New 'Most Efficient' Label Adds Tier to Energy Star Ratings

Good morning my friends,

Today is Thursday. Still, the topic is about Energy Saving.

      Energy Star just launched a pilot program for a new designation that’s supposed to help me figure out how to do that. The new "Most Efficient" Energy Star label will be given to the top 5% of washers, heating and cooling equipment, televisions, and refrigerator-freezers that already bear the Energy Star designation. 

Although many of the first products to get the designation are pricey ones, it’s a positive step because virtually all the home appliances on the market already have the designation, which dilutes the value of the program for consumers. If you’re at a big-box home store shopping for a stainless steel dishwasher, you can choose from 95 products — 92 of which are Energy Star (the three that aren’t are budget-busting double-drawer models).

      If you’re choosing household products based on energy performance,we suggest you also check out Consortium for Energy Efficiency ratings. The highest-rated Energy Star products are on the low end of CEE’s ratings (and Energy Star isn’t shabby!).

Some people question the whole Energy Star program, saying it’s too easy to get certified. That’s an assessment the Government Accounting Office confirmed last year when it tricked the EPA into giving a gas-powered alarm clock and 15 other fake products the Energy Star label.
      That fiasco certainly had me wondering about the value of the program, but it sounds like Energy Star is at least moving in the right direction with this new most-efficient label.

Did you consider energy use the last time you bought an appliance? Do you think the “Most Efficient” Energy Star label is a positive step?

Resource from:

http://www.houselogic.com/blog/saving-energy/new-energy-star-label/

Quick Saving Tips for Real Estate Investors

Morning everyone~

Today is Tuesday. Hope you have a supreme week. 

For the second day of a new week, here are some quick tips to help you prepare for tax time.

• Don't Overtax Rental Income: Rent income is not subject to self-employment (social security) taxes. Too many tax accountants classify rent income as self-employment income causing the investor to pay another 15% in taxes.

• Create Valuable Depreciation Deductions: This is your most valuable deduction because it does not require you to spend any cash to get the deduction. You also get the deduction every year, plus when you sell, you have no recapture and don't have to pay any of these tax savings back by selling the property tax free via a 1031 exchange. You can extend these huge savings thru specialized compounding:

a) 5 year Personal Property: depreciate personal property over 5 years instead of 27 or 39 years. Examples include movable walls, kitchen cabinets, shelves, storage, carpeting and appliances.

b) 15 year land improvements – Land improvements are depreciated over 15 years.  Land improvements include; landscaping, fences, under ground sprinklers, paved surfaces, parking lots, etc.

c) 15 year Land improvements to building – Examples include; outside lighting and utility connections

d) Low land value maximizes depreciation deductions – The land portion of the cost of property is not eligible for depreciation deductions. Allocations toward depreciable land improvements reduce amount allocated to non-depreciable land.

e) Fully deduct remaining basis of components that are replaced (rehab)

• Generate Repair Deductions: This is where you want to use strategies to reclassify Rehab improvements into fully deductible repairs. There are many tax-saving benefits of classifying expenditures as repairs rather than capital improvements.

a) Be sure to separate invoices for each repair job between improvements and repairs.

b) Documents should be worded as 'repairs'. Certain words work in the taxpayer's favor such as; patch, temporary, minor, annual and repaint.

• Get More Deductions: Always look for overlooked deductions to get more savings such as: home office expenses, business travel and entertainment.

• Avoid Passive Loss Limitations: Deduct unlimited property tax losses even if they are over $25,000 or your income is over $150,000 as a real estate professional. Deductions can pile up so your properties will have paper tax losses which you want to fully deduct against your other income. Except for $25,000 of losses, rental property losses are subject to passive loss limitations.

This means real estate investors cannot deduct property tax losses against non-passive income such as salaries, business income, gains, IRA distributions, etc. To avoid this scenario, you must document at least 751 hours of time spent on the real estate property business. This will help you increase your cash flow each year.

