Confusion With Smoke Detector Law 2019

Sale and rental transactions are not subject to requirement of new smoke detector law Several media outlets in New York are inaccurately reporting that sales and rentals of real property are subject to the requirements of a new smoke detector law that goes into effect on April 1, 2019. The articles and reports are claiming such things as, “If you’re going to sell your house, you’re not going to be able to sell it with open battery systems. You’re going to have to do it with the 10-year closed battery systems,” which is not an accurate statement.

According to the new law (General Business Law §399-ccc), the distribution, sale, offering for sale or importation of any solely battery operated (replaceable batteries like a 9-volt) is prohibited by law. All smoke detectors distributed, sold, offered to be sold or imported after April 1, 2019 must be hard wired or contain a 10-year non-removable and non-replaceable battery (sometimes referred to as a sealed battery). A copy of the law can be found below.

It should be noted that real estate sales and rentals are not subject to the requirements of the new law, pursuant to the language contained within the law itself. According to section 3, “The provisions of this section shall not apply to solely battery-operated smoke detecting alarm devices powered by a replaceable, removable battery that have been ordered by, or are in the inventory of, owners, managing agents, contractors, wholesalers or retailers on or before the effective date of this section.” (emphasis added).

As can be seen, the language specifically exempts owners and managing agents and as such, would make the requirements of the new law inapplicable to real estate transactions. However, if after April 1, 2019 the smoke detector needs to be replaced prior to or as part of the sale or rental, it must be replaced with a smoke detector that complies with the new law. The exemption only applies to pre-existing solely battery-operated smoke detectors.

Nothing prevents a REALTOR® from recommending that a seller or landlord upgrade their current solely battery-operated smoke detectors to the newer “sealed” or hard-wired smoke detectors if they believe that it will assist in the sale or rental of the property. It should also be noted that the life expectancy of smoke detectors is generally 10 years. After 10 years, the sensors can begin to lose sensitivity, making the smoke detector ineffective and possibly creating a dangerous condition for occupants. Even if the smoke detector still works when the test button is pressed, this confirms that the unit can still sound an alarm, not that the sensors are still working.

General Business Law § 399-ccc. Smoke detecting devices [Effective April 1, 2019]
1. It shall be unlawful for any person or entity to distribute, sell, offer for sale, or import any solely battery-operated smoke detecting alarm device powered by a replaceable, removable battery. All solely battery-operated smoke detecting alarm devices that are distributed, sold, offered for sale, or imported, shall employ a non-removable, non-replaceable battery that powers the device for a minimum of ten years.

2. All product packaging containing a solely battery-operated smoke detecting alarm device shall include the following information:
(a) the manufacturer’s name or registered trademark and the model number of the smoke detecting alarm device; and
(b) that such alarm device is designed to have a minimum battery life of ten years.

3. The provisions of this section shall not apply to solely battery-operated smoke detecting alarm devices powered by a replaceable, removable battery that have been ordered by, or are in the inventory of, owners, managing agents, contractors, wholesalers or retailers on or before the effective date of this section. The provisions of this section shall not apply to smoke detecting alarm devices that receive their power from the electrical system of the building, fire alarm systems with smoke detectors, fire alarm devices that connect to a panel, devices that use a low-power radio frequency wireless communication signal, or such other devices as the state fire administrator shall designate through its regulatory process.

2019 Tax Deductions for Homeowners: How the New Tax Law Affects Mortgage Interest

Article From HouseLogic.com
By: Leanne PottsPublished: December 21, 2018

Tax changes for 2019 change the landscape for homeowners. Tax season is upon us once again, and to make it even more interesting this year, the tax code has changed — along with the rules about tax deductions for homeowners. The biggest change? Many homeowners who used to write off their property taxes and the interest they pay their mortgage will no longer be able to.

Tax season is upon us once again, and to make it even more interesting this year, the tax code has changed — along with the rules about tax deductions for homeowners. The biggest change? Many homeowners who used to write off their property taxes and the interest they pay their mortgage will no longer be able to.

Stay calm. This doesn’t automatically mean your taxes are going up. Here’s a roundup of the rules that will affect homeowners — and how big of a change to expect.

Related: Are Closing Costs Tax Deductible?

Standard Deduction: Big Change

The standard deduction, that amount everyone gets, whether they have actual deductions or not, nearly doubled under the new law. It’s now $24,000 for married, joint-filing couples (up from $13,000). It’s $18,000 for heads of household (up from $9,550). And $12,000 for singles (up from $6,500).

