Today’s Challenge – Rent or Buy Your Home

With today’s economy it is often difficult to determine the best course of action for your finances. Home ownership is one of those difficult decisions. Do you take advantage of the low interest rates and purchase a home while it is a buyer’s market? Do you wait until the economy is more stable before you commit to a large long-term loan obligation? Kiplinger supplies you with a guide to determine what might be best for your unique financial situation and the market conditions of your area. Follow the link to read their article, Should You Buy or Rent Your Home? – Kiplinger.

There are tax advantages to owning a home over renting. Typically the combination of your mortgage interest and real estate property taxes added to state taxes, charitable donations and miscellaneous deductions will give you enough deductions to itemize rather than taking the lower standard deduction. This effectively lowers your taxable income and reduces your overall tax liability. While this is a great tax advantage, I recommend you do not include this in your assessment of your personal finances when determining if home ownership is right for you. If your assessment of your personal financial situation determines home ownership is the best move for you, let the tax savings be an added benefit to be used to increase your savings. There are far too many unknowns in the future as to what tax deductions may be eliminated or reduced, to enter into a long term obligation, dependent upon a tax deduction that is available today. Assess your finances without consideration of the possible tax savings based on current tax law and you will be in a far stronger financial situation no matter what changes are made in the future.

Planning is the key to financial success. Weigh your options carefully before choosing. Each individual must make a true assessment of their personal financial situation in relationship to their short-term and long-term goals. Separate your emotions from the numbers. What do the numbers tell you? Let the numbers guide you.

Related articles

• Why renters should consider buying a home (cbsnews.com)
• A 30- or a 15-year mortgage, which is right for you? (freedommortgage.com)
• TurboTax – Tax Deduction Wisdom – Should You Itemize? (turbotax.intuit.com)
• 9 New Reasons to Rent Instead of Buy (rentersinsurance.com)

Waving Red Flags to the IRS?

“Worried about an IRS audit? Avoid what’s called a red flag. That’s something the IRS always looks for. For example, say you have some money left in your bank account after paying taxes. That’s a red flag.” – Jay Leno

Jay Leno’s definition of red flags differs from most tax professionals. The professionals at Kiplinger have a video that explains three red flags from their complete list. Find the complete list on their website.

Red Flags for IRS Auditors Video

Red flag items indicate these are areas the IRS watches for deductions they can potentially disallow. It is important to understand the rules for eligibility for these deductions to ensure you qualify to take the deduction. Equally important, you must retain your receipts for these deductions. Even if you are eligible to take the deduction, without receipts, you may be disallowed the deduction during an audit.

If your tax return includes red flag items, I advise you to consult with a tax professional. Understanding tax law, your rights as a taxpayer and how best to apply these to your personal tax situation, requires a seasoned professional who stays current on developments with the ever-changing laws. Fear of audit should not dissuade you from taking a legitimate tax deduction, but being prepared will help ensure you are allowed the deductions during an audit. Contact a tax professional to discuss your personal tax situation to maximize your deductions and minimize your tax liability.

Related articles

• What’s the Difference Between an Audit, Correspondence Audit, and an Adjustment Letter? (turbotax.intuit.com)
• Tax Audit Red Flags: 11 Things That May Get the IRS to Pick You (dailyfinance.com)
• TurboTax – Handling Notices from the IRS (turbotax.intuit.com)
• TurboTax – Top Five Ways to Avoid a Tax Audit (turbotax.intuit.com)

Welcome World!

It is my pleasure to introduce you to Holt Accounting & Tax Professionals, LLC, providing current information in accounting and taxes. I am happy to offer my 30 years of experience to inspire individuals and businesses to achieve their financial goals, by offering real solutions to the many challenges they are facing today.

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