• Avoid being a dealer: You must absolutely avoid the costly Dealer status. When you start doing real estate deals, the IRS may try to classify you as a dealer. This could be disastrous because you will be subject to the highest ordinary income tax rates plus social security taxes and alternative minimum taxes.

This means up to 50% of your hard earned money could disappear! Dealer profits also get taxed in full and cannot be tax-deferred. You can avoid this by by stating yourself as an 'investor'. There are many strategies to avoid the dealer status. One of the best is investment intent, which means to demonstrate the main purpose of quick sale profits is for investment purposes.

• Sell Your Properties Tax-Free: Avoid paying capital gains taxes on the sale of property. You can avoid the 25 – 30% on capital gains by:

a) 1031 Exchange: This is a 'rollover' of a like kind of properties that can avoid many tax liabilities. Examples include – rental houses, condos, duplexes and apartment building.

b) Reverse Exchanges – A way to bypass exchange deadlines and not rush into a bad deal. In a reverse exchange the closing is reversed so the replacement property is acquired before the closing of the relinquished property. This means you can do not have to rush when doing your deal and can look for below market bargains.

c) Self-Directed IRA – This is a great way to avoid taxes on gains, especially for quick flips. This strategy is recommended for real estate transactions that generate immediate income such as flips or options.

Some of the Best Tax breaks Are Available for Real Estate Investors

Good morning my dear clients,

Monday's topic still the Money&Finance.


      For Real Estate Investors or non-Investors taxes can be the biggest expense in one’s lifetime. Let me tell you first hand that Real estate has some of the BEST TAX BREAKS of any investment.

      As I am sure you are aware, the more you earn through your 9-5 job or any other source of income, the more you get taxed. The system is setup that way to tax hard workers and benefit investors. Have you ever looked at the bottom stub of your paycheck lately and seen how much the government takes from you? Wage income not only requires work, it gets taxed at a very high rate, plus the government takes social security, which is a system that may be bankrupt by the time you retire.

      Real estate has many tax advantages:

Capital Gains

The maximum federal tax rate on capital gains is 15%, whereas wage income is taxed up to 35%. There's state taxes also. Some states offer further discounts on capital gains taxes. Remember, according to capital gains tax laws, you are required to hold a property for 12 months or more before selling and that it be held for productive use (i.e., as a rental, not a long-term fix and flip).

Principal Residence Exemption

If you sell your residence, the first $250,000 is exempt from gain or $500,000 if you are married. Remember, this requires that the residence was used as such for two of the last five years.

1031 Exchanges

Under IRC Sec 1031, you can roll your profits from a rental property into another real estate transaction and defer paying taxes. Your tax basis rolls into the next property. The rules are rather stringent, in that the exchange must be completed with 180 days and the exchange property must be identified within 45 days of the sale of the relinquished property.

Interest Deduction

You get to deduct interest you pay on debt you have used to acquire your real estate.

Property and Real Estate Depreciation

For rental properties, you get a tax deduction for the "wear and tear" on the structure, even if the property increases in value! Thus, you can actually break even or make money, but on paper show a loss to offset other income.

Don't Pay Social Security Tax

Your income from real estate is general NOT subject to Social Security tax withholding. Regular employment income is subject to 15.3% tax on the first $97,000, and thereafter your earned income is subject to medicare withholding (which you may never get back in your lifetime the way things are going!).

It's not just how much or what you make, it's how much you keep. If you plan ahead wisely, you will be rewarded in keeping more of your income to invest and enjoy.

Tax Credits for Installing Solar Panels

      My dear clients, today is Energy Saving day. 
      A generous federal tax credit makes solar panels more attractive to the average homeowner, especially if electric bill are sky high.
      So our topic today is about solar panels.

Incentives lower cost of solar

      Solar-panel systems are classified by watts of capacity. Systems under 10 kilowatts—1 kilowatt equals 1,000 watts—are primarily for residential use. The average size of a residential solar-panel system is 5.2 kilowatts. In 2008, the installed cost of a system that size was $44,200, according to a report from the U.S. Department of Energy’s Lawrence Berkeley National Laboratory, or $8.50 per watt.

