It may be better to sell that big home rather than keep it.

Provided by Deanna Pickering

You want to retire, and you own a large home that is nearly or fully paid off. The kids are gone, but the upkeep costs haven’t fallen. Should you retire and keep your home? Or sell your home and retire? Maybe it’s time to downsize.

Lower expenses could put more cash in your pocket. If your home isn’t paid off yet, have you considered how much money is going toward the home loan? The typical mortgage payment in the U.S. represents about 30% of gross income and about 50% of after-tax income.¹ When you move to a smaller home, your mortgage expenses may diminish and your cash flow may greatly increase – and don’t forget about interest savings over the life of the loan.

You might even be able to buy a smaller home with cash (if finances permit) and cut your tax liability. Optionally, that smaller home could also be in a region with lower income taxes and a lower cost of living.

You could capitalize on some home equity. Why not convert some home equity into retirement income? If you were forced into early retirement by some corporate downsizing, you might have a sudden and pressing need for retirement capital – another reason to sell that home you bought decades ago and head for a smaller one.   

The lifestyle reasons to downsize (or not). Maybe your home is too much to keep up, or maybe you don’t want to climb stairs anymore. Maybe a condo or an over-55 community appeals to you. Maybe you want to be where it seldom snows. On the other hand, you may want and need the familiarity of your current home and your immediate neighborhood (not to mention the friends attached). 

If you decide to downsize, it may not pay to wait. Anyone who wants to retire in the current economy needs all the financial resources that can be mustered. Of course, the real estate market will eventually improve; it depends on how long you want to wait for improvement. Some people want to retire and then sell their home, but it may be wiser to sell a home and then retire since homes tend to sit on the market these days. If you sell sooner instead of later, you can always rent until you find a smaller house that could save you thousands (or tens of thousands) of dollars.

Deanna Pickering is a Representative with 1st Global Capital Corp.

This material was prepared by Peter Montoya Inc., and does not necessarily represent the views of the presenting Representative or the Representative’s Broker/Dealer. This information should not be construed as investment advice. Neither the named Representative nor Broker/Dealer gives tax or legal advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. The publisher is not engaged in rendering legal, accounting or other professional services. If other expert assistance is needed, the reader is advised to engage the services of a competent professional. Please consult your Financial Advisor for further information.. www.petermontoya.com, www.montoyaregistry.com, www.marketinglibrary.net

Citations

1 – investopedia.com/articles/pf/07/downsize.asp [7/2/10]

On March 18, 2010, President Obama signed into law the Hiring Incentives to Restore Employment Act (HIRE). Here’s the basics:

As an employer, you will be exempt from paying the employer portion of SS taxes for the remainder of the year on new hires who were previously unemployed. To qualify, the employee must be hired between 2/3/10 and 1/1/11, cannot have worked more than 40 hours during the previous 60 days, is not hired to replace another employee unless the previous employee voluntarily left or was let go for cause, and is not a family member.

You claim the credit on your 941 starting in the 2nd quarter.

There is also a business tax credit for retaining these qualified employees. The credit is the lesser of $1,000 or 6.2% of the wages paid during the first 52-week retention period. Wages paid in the second 26-week period must be at least 80% of the wages paid in the first 26-week period.

We are here to assist you in taking advantage of this benefit and to help you comply with the requirements.

Wow!  Is February already gone?!  It feels like we just got started.  The thing I love most about tax season is seeing my favorite clients.  At the end of a day full of appointments I am exhausted.  Not because it was so hard… But – TRULY – because it was so enjoyable catching up on life and activities.  It’s amazing what people do in a year!

It’s that time of year again.  We’ve come to do the audit, and as much preparation as you’ve put into it, it just seems like there is something that was overlooked.  There was the invoice that wasn’t properly approved, or the voided check that got lost.  Maybe it was just that you didn’t remember that a employee left at the beginning of the year, and as a result salary expense is considerably lower than the year before.

Each month I will be discussing a different area of auditing.  I will be commenting on common errors, and ways to detect and correct those errors.  I will also be discussing new standards as they are issued by the American Institute of Certified Public Accountants (AICPA), and how they will affect different business entities.

I encourage you to come back to my blog often, and comments are always welcome and encouraged.  Thank you!!

2010 donations made in Jan. and Feb. can be deducted on 2009 returns if donors prefer. Eligible contributions can be made in cash or by check, credit card or cell phone text message. A copy of the cellular bill showing the donee’s name, the date of the gift and the amount will suffice to substantiate the contribution. Donations must be made to U.S. charities. Nonitemizers won’t benefit from this rule.

Welcome to our new website.  We’re excited about it and hope you will be too.  Watch for news articles and other information.  Also, be sure to check out our reading program to see what we are reading.