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Having started looking to buy a home a few weeks ago, I've been trying to read up on Alternative Minimum Taxes to get an idea of where I might stand, financially. I am seeing some horror stories about this tax, and that it will apply to about 95% of couples filing jointly and earning between $100K-$200K annually, unless Congress takes some action and makes some adjustments to it.
I have seen that, especially in a state like NJ, with ultra-high property taxes, this tax can cost the average couple (per above) an additional $2,000-$3,000 per year in federal taxes.
I have also read that starting in 2010, even your deduction for mortgage interest is going to be hit.
So, if we can no longer deduct high property taxes, nor mortgage interest, on our federal taxes, does it really make any sense to try to buy a house? It seems like this is potentially going to make more real estate stagnate on the market for a very long time, and prices (and values) will continue to drop, even after next year.
Forgetting the state of the housing market, and assuming now is the BEST time to buy if you can afford it, why would buying NOW be a problem? You'd have at most 1 or 2 months of taxes and mortgage to deduct. Assuming you rent now, you'd probably end up taking the standard deduction.
We only owed AMT one time, after a rather lucrative bonus I received. Otherwise we were well within the limits.
Have the AMT rules changed for 2010 and if they did, wouldn't it apply to 2011 tax year?
My guess is that this would not even cross the minds of 95% of people thinking about buying a house. So I think any impact would be very small.
Maybe correct. But I was only made aware of it this past weekend, and I've been trying to get my hands around understanding it. So I wanted to post it here, as it might make a few folks take notice and be aware of it's potential imapact on their finances.
Thanks so much for your input here. I am open to ALL opinions.
Forgetting the state of the housing market, and assuming now is the BEST time to buy if you can afford it, why would buying NOW be a problem? You'd have at most 1 or 2 months of taxes and mortgage to deduct. Assuming you rent now, you'd probably end up taking the standard deduction.
I don't WANT to forget the state of the housing market. It's this state that has finally put the idea of owning a house within my grasp. Actually, we're not looking to buy THIS year, but springtime of 2011 looks great, as my lease will be coming up for renewal, and finances should be in order (and also, I'll have a better idea about where NJ's property taxes are going to wind up). So it's actually 2011's taxes that have become an "unknown" for me, and I need to ensure that I budget properly.
Quote:
Originally Posted by tahiti
We only owed AMT one time, after a rather lucrative bonus I received. Otherwise we were well within the limits.
Have the AMT rules changed for 2010 and if they did, wouldn't it apply to 2011 tax year?
As I understand it, they HAVE changed ... or at least, they haven't been adjusted, as they were in the past several years. Looks like it's going to hit more people ... for more money, than in years past ... and yes, into future years. I am hoping Congress will step in and make some adjustments as they did in the past.
I don't WANT to forget the state of the housing market. It's this state that has finally put the idea of owning a house within my grasp. Actually, we're not looking to buy THIS year, but springtime of 2011 looks great, as my lease will be coming up for renewal, and finances should be in order (and also, I'll have a better idea about where NJ's property taxes are going to wind up). So it's actually 2011's taxes that have become an "unknown" for me, and I need to ensure that I budget properly.
As I understand it, they HAVE changed ... or at least, they haven't been adjusted, as they were in the past several years. Looks like it's going to hit more people ... for more money, than in years past. I am hoping Congress will step in and make the adjustments.
sorry, i wasn't trying to say whether it was a good time or not or whether you should or not, i was just saying that "barring whether it's a good time" (because someone would probably chime in and tell you not to buy because the market sucks).
ok, i thought you meant NOW as in literally within the next month or so.
do you have a link with the changes to AMT? the link you provided before doesn't really address changes, from what I can see, it just shows the rise is effective tax rate over the past few years. i'd like to dig more into this!
do you have a link with the changes to AMT? the link you provided before doesn't really address changes, from what I can see, it just shows the rise is effective tax rate over the past few years. i'd like to dig more into this!
Some of what I've posted here came from an email I received from an accountant. But I have also found and read this: 2010 Taxes
The one point that was in the email from the accountant, that I cannot seem to corroborate with online searches, is the elimination of Mortgage Interest as a deductible. OUCH! That would hurt a lot of people. Has anyone got any information about this actually being part of the plan?
Some of what I've posted here came from an email I received from an accountant. But I have also found and read this: 2010 Taxes
The one point that was in the email from the accountant, that I cannot seem to corroborate with online searches, is the elimination of Mortgage Interest as a deductible. OUCH! That would hurt a lot of people. Has anyone got any information about this actually being part of the plan?
thanks. this list shows some good things too, imho.
i cannot imagine mortgage interest will not be deductible.
as far as the "bad" stuff - here's what stuck out:
# Additional deduction for state and local property taxes for those who don’t itemize
**i think most new homeowners itemize so this wouldn't apply
# Election to itemize state and local sales taxes instead of state and local income taxes
** this really doesn't apply to NJ since nearly everyone would deduct income taxes. this benefits ppl in no tax states like washington.
i don't see anything listed there affecting AMT for a homeowner in NJ.
thanks. this list shows some good things too, imho.
i cannot imagine mortgage interest will not be deductible.
as far as the "bad" stuff - here's what stuck out:
# Additional deduction for state and local property taxes for those who don’t itemize
**i think most new homeowners itemize so this wouldn't apply
# Election to itemize state and local sales taxes instead of state and local income taxes
** this really doesn't apply to NJ since nearly everyone would deduct income taxes. this benefits ppl in no tax states like washington.
i don't see anything listed there affecting AMT for a homeowner in NJ.
Cool! Thanks Tahiti. When I read this stuff, it all becomes gobbledygook in my mind. I really don't understand a lot of what's written, the terminology, etc.
FWIW, I just found THIS: Changes to the Mortgage Tax Deduction? , which DOES address the Mortgage Interest Deduction. It's conclusion is that "since the bill doesn’t have much support – given current economic conditions – and it seems unlikely that the deduction will be phased out any time soon". So it looks like I can rest more easily, and continue planning to buy in a few months.
I know there was talk of eliminating the mortgage interest deduction for everyone. I can't fathom enough politicians would have the b alls to do this.
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Actually, we're not looking to buy THIS year, but springtime of 2011 looks great, as my lease will be coming up for renewal, and finances should be in order (and also, I'll have a better idea about where NJ's property taxes are going to wind up). So it's actually 2011's taxes that have become an "unknown" for me, and I need to ensure that I budget properly.