However, once local, state, and federal tax incentives were factored in, the installed cost of a 5.2 kilowatt system in 2008 fell to $29,120, or $5.90 per watt. Costs vary by state, but in general systems are cheaper in places like Arizona and California, where electricity is expensive, sunshine is plentiful, and solar has gained wider acceptance. Search the Database of State Incentives for Renewables & Efficiency for state and local incentives.

IRS expands federal tax credit

      An expansion of the federal energy-efficiency tax credit should slash the cost of solar even more. Systems installed between Jan. 1, 2009, and Dec. 31, 2016, are eligible for a tax credit equal to 30% of the cost. To qualify, the system must supply electricity to a residence and meet local building codes. In 2008, the federal tax credit was capped at $2,000.

      That means a 5.2 kilowatt system installed between 2009 and 2016 that costs $44,200 would, in theory, earn a federal tax credit of $13,260 vs. just $2,000 before 2009. That’s an extra $11,260 in savings, in addition to local and state incentives. (This is a simplified example. Consult a tax adviser.)

The tax break can be applied to a solar-panel system installed at your primary residence or second home. Take the credit for the tax year the system becomes operational. Use IRS Form 5695. The credit can’t exceed the total amount owed in federal taxes for that year, but it can carry over to future years. Save receipts and certification statements.

Reduce your electric bills

      A typical residential system should lower your electric bills by 25% to 50%, says Monique Hanis, a spokeswoman for the Solar Energy Industries Association. The average household pays about $100 a month for electricity, according to the Energy Department, so a solar-panel system should save you between $300 and $600 a year.

      The payback period will vary greatly depending on where you live, the size of your system and its post-incentives price tag, and future swings in electricity costs and consumption rates. Figure it’ll take anywhere from six to 18 years, says Hanis. Solar panels have a life span of 20 to 30 years. 

      Producing excess energy can accelerate how quickly you’ll recoup your investment. A battery can store extra electricity for later use, or you can sell surplus energy back to the utility company in a practice called net metering. Many cities have net metering in place, but check with your utility company before you install solar panels.

Breaking down the expenses

      Fifty-six percent of the cost of a residential system goes toward the solar modules themselves, the Berkeley Lab report found. The inverter, a device that converts thermal energy into household electrical current, accounts for 9% of the total bill. The remainder, 35%, goes toward things like labor and profit for the installer. A typical residential installation takes a day or two.

Before you install solar panels, be sure your roof is in good shape. If it isn’t, you might need to shell out $5,000 or more on repairs to make your roof structurally sound. This expense doesn’t count toward the federal tax credit. You might also need to cut down trees that block direct sunlight.

Energy Star, the federal program that promotes energy efficiency, doesn’t rate solar panels. Look for an installation company that offers a warranty on the system for at least 20 years. If feasible go with an installer that’s familiar with the permit process of your local zoning board. According to Hanis, getting a permit can be one of the most challenging aspects of a solar project.

Make your home efficient first

      Take fundamental steps to improve your home’s energy efficiency before resorting to solar panels. Conduct your own energy audit, seal windows and doors, and replace old appliances. Simply adding insulation to an attic can lower heating and cooling bills by 10% to 50%. A tube of caulk and a few rolls of fiberglass insulation cost a whole lot less than solar panels.



This article provides general information about tax laws and consequences, but is not intended to be relied upon by readers as tax or legal advice applicable to particular transactions or circumstances. Readers should consult a tax professional for such advice, and are reminded that tax laws may vary by jurisdiction.

resource from: http://www.houselogic.com/home-advice/tax-credits/tax-credits-installing-solar-panels/

Tax Tips for Rental Property Owners

      Hello everyone, a new week start. Are you ready?
      Our topic today is about Money&Finances.


      Many of the following top tax tips and strategies are applicable not only to rental property owners but may apply to most business owners.

