Tax Time Is Prospecting Time

April 15 is coming fast.

“Big deal — what’s your point?” you ask.

Good question: buyers and sellers want and need professionals to help them with their real estate needs. So my point is this: You can use this looming date to your advantage – you can use it as a reason to get in front of your past clients, and prospective buyers and sellers. The tax landscape is always changing and if you’re up on those changes, that’s just one more reason to be talking with prospects and for buyers and sellers to choose you as their agent.

Be the pro who knows!

Look around at some of your competitors – how many of them would you consider to be pros about real estate tax information? My guess is not many. This is a perfect opportunity to stand out from the crowd. Knowing tax breaks for homeowners is, in my book, a must. Here are some key items from the National Association of Realtors you should know and share with past clients and prospects:

1. Mortgage Interest Deduction: No big surprise here but in case you didn’t know, homeowners who itemize their deductions can deduct the interest paid on a mortgage with a balance of up to $1 million. Remind your past clients about this and put a feather in your cap. Oh, and get this little tidbit: Americans save about $100 million every year when they deduct mortgage interest on their tax returns.

2. Home Improvement Loan Interest Deduction: Homeowners can deduct the interest on home equity loans they use to make capital improvements in their homes. And on loans with balances of up to $100,000, the interest is tax-deductible for a homeowner who uses the loan to make improvements such as adding square footage, upgrading the components of the home or repairing damage from a natural disaster.

3. Energy Efficiency Upgrades/Repairs Deduction: A related home improvement deduction is that homeowners can deduct the cost of building materials used for energy efficiency upgrades to their home. This is actually a tax credit applied as a direct reduction of how much tax the homeowner owes, not just a reduction in taxable income. Insulation, doors, new roofs, water heaters and other items qualify for the energy efficiency credit.

4. Private Mortgage Insurance (PMI) Deduction: Homeowners who make a down payment of less than 20 percent usually have to pay private mortgage insurance. If the mortgage originated after January 1, 2007, and the buyer has PMI, it can be deducted. The deduction is phased out, 10 percent per $1,000, for taxpayers who have an adjusted gross income between $100,000 and $109,000 and those above that level don’t qualify. Also know that this deduction won’t be available next year unless Congress renews it for 2014.

5. Mortgage Points/Origination Deduction: Homeowners who paid points (or origination fees) when they bought their home or refinanced can usually deduct those points on their tax returns. On a home purchase loan, taxpayers can deduct all the points paid in the same year. On a refinance loan, the points must be deducted as an amortization over the life of the loan. Many taxpayers forget about this amortized benefit over time, so it’s important to keep good records on the deduction of points on a refinance.

Let me hear from you. What opportunities are you using to stay in touch with past clients or prospects? Do you feel you’re up on the latest tax rules for real estate? If not, will you take time to do that this month?

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