!*

 

CONNECT WITH CAT:

Website – http://www.catlandrydesign.com/Cat_Landry_Design/Home.html

Facebook – https://www.facebook.com/cat-landry-design-graphic-design-for-print-web-112189388813025/

Knowing the Benefits of a Home Warranty Plan

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Buying a home is one of (if not THE) largest investments of your life. However, it does not have to be the most stressful investments of your life. It helps to be aware of certain steps that can be taken to help give you peace of mind throughout the home-buying process.

A home warranty plan is one way to safeguard your budget against unexpected and expensive system and appliance failures. With a home warranty plan, you can invest in a home with the knowledge that covered repairs will be resolved efficiently. It is important to note that home warranties are not insurance policies. They’re service contracts – essentially a company’s agreement to pay for fixing (or replacing) specified home components.

A basic home warranty plan costs around $350 to $500 a year. Sellers generally offer a year’s coverage as an incentive to potential buyers. As a buyer, it is important to remember that when you purchase a previously owned home, you are also purchasing used appliances and home systems that have accumulated normal wear and tear. Protect yourself against unexpected costs by carefully reading through the warranty plan offered by the seller. While tedious, doing so may save you a lot of money! A standard plan generally offers coverage for the following: heating systems, ductwork, plumbing, limited pest control, electrical, garage door opener, central vacuum, dishwasher, trash compactor, kitchen exhaust fan, oven, range, cook-top, microwave oven. The photo below (taken from Old Republic Home Protection) shows the average out-of-pocket costs for repairs or replacements for systems or appliances.

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If you do experience a problem, always contact your warranty provider before hiring a service provider (such as a plumber, technician, etc). Warranty providers have their agreements with their own network of qualified service providers and may not provide compensation if other contractors are used.

There are a few other general conditions that are helpful to be aware of:

  • Coverage is normally effective upon close of sale for a one-year term.
  • The damage must have become inoperative due to normal wear and tear
  • Only systems and appliances specifically mentioned are covered
  • The appliance must have been functioning in a safe and proper manner on the effective date of the contract
  • They must be properly and permanently installed and located within the main foundation of the occupied living space of the home and/or detached garage
  • The appliance must be designed for residential use
  • Home warranties charge a service call fee (also called a trade call fee) every time the warranty holder requests that a service provider come out to the house to examine a problem (whether the service is covered or denied)

*Be sure to double-check your specific plan, as each varies to some degree.*

In conclusion, a home warranty can provide reassurance to a homebuyer who has limited information about how well the home’s systems have been maintained. A warranty can also be helpful for someone who has just spent a large portion (if not all) of their savings to purchase a home and want to avoid any additional expenses. Warranty plans and providers are not perfect, but can save home owners a significant amount of money! Be sure to know what is included and covered in your plan!