Many more people will now get a better deal taking the standard than they would with their itemizable write-offs.

For perspective, the number of homeowners who will be able to deduct their mortgage interest under the new rules will fall from around 32 million to about 14 million, the federal government says. That’s about a 56% drop.

“This doesn’t necessarily mean they’ll pay more taxes,” says Evan Liddiard, a CPA and director of federal tax policy for the National Association of REALTORS? in Washington, D.C. “It just means that they’ll no longer get a tax incentive for buying or owning a home.”

So will you be able to itemize, or will you be in standard deduction land? This calculator can give you an estimate.

If the answer is standard deduction, you’ll be pleased to know that tax forms are easier when you don’t itemize, says Liddiard. Find instructions for IRS Form 1040 here.

Mortgage Interest Deduction: Incremental Change

The new law caps the mortgage interest you can write off at loan amounts of no more than $750,000. However, if your loan was in place by Dec. 14, 2017, the loan is grandfathered, and the old $1 million maximum amount still applies. Since most people don’t have a mortgage larger than $750,000, they won’t be affected by the cap.

But if you live in a pricey place (like San Francisco, where the median housing price is well over a million bucks), or you just have a seriously expensive house, the new federal tax laws mean you’re not going to be able to write off interest paid on debt over the $750,000 cap.

State and Local Tax Deduction: Degree of Change Varies by Location

The state and local taxes you pay — like income, sales, and property taxes — are still itemizable write-offs. That’s called the SALT deduction in CPA lingo. But. The tax changes for 2019 (that’s tax year 2018) mean you can’t deduct more than $10,000 for all your state and local taxes combined, whether you’re single or married. (It’s $5,000 per person if you’re married but filing separately.)

The SALT cap is bad news for people in areas with high taxes. The majority of homeowners in around 20 states have been writing off more than $10,000 in SALT each year, so they’ll lose some of this deduction. “This is going to hurt people in high-tax areas like New York and California,” says Lisa Greene-Lewis, CPA and expert for TurboTax in California. New Yorkers, for example, were taking SALT deductions averaging $22,000 a household.

Rental Property Deduction: No Change

The news is happier if you’re a landlord. There continue to be no limits on the amount of mortgage debt interest or state and local taxes you can write off on rental property. And you can keep writing off operating expenses like depreciation, insurance, lawn care, and utilities on Schedule E.

Home Equity Loans: Big Change

You can continue to write off the interest on a home equity or second mortgage loan (if you itemize), but only if you used the proceeds to substantially better your home and only if the total, combined with your first mortgage, doesn’t go over the $750,000 cap ($1 million for loans in existence on Dec. 15, 2017). If you used the equity loan to pay medical expenses, take a cruise, or anything other than home improvements, that interest is no longer tax deductible.

Here’s a big FYI: The new rules don’t grandfather in old home equity loans if the proceeds were used for something other than substantial home improvement. If you took one out five years ago to, say, pay your child’s college tuition, you have to stop writing off that interest.

4 Tips for Navigating the New Tax Law

  1. Single people may get more tax benefits from buying a house, Liddiard says. “They can often reach [and potentially exceed] the standard deduction more quickly.” You can check how much you’re likely to owe or get back under the new law on this tax calculator.
  2. Student loan debt is deductible, up to $2,500 if you’re repaying, whether you itemize or not.
  3. Charitable deductions and some medical expenses remain itemizable. If you’re generous or have had a big year for medical bills, these, added to your mortgage interest, may be enough to bump you over the standard deduction hump and into the write-off zone.
  4. If your mortgage is over the $750,000 cap, pay it down faster so you don’t eat the interest. You can add a little to the principal each month, or make a 13th payment each year.

Are Closing Costs Tax Deductible Under the New Tax Law?

By: Leanne Potts

Published: December 21, 2018

Here’s the scoop on what’s tax deductible when buying a house.

Are closing costs tax deductible? What about mortgage interest? Or property taxes? The answer is, maddeningly, “It depends.”

Basically, you’ll want to itemize if you have deductions totaling more than the standard deduction, which is $12,000 for single people and $24,000 for married couples filing jointly. Every taxpayer gets this deduction, homeowner or not. And most people take it because their actual itemized deductions are less than the standard amount.

But should you take it?

