Guest Blogger: Kristin Hutchins
Don't Overspend on Furniture and Remodeling
You have just handed over a large portion of your life savings for a down payment, closing costs and moving expenses. Money is tight for most first-time homeowners. When you are a first time homeowner you are very excited and want to personalize and upgrade what may have been temporary apartment furniture for something nicer. Do not go on a massive spending spree to improve everything all at once. Just as important as getting your first home is staying in it. Give yourself time to adjust to the expenses of homeownership and rebuild your savings. The cabinets will still be waiting for you when you can afford them.
Don't Ignore Important Maintenance Items
One of the new expenses that accompanies homeownership is taking care of the repairs. There is no longer a landlord to call if your roof is leaking or if your toilet is clogged. While you should exercise restraint in purchasing the nonessentials, you should not neglect any problem that puts you in danger or could get worse over time. This could go from a small problem into a much larger and costlier one.
Hire Qualified Contractors
Do not try to save money by making improvements and repairs yourself that you aren't qualified to make. Your home is both the place where you live and an investment, and it deserves the same level of care and attention you would give to anything else you value highly. There's nothing wrong with painting the walls yourself, but hire professionals to do work you don't know how to do. This is the best way to keep your home in top condition.
Get Help with Your Tax Return
It is that time of year! Even if you hate the thought of spending money on an accountant when you normally do your returns yourself hiring an accountant to make sure you complete your return correctly and maximize your refund is a good idea. The best financial counseling we can give you in this blog today is homeownership significantly changes most people's tax situations and the deductions they are eligible to claim. Just getting your taxes professionally done for one year can give you a template to use in future years if you want to continue doing your taxes yourself.
Keep Receipts for Home Improvements
When you sell your home, you can use these costs to increase your home's basis, which can help you to maximize your tax-free earnings on the sale of your home. In 2008, you could have earned up to $250,000 tax free from the sale of your home if it was your primary residence and you had lived there for at least two of five years before you sold it. This assumes that you owned the home alone. If you owned it jointly with a spouse, you could each have gotten the $250,000 exemption.
Don't Confuse a Repair with an Improvement
Unfortunately, not all home expenses are treated equally for the purpose of determining your home's basis. The IRS considers repairs to be part and parcel of homeownership. For example, if you bought a foreclosure and had to fix a lot of broken stuff, the home is obviously worth more after you fix those items, but the IRS doesn't care. You did get a discount on the purchase price because of those unmade repairs, after all. It's only improvements, like replacing the roof or adding central air conditioning, which will help decrease your future tax bill when you sell your home.
Get Properly Insured
Your mortgage lender requires you not only to purchase homeowners insurance, but also to purchase enough to fully replace the property in the event of a total loss. But that's not the only insurance coverage you need as a homeowner. If you share your home with anyone who relies on your income to help pay the mortgage, whether it's a spouse or a child, you'll need life insurance with that person named as a beneficiary so he or she won't lose the house if you die unexpectedly. Similarly, you'll want to have disability-income insurance to replace your income if you become so disabled that you can't work.
These are all great tips to take as a new homeowner! Homeownership is the American dream and we want to make sure you stay in your home. Making sure to follow these tips is a great step in the direction of community building.