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real estate

Monday’s need-to-know money news

June 21, 2021 By Liz Weston

Today’s top story: Are cash offers better for home sellers? Also in the news: A new episode of the Smart Money podcast on savings tips and the Child Tax Credit, 4 smart insurance moves for hurricane season, and how to find unclaimed money that’s owed to you.

Are Cash Offers Better for Sellers?
An all-cash offer for your home might seem like the golden ticket, but take the time to weigh all your options.

Smart Money Podcast: Savings Tips and Updates to the Child Tax Credit
Saving money can involve both cutting expenses and knowing how to make saving easier for you.

4 Smart Insurance Moves to Make for Hurricane Season
Checking your coverage and deductibles in advance can help you protect yourself financially.

How to Find Unclaimed Money That’s Owed to You
Finding your unclaimed property.

Filed Under: Liz's Blog Tagged With: cash offers, child tax credit, hurricane season, Insurance, real estate, savings tips, Smart Money podcast, unclaimed property

Monday’s need-to-know money news

June 14, 2021 By Liz Weston

Today’s top story: The pros and cons of selling your home to an iBuyer. Also in the news: A new episode of the Smart Money podcast on travel insurance and buying an electric car, 5 pandemic credit card habits to carry forward, and preparing your wedding budget for the reception resurgence.

Pros and Cons of Selling Your Home to an iBuyer
Figuring out your priorities — such as having a flexible schedule, getting the best price or minimizing stress — can help you decide whether selling to an iBuyer could work for you.

Smart Money Podcast: When Travel Insurance Is Worth It and Buying an Electric Car
What it offers, how much it costs and when you should purchase it.

5 Pandemic Credit Card Habits to Carry Forward
Among credit card holders whose credit limits were cut during the pandemic, 93% say their financial views or strategies changed because of it.

Is Your Wedding Budget Ready for the Reception Resurgence?
Wedding celebrations are back.

Filed Under: Liz's Blog Tagged With: credit card habits, electic cars, iBuyers, pandemic, real estate, Smart Money podcast, travel insurance, wedding receptions

Q&A: This $1 house deal comes with elder care responsibility. It could get complicated

June 14, 2021 By Liz Weston

Dear Liz: My father-in-law died recently. My mother-in-law is not well enough to live alone. My husband has a brother and a sister who would like my husband and me to buy my in-laws’ big, old home for $1, take care of my mother-in-law 24/7, and make 60 years’ worth of updates and repairs to the house. I see plenty of downsides to this arrangement, but no upside. Is there a way this deal can work for us, and not just for the other siblings?

Answer: The upside is that you would own the house. Although the home may not be in great shape, it presumably is an asset with some value. Whether it has enough value to be worthwhile, and whether you want to acquire it this way, are open questions.

If you and your husband buy the home for $1, the IRS will assume that your mother-in-law gave the two of you her property, and that can be problematic. The difference between the sale price of the home and its fair market value would be treated as a gift for gift tax purposes, said Mark Luscombe, principal analyst for Wolters Kluwer Tax & Accounting. Your mother-in-law probably wouldn’t owe gift taxes, but she likely would have to file a gift tax return, and the gift would use up part of her lifetime gift and estate tax exemption.

If the home is a gift, you get her tax basis, as well. If instead she bequeathed the home to you and your husband in her will, the home would get a new, stepped-up value for tax purposes. How big a deal this might be depends on a lot of factors, including which state the home is in, so you’d need to consult a tax professional for details.

On the other hand, taking title to the home before your mother-in-law dies ensures that you and your husband actually get this asset. If it’s left in a will, your mother-in-law could change her mind and leave it in full or in part to someone else. If she doesn’t have a will, the house would be divided according to state law, which probably means your husband would have to share the asset with his siblings.

There are other aspects to consider. Taking care of another person can be costly: Caregivers spend nearly 20% of their personal income on out-of-pocket costs related to helping a loved one, according to an AARP study in 2019.

Also, more than half of family caregivers adjust their work hours by taking time off, reducing their hours or quitting altogether, AARP researchers found. In addition to losing income, they can lose promotions, job security and opportunities to save for retirement.