To decide, you need to know what’s tax deductible when buying or owning a house. Here’s the list of possible deductions:

Closing Costs

The one-time home purchase costs that are tax deductible are mortgage interest paid, real estate taxes, and some loan origination fees (a.k.a. points) applicable to a mortgage of $750,000 or less.

But you’ll only want to itemize them if all your deductions total more than the standard deduction.

Costs of closing on a home that aren’t tax deductible include:

  • Real estate commissions
  • Appraisals
  • Home inspections
  • Attorney fees
  • Title fees
  • Transfer taxes
  • Mortgage refi fees

Mortgage interest and property taxes are annual expenses of owning a home that may or may not be deductible. Continue reading to learn more about those.

Mortgage Interest

Yearly, you can write off the interest you pay on up to $750,000 of mortgage debt. Most homeowners don’t have mortgages large enough to hit the cap, says Evan Liddiard, CPA, director of federal tax policy for the National Association of REALTORS®. But people who live in pricey places like San Francisco and Manhattan, or homeowners anywhere with hefty mortgages, will likely maximize the mortgage interest deduction.

Note: The $750,000 cap affects loans taken out after Dec. 17, 2017. If you have an loan older than that and you itemize, you can keep deducting your mortgage interest debt up to $1 million. But if you re-fi that loan, you can only deduct the interest on the amount up to the balance on the day you refinanced – you can’t take extra cash and deduct the interest on the excess.

Home Equity Loan Interest

You can deduct the interest on a home equity loan or a second mortgage. But — and this is a big but — only if you use the proceeds to substantially improve your house, and only if the loan, combined with your first mortgage, doesn’t add up to more than the magic number of $750,000 (or $1 million if the loans were existing as of Dec. 15, 2017).

If you use a home equity loan to pay medical bills, go to Paris, or for anything but home improvement, you can’t write off the interest on your taxes.

State and Local Taxes

You can deduct state and local taxes you paid, including property, sales, and income taxes, up to $10,000. That’s a low cap for people who live in places where state and local taxes are high, says Liddiard. To give you an idea of how low: The average New Yorker has taken $21,000 in state and local tax deductions in past years.

Loss From a Disaster

You can write off the cost of damage to your home if it’s caused by an event in a federally declared disaster zone, like areas in Florida after Hurricane Michael or Shasta County, Calif., after a rash of wildfires.

This means standard-variety disasters like a busted water pipe while you’re on vacation or a fire caused because you left the toaster on aren’t deductible.

Moving Expenses

This deduction is also only for some. You can deduct moving expenses if you’re an active member of the armed forces moving to a new station.

And by the way, no matter who you are, if your employer pays your moving expenses, you’ll have to pay taxes on the reimbursement. “This will be a real hardship to many because it’s non-cash income,” says Liddiard.  Some employers may up the gross to provide cash to pay the tax, but many likely will not.

Home Office

This is a deduction you don’t have to itemize. You can take it on top of the standard deduction, but only if you’re self-employed. If you are an employee and your boss lets you telecommute a day or two a week, you can’t write off home office expenses. You claim it on Schedule C.

Related: 2 Ways to Claim Home Office Expenses

Student Loans

Anyone paying a mortgage and a student loan payment will be happy to hear that the interest on your education loan is tax-deductible on top of the standard deduction (no need to itemize). And you can deduct as much as $2,500 in interest per year, depending on your modified adjusted gross income.

Ways to Increase Your Eligible Deductions

There are some other itemize-able costs not related to being a homeowner that could bump you up over the standard deduction. This might allow you to write off your mortgage interest. Charitable contributions and some medical expenses are itemize-able, although medical expenses must exceed 7.5% of your adjusted gross income.

So if you’ve have had a hospital stay or are generous, you could be in itemized-deduction land.

Also, if you’re a single homeowner, it could be easier for you to exceed the standard deduction, Liddiard says. The itemized deductions on your house will probably more quickly break the $12,000 standard deduction threshold than a couple’s similar house will break their $24,000 threshold.

Tax-Savvy Home-Buying Ideas

If you’re a prospective homeowner with an eye to making the most efficient use of your tax benefits, here are a few ways to buy smart:

  • Especially in expensive areas, buy a less expensive home so you don’t hit the cap on mortgage debt and local and property taxes, says Lisa Greene-Lewis, a CPA and tax expert for TurboTax.
  • If you’re buying a higher price home, make a bigger down payment so your original mortgage doesn’t exceed the $750,000 cap.

