The added value, or extra tax breaks from owning your home

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When it comes to homebuying, or owning a home, you’re used to hearing that the interest on your loan is tax deductible. But there are many more possibilities for tax breaks related to

owning your home in the United States. Because you may be in the process of buying your first home, or you have bought a home for the first time in the United States, some of the terms mentioned here may be new to you. To that end, here’s a handy Dictionary of real estate purchase and lending terms that I wrote a while back. Keep it handy, and let’s see if I can help you save some money on taxes next year!

State tax
It may seem unimportant but if you own a $500,000 home in Maryland, that’s a $5,500 property tax that you can deduct on next year’s return.

Points!
If you close on a home loan this year, keep in mind that both origination and rate discount points are deductible; that’s because the IRS considers them interest paid on a loan which, as I mentioned at the start of this post, everyone knows you can deduct on your tax return. Some are deductible all at once, as happens with the purchase of a first home, or on a loan to build your first home. Others are deductible over the life of your loan. The best way to figure out how to deduct the points on your loan(s) is to visit the IRS’s webpage on home owner deductions.

IRA withdrawal for down payment
If you are a first/time homebuyer, you can withdraw up to $10,000 penalty-free from your

IRA account if you use it as a down payment. Spouses, children and parents can help by doing the same. This is not a tax deduction, but it is penalty free and that is a tax break on its own.

Note: keep in mind that I stated that the IRA withdrawals for home buying are penalty-free. The money you withdraw is still taxable income that you will have to include in next year’s tax return.

PMI and FHA mortgage insurance premiums
Private mortgage insurance, a lender-mandated insurance for homebuyers who lack or are short on their down payments, can be deducted on a tax return, as long as their income is below a certain limit. FHA mortgage insurance premiums may also be deducted. Ask your tax preparer or check the IRS Home Mortgage Interest Deduction instructions to see what qualifies (IRS tax forms are actually understandable if we sit down and follow the instructions).

Home repairs
Home repairs are often a necessary evil. Others, we just like to make our home into a place that is more suited to our tastes, or nicer to live in. Whatever the reason, there are two tax savings related to home improvements:

A wind tree.

• If you take a home improvement loan of less than $100,000, the interest on that loan will be deductible on your future tax returns; and
• While the cost of the repairs is not tax deductible, it is deductible from capital gains the day you choose to sell the home, and that will save you on that year’s tax return. 

And speaking of home improvements, let’s talk about how you can save even more on those.

Energy efficiency credits
I am sad to report that the $500 tax credit for the purchase of energy efficient equipment (like energy-saving windows, storm windows and doors, insulation) expired at the end of 2016 and has not been renewed.

Nonetheless, there’s a much greater Renewable Energy Efficiency Property Credit that can save you a lot on your next tax return. If you install renewable energy-consuming equipment, you can get a tax credit of up to 30% of the cost, including the cost of installation. Solar panels, solar heaters, fuel cells, small wind energy equipment and

geothermal pumps all qualify. Clean energy that saves you money, helps the planet, and provides tax credits? Bliss!

And last, but not least…

Damage losses
Sometimes bad things can happen to our home: flooding, vandalism, fire, storm damage; these things happen and insurance doesn’t always cover us for everything we lost. If this is the case, and you end up paying a lot to replace lost items or destroyed property, if insurance deductible that you’re asked to pay exceeds 10% of your Adjusted Gross Income (see box to the left), or the repairs that you’ve had to make on your own exceed that amount, keep documentation and receipts for all of it, as you will receive a tax break for it.

Valuable information

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Safety deposit boxes are things we see in James Bond movies, and we tend to think that they’re a luxury for those who have lots of valuables, or something to hide. The reality is that they’re the best way to protect valuables that are not good to have at home.

Most people have home insurance against theft or destruction of various types. That’s why,

Coin collections usually
fit in safety deposit boxes.

when you consider whether you need a safety deposit box, you should do so keeping in mind those objects that are difficult or impossible to replace not just from the economic, but the personal standpoint; also consider documents that are valuable to you but you don’t need to have on hand all the time:

• The deed to your home
• Deeds to investment properties
• Long term investment bonds
• Family marriage, divorce and death certificates 
• Inherited valuables
• Special jewelry that you use only on very special occasions 
• Pictures or an electronic file, plus an inventory of insured home valuables
• Picture negatives

How do safety deposit boxes work?
The boxes are in a larger safe secured against theft and fire. Inside it are various small thick

It's not a good idea to keep
your will in a safe.

metal doors, behind which are the individual deposit boxes. These gates can only be opened by means of two keys, used and turned together: one key belongs to you, the owner of the box, and the other belongs to and is kept at the financial institution (in this case, the Credit Union). To access your box, you go to the Credit Union and request to access your box from the person in charge. You sign a register with the date and, alongside the person assisting you, you access your safety deposit box locked gate using the two keys. Then the box is removed and you go to a private place to access its contents on your own. When you’re done, the person assisting you will help you put the box back and lock it in front of you. You leave with your key.

You can access your OAS FCU during business hours, from 9 in the morning till two in the afternoon, Washington DC time. You may also access your box during some extended hours, but it would be at an additional charge. This is why it’s recommended that you only put in your safety deposit box things that you will not need at a moment’s notice.

How big are safety deposit boxes?
At OAS FCU they come in four different sizes:

• 3 x