Caregiving also is associated with higher levels of stress, worse health and increased risk of death, according to the Centers for Disease Control.

Before you take on this task, consider hiring a geriatric care manager to help you assess your mother-in-law’s needs and discuss alternatives. You can get referrals from the Aging Life Care Assn.

Filed Under: Elder Care, Q&A Tagged With: elder care, q&a, real estate

Wednesday’s need-to-know money news

June 2, 2021 By Liz Weston

Today’s top story: How a mortgage nerd bought a house in a seller’s market. Also in the news: Why you should consider a second city trip in 2021, what changed while you were ignoring travel, and why travel is more expensive this summer.

How a Mortgage Nerd Bought a House in a Seller’s Market
Buying a house was super-hard, and I write about homebuying for a living. If you’re wondering how to pull it off, you’re not alone. Here’s what I did.

Why You Should Consider a ‘Second City’ Trip in 2021
Travelers are less interested in visiting big cities this summer. Here are some good alternatives.

What Changed While You Were Ignoring Travel?
Catch up on what happened in the travel industry while you were staying home.

7 Reasons Travel Is More Expensive This Summer
A look at the prices.

Filed Under: Liz's Blog Tagged With: real estate, seller's market, travel costs, travel tips

Q&A: Taxes on a home sale

June 1, 2021 By Liz Weston

Dear Liz: My wife wants to sell our home of three years for a $300,000 profit after an extensive remodel and move into our rental home. She wants to stay there for two years and then sell to take advantage of the capital gains exemption. If we do it her way, we lower our monthly mortgage payment but lose the yearly rental income of $30,000. Our income is around $130,000. Any input?

Answer: Each homeowner can exclude up to $250,000 of home sale profits from capital gains taxes if they have owned and lived in a property as their primary residence for at least two of the previous five years. Married couples can exclude up to $500,000. This tax break can be used repeatedly.

The federal capital gains tax rate is currently 15% for most people, so the full $500,000 exemption could save a seller $75,000 in federal capital gains taxes. If your state or city has an income tax, you could save there as well. California, for example, doesn’t have a capital gains tax rate, so home sale profits would be subject to ordinary income tax rates of up to 13.3%.

The math is a little different when you move into a property you’ve previously rented out, said Mark Luscombe, principal analyst for Wolters Kluwer. Over the years, you’ve taken tax deductions for depreciation of your property. When you sell, the Internal Revenue Service wants some of that benefit back, something known as depreciation recapture.

When you sell a former rental property, some of the gain will be taxed as income, even if you’ve converted the home to personal use, Luscombe said. The maximum depreciation recapture rate is 25%.

A tax pro can help you figure out the likely tax bill. Any tax savings would be offset by the net result of a move, such as the lost rental income (minus the lower mortgage payments) and the substantial costs of selling, including real estate commissions and moving expenses.

It’s not clear if you’ve already remodeled your current home. If you haven’t, please think twice about an extensive remodel if you plan to sell, because you probably won’t get back the money you spend. Home improvement projects rarely return 100% of their cost. You’ll typically get a better return by decluttering, deep cleaning, sprucing up the yard or putting on a new coat of paint.

Filed Under: Q&A, Real Estate, Taxes Tagged With: q&a, real estate, Taxes

Monday’s need-to-know money news

May 3, 2021 By Liz Weston

Today’s top story: How you can recover from a bounced check. Also in the news: A new episode of the Smart Money podcast on pet scams and buying different home types, the mortgage outlook for May, and how to find out if you qualify for a monthly broadband subsidy.

How You Can Recover From a Bounced Check
If you’ve bounced a check, ask your bank if it can waive any fees you’ve incurred, and get overdraft protection.

Smart Money podcast: Pet Scams and Buying Different Home Types
Common scams people fall victim to and how to avoid them.

Mortgage Outlook: May Rates Are Just Waiting on a Trend
How April rates flipped the script.

Do You Qualify For a $50 Monthly Broadband Subsidy?
Millions without broadband now qualify.

Filed Under: Liz's Blog Tagged With: bounced check, broadband subsidy, mortgage outlook, pet scams, real estate, Smart Money podcast

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