1. Time Rental Income

      In future, tax rates are expected to increase from current historical low rates. If you expect rates to go up it might be better to accelerate income by receiving by January rental income in December. Income timing is not easy and you should consider its impact on various deductions.

2. Accelerate Rental Expenses

      There are many different types of expenses that can be accelerated to reduce rental income for the year. You can purchase goods and services needed for the rental property business, and pay the bills early. Qualifying expenses include advertisements for vacancies, printing, association memberships, business insurance, seminar fees, education courses, cell services, subscriptions, insurance, and utilities. You can also stock up on any office supplies, like printer paper and ink cartridges.

      Interest is generally one of the largest deductible expenses – so you can prepay the January mortgage payment to increase your interest expense for the current year.

      If you have employees that you pay for your rental business, prepay the withheld Social Security, Medicare, and unemployment taxes.

3.  Harvest Capital Gains or Losses

      The low 15 percent federal long term capital gain has been extended through 2012.  Consider tax loss harvesting to offset any current year gains or to accumulate losses to offset future capital gains that would be taxed at higher rates.

4. Employees Health Insurance Credit

      You can deduct the cost of health insurance for any employees of your rental business. Take advantage of the health insurance credit, which provides a credit worth up to 35% of premium costs.

5. Claim Home Office, Workshop, Garage Deduction

      If requirements are met, this is one of the best deductions as it enables conversion of non-deductible personal expense into a tax-deductible rental business expense.

      Besides deducting expenses for use of space at home for office work, you can deduct space used as work- shop for rental business. If you use your garage to store your tractor to cut grass or to hold furnishings, you can deduct expense for its use.

6. Hire Your Children and Put the Earned Money in IRA

      Consider hiring your children to work for your rental business part-time. Deduct their compensation and it is likely you will be moving the income from high tax bracket to lower tax bracket.

      In addition, unincorporated businesses do not pay FICA tax on wages paid to children under 18. Put the money earned in an IRA account for them. It is a great way to move money into an account that can grow faster through tax deferral.

7. Casualty, Disaster Losses

      Losses experienced by rental business due to casualty, disaster or theft may be tax deductible. If your rental business experienced a casualty or disaster loss, use the loss to your benefit. Do not forget to take the casualty and theft losses because of theft, floods, etc.

8. Claim Your Automobile Expenses

      Automobile expenses paid exclusively for your rental business can be fully deductible. You can select either the actual expenses method instead of standard mileage if the automobile incurred extensive expenses in 2011.

9. Claim Your Travel and Entertainment Expenses

       Deduct travel and entertainment expenses incurred when traveling for your rental business. If you travel overnight for your rental business, deduct your airfare, hotel bills, meals and other expenses related to that trip.

10. Expense Repair Costs

       Remember that repairs are expensed in the year that they occur while improvements are depreciated. Deduct the full cost of repairs that are necessary to keep your property in good working condition like fixing broken windows, gutters, leaks, locks, painting rooms, plastering, etc.

Bonus Tips

1. Increase Rental Property Asset Depreciation Expense

      Identify your rental property’s short life assets to depreciate them faster. Personal assets like air conditioners, refrigerator, carpets, clothes dryer, etc can be depreciated over 5-year life while land improvements such as fences, patio, sidewalk, etc. can be depreciated over 15 years. By separating assets and depreciating them separately, deductions are taken sooner.

2. Exclude Rental Income

      If you rented your vacation home or primary residence for less than 15 days, you can exclude the rental income on your tax return. In order to avail this tax benefit, the vacation home has to be considered your residence. In order for the property to be considered a residence, you or your family member have to use the home for 15 days at least. You may not be able to deduct any rental expenses but you can deduct interest, property taxes if you itemize deductions.

3. Installment sale

       The low 15 percent federal long term capital gain has been extended through 2012.  If you have sold a property on installment sale, consider options of triggering a gain on the contract so that you lock into the low 15 percent capital gain rate.