Wednesday, February 15, 2017

Mortgage Home deduction that you cannot deduct

Foreign words for some of you - acquisition debt. I bet most of you never heard of it. If you don't own a property, you can sleep better at night. For the rest of you, you need to know this - because your accountant may not know this, nor your mortgage broker, and you might be on the hook with IRS.

Let's use a real example. It would be easier for you to understand an "acquisition debt" gibberish.

You are one of those lucky families that bought a $500k house, taking out a $400k mortgage and you are lucky you did not buy it at the top of the of the real estate market. And in with time, you paid some of your principal down, so you now owe only $200K to the bank.

But, a real estate market has been appreciating, your house is now worth $700k; a good rate to refinance, all stars align for you, and you refinance taking out $500k loan happily paying off previous mortgage bank what you owe - $200k, And you are pocketing $300k in cash to pay for your child's upcoming college education - you are a good parent after all!

Well, here is where your acquisition debt problem begins.
According to IRS, your acquisition debt is the original outstanding mortgage balance of $200k even though you paid it off via refinance. By law, you are allowed to add a $100k equity limit to your acquisition debt, so your acquisition debt limit is now $200k + $100k = $300k. With me so far?

But, you have borrowed $500k, so you are $200k short. $200k is almost ~30% of your refinance amount, so only ~70% of the interest in your primary home interest is tax deductible. I bet you thought you can deduct it all.

Well, IRS had NOT been scrutinizing this little known acquisition debt of yours, but it is changing. If you look at your 2016 tax form (1098) from your mortgage bank, you would see something you have never seen before:
1. IRS is now requiring banks to report mortgage origination date (Box 3)
2. IRS wants to know if an address of property securing the mortgage is same as payer's address. (Box 7)

Believe it or not, IRS is trying to curb the biggest deduction in US tax code.

Tuesday, February 14, 2017

Verizon "Unlimited" with FINE PRINT

For those who are interested, I have more details on Verizon unlimited plan that just has been introduced. But, before I go into details, let me mention that AT&T is expected to come up with some matching plan quite soon, so don't rush switching the carrier just yet.

So, first of all, there is no such thing, as unlimited plan. All plans are limited...for all carriers.
New Verizon "Unlimited" plan is actually limited to 22GB per device (AT&T-22GB, T-Mobile-28GB, Sprint-23GB), so after kicking the limit, you may see some throttling if towers are busy (how much throttling, Verizon does not say, but you get to be behind in the line).

The plan, multi-line one, in particular is calculated as following:
$110 - for unlimited data plan
$-10 for signing up for electronic statements and Auto-Pay (by e-check, ECH, debit card, but no CC - wow! forget the miles!)
$20 - for each additional device (smart phone, dumb phone, tablet, etc)
~ up to 10-devices on the same plan

So, family of 4 would pay $100+$80=$180 OR same as $45/per device
Sign up 10-devices, $100 + $200 = $300 OR same as $30/per device, not bad if you have a big family.

++ taxes and fees, always!

What do you get besides "unlimited" data?:

* Unlimited texts

* Unlimited talk, including to/from Mexico and Canada (if you are immigrating or being deported into Mexico/Canada, grab a new plan...before you go)

* 10GB for each device /per billing cycle for Sharing data - aka HotSpot. After that, hotspot speed goes to 3G regardless how busy Verizon is, but unlimited...good luck there... who uses 3G now-days? The good part, if you use it a lot, keep switching your Hotspot devices to keep 4G speeds floating..

* 500 Mbg/day data in over 100-Countries; You can buy additional data for $10/day. The fine print says you really have to be a visitor, not living in one of those 100-countries. Otherwise, they kick you out of the plan.


The cream on the cake - this is all introductory pricing, so it is subject to change based on what competition does.

I am sure someone will ask - what about a single line. Hmm, you do not want to be single in this case :)

It would cost you around $80 - just to compare Sprint offers 5-lines for $ much for the competitive pricing.