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April 2003
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Qualifying For The Home Office Deduction
The Internal Revenue Service recently gave work-at-home owners a break on the home-office deduction when they sell their home, but owners can't enjoy the home-office deduction without meeting a round of qualifications.
As long as your qualified home-based business is in the same dwelling as your primary residence -- rather than some unattached structure on your property -- you don't have to allocate a home sale's capital gains between the home and the business, according to "Exclusion Of Gain From Sale Or Exchange Of A Principal Residence," U.S. Department of Treasure Decision 9030, published Dec. 24, 2002 in the Federal Register, Vol. 67, No. 247. That's a big switch from initial requirements set forth by the Taxpayer Relief Act of 1997.
"In the past, if you used 10 percent of your home for a home-based business, 10 percent of the gain on the sale would be subject to capital gain taxes and you couldn't use the exclusion on that portion," said Marie Sternberger, an enrolled agent from Sunnyvale, CA. Now, provided you meet the primary residency and other requirements, even if you operate a business from your home, you are entitled to the full tax exclusion on capital gains realized from the sale of your home, according to the IRS.
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LIBORmania
The LIBOR ARM is on a roll. Everyone knows that fixed rate mortgages are at historical lows and millions of homeowners are saving money by refinancing. But as short-term rates continue to fall, the temptation of taking out an adjustable rate mortgage increases.
It seems that the LIBOR ARM is the most attractive of the myriad of adjustable rates available. For those who are unfamiliar with the LIBOR, let me explain.
LIBOR stands for London Interbank Offering Rate. Basically, the LIBOR is the interest rate that European financial institutions charge each other for funds. Many American lenders offer adjustable rate mortgages that are tied to the LIBOR index. This wouldn't normally be newsworthy - there are lots of different types of ARMs available. The thing that makes the LIBOR index interesting is that the One-Month LIBOR rate is hovering at about 1.38 percent. As far as adjustable rate indexes go, that's pretty low. And most LIBOR ARMs are offered without charging points.
Here's the next thing: Various mortgage brokers and lenders are offering LIBOR-based adjustable rate mortgages with a margin as low as two percent. The margin is the amount that is added to the index in order to determine the interest rate.
The LIBOR's not for everyone. For those who are living in their dream home and will not be moving, lock into today's fixed rates and forget about it.
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How Good Is Your Roof?
Many of us are working hard just to keep a roof over our heads -- but how good is that roof? With April showers on the way, it might pay you to find out.
If you are in the market for a house, remember there's more to a dream home than a stunning floor plan. Replacing a roof can cost thousands of dollars, depending on the size of the roof and the style of materials you select. A leaking roof also can lead to messy and costly water damage.
The National Roofing Contractors Association says asphalt shingles remain the overwhelming roofing choice for U.S. homes. The shingles come with warranties ranging from about 20 to 40 years. However, Dave Flickinger, the NRCA's technical services manager, says the warranties "are not indicative of service life. The warranty covers material only. It has to be installed correctly." He says certain things will void a warranty, "such as hail and high winds." Flickinger also points out that 40-year shingles are relatively new and have not yet stood the test of time. In addition, warranties may not be transferable to new owners.
According to Flickinger, when you're sizing up a roof, "general appearance is the first clue." He warns you could be headed for problems "if you see shingles that are buckled, curled (turning up at the edges), or clawing (turning down at the edges)." A lot of shingle granules in your gutters is another bad sign.
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