How to Decide If You Should Itemize

To see whether you should consider itemizing, plug your numbers into this clever tool from TurboTax, and you’ll get their recommendation in just a few seconds.

Though every homeowner’s tax benefits will be a little different, in the end, you’re building equity, you’ll likely make money when you sell, and you have the freedom to paint your walls any color you want and get a dog.

Related: How the New Tax Laws Affect Homeowners

Home Loans 101

Article From HouseLogic.com
By: HouseLogic Published: February 27, 2018

With this super-simple breakdown of loan types, you won’t get overwhelmed — you’ll find the right mortgage.

When it comes to buying a house, most people know what they prefer: a bungalow or a condo, a hot neighborhood or a sleepy street

Mortgages, too, come in many styles — and recognizing which type you should choose is just slightly more involved than, say, knowing that you prefer hardwood floors over wall-to-wall carpeting.

First things first: To pick the best loan for your situation, you need to know what your situation is, exactly. Will you be staying in this home for years? Decades? Are you feeling financially comfortable? Are you anxious about changing loan rates? Consider these questions and your answers before you start talking to lenders. (And before you choose a lender, read this.)

Next: You’ll want to have an understanding of the different loans that are out there. There are lots of options, and it can get a little complicated — but you got this. Here we go.

Mortgages Are Fixed-Rate or Adjustable, and One Type Is Better for You

Let’s start with the most common type of mortgage, that workhorse of home loans — the fixed-rate mortgage.

A fixed-rate mortgage:

•Lets you lock in an start_tip 76 interest rate end_tip for 15 or 30 years. (You can get 20-year loans, too.) That means your monthly payment will stay the same over the life of the loan. (That said, your property taxes and insurance premiums will likely change over time.)

It’s ideal when: You want long-term stability and plan to stay put.

Here’s what else you need to know about fixed-rate mortgages:

A 30-year fixed-rate mortgage offers a lower monthly payment for the loan amount (for this reason, it’s more popular than the other option, the 15-year).
•A 15-year fixed-rate mortgage typically offers a lower interest rate but a higher monthly payment because you’re paying off the loan amount faster.
Now let’s get into adjustable-rate, the other type of mortgage you’ll be looking at.

An adjustable-rate mortgage (ARM):

•Offers a lower interest rate than a fixed-rate mortgage for an initial period of time — say, five or seven years — but the rate can fluctuate after the introductory period is over, depending on changes in interest rate conditions. And that can make it difficult to budget.
 •Has caps that protect how high the rate can go.

It’s ideal when: You plan to live in a home for a short time or you expect your income to go up to offset potentially higher future rates.

Here’s what else you need to know about adjustable-rate mortgages:

•Different lenders may offer the same initial interest rate but different rate caps. It’s important to compare rate caps when shopping around for an ARM.
•Adjustable-rate mortgages have a reputation for being complicated. As the Consumer Financial Protection Bureau advises, make sure to read the fine print.

A general rule of thumb: When comparing adjustable-rate loans, ask the prospective lender to calculate the highest payment you may ever have to make. You don’t want any surprises.

Conventional Loan or Government Loan? Your Life Answers the Question

Which fixed-rate or adjustable-rate mortgage you qualify for introduces a whole host of other categories, and they fall under two umbrellas: conventional loans and government loans.

Conventional loans:

•Offer some of the most competitive interest rates, which means you’ll likely pay less in interest over the period of the loan. •Typically you can get one more quickly than a government loan because there’s less paperwork.

Who qualifies? Typically, you need at least a credit score of 620 or above and a 5% down payment to qualify for a conventional loan.

Here’s what else you need to know about conventional loans:

•If you put less than 20% down for a conventional loan, you’ll be required to pay private mortgage insurance (PMI), an extra monthly fee designed to mitigate the risk to the lender that a borrower could default on a loan. (PMI ranges from about 0.3% to 1.15% of your home loan.) The upshot: The lender has to cancel PMI when you reach 22% equity in your home, and you can request to have it canceled once you hit 20% equity.

•Most conventional loans also have a maximum start_tip 78 43% debt-to-income (DTI) ratio, end_tip which compares how much money you owe (on student loans, credit cards, car loans, and other debts) to your income — expressed as a percentage.
Fannie Mae and Freddie Mac set limits on how much money you can borrow for a conventional loan. A home loan that conforms to these limits is called a conforming loan:

•In most cities, the maximum amount for a conforming loan is $453,100.
•In high-cost areas, such as New York City and San Francisco, the limit is $679,650. •Limits are revisited annually and are subject to change based on each area’s average home price.

A home loan that exceeds these limits is called a jumbo loan:

•Jumbo loans typically require a higher down payment (up to 30% for some lenders) and a credit score of at least 720. Some borrowers can qualify while putting down 20%, but their credit score has to be higher.)
•They also tend to have stricter debt-to-income requirements, generally allowing for a maximum DTI ratio of 38%.

There are practical considerations to take into account before getting a jumbo loan too, mainly: Are you comfortable carrying that much debt? The answer depends on your current financial situation and long-term financial goals.

Government loans:

•Include loans secured by the Federal Housing Administration (FHA), U.S. Department of Veterans Affairs (VA), and the U.S. Department of Agriculture (USDA) Rural Development.
•Are meant to stimulate the housing market and enable folks who may be unable to qualify for conventional loans to still become homeowners.
Who qualifies? That depends on which government loan you’re looking at.

If you’ve had trouble qualifying for a mortgage because of income limitations or credit:

FHA loans are used by a broad swath of people, including those with lower credit scores and income.

•You can get an FHA loan with a downpayment of 3.5% if you have a minimum credit score of 580. You can still qualify with a credit score below 580 — even with no credit score — but the start_tip 94 down payment end_tip and other requirements will be much higher.
•FHA loans conform to loan limits set by county; these limits typically range from $294,515 to $679,650 in high-cost areas. You can view the FHA mortgage caps for your county at hud.gov.
•If you get an FHA loan, you must pay an upfront mortgage insurance premium (MIP) and an annual premium of 0.85%. Currently, the MIP is 1.75% of the loan amount — so, $1,750 for a $100,000 loan. This premium can be paid upfront at the mortgage closing, or it can be rolled into the monthly mortgage payment.
Also, a heads-up — the date an FHA loan was issued affects the MIP.

If you received an FHA loan on or before June 3, 2013: You’re eligible for canceling MIP after five years, but you must have 22% equity in your home and have made all payments on time.
If you received an FHA loan after June 3, 2013: To stop paying MIP, you’d have to refinance into a conventional loan and have a current loan-to-value of at least 80%.
If you’re in the military, a veteran, or a veteran’s spouse:

•VA loans offer active or retired military (or a veteran’s surviving spouse) a mortgage with a 0% down payment.
•VA loans also can have more lenient credit requirements — typically around a minimum 620 credit score — and lower DTI requirements.
•The VA only allows lenders to charge 1% maximum to cover the costs of originating and underwriting the loan, so you save money at closing. There is, however, an additional upfront, one-time funding fee of 2.15%.
VA loans also don’t charge borrowers mortgage insurance — potentially helping you save a significant chunk of cash on your monthly payment.

Given the benefits, a VA loan is often the best mortgage option for people who qualify.

If your income is limited and you live in a small or rural town:

USDA loans are mortgages for limited-income home buyers in towns with populations of 10,000 or less, or that are “rural in character,” meaning that some areas that now have bigger populations are grandfathered in. You can see whether your town is eligible on the USDA’s website.

•USDA loans typically have lower interest rates than non-USDA loans.
•Down payments can be as low as 0%.
•USDA mortgages also have more lenient credit score requirements than conventional loans.
•Income limits to qualify depend on location and household size.
•USDA loans charge an upfront mortgage insurance fee of 1% of the loan amount and annual mortgage insurance premium of 0.35%.
•And USDA loan borrowers must buy a “modest home” — a property with a market value deemed reasonable for the area, though the USDA does not set specific price limitations.
Only a select number of lenders offer USDA loans; here’s a list of USDA-approved lenders nationwide.

If your job is to help people:

Niche programs, like the Neighbor Next Door from HUD, allows teachers, law enforcement officers, first responders, and government workers — as much as 50% — on eligible homes in revitalization districts.

Note: Downpayment assistance programs offer qualified buyers such things as grants and interest-free loans. Start with your state’s housing finance agency to find options.

Speaking of your lender: Ultimately, you’ll be working with your loan officer or broker to narrow down these choices, and to find a loan that works for you and your finances. (Just another reason why it’s important to choose a lender you’re comfortable with.)

Andrew McDermott will be able to offer some insight, too. And because I don’t earn a paycheck from your loan selection, my advice about mortgages would be impartial.

You know your stuff. And you know whom to ask for help. Who’s overwhelmed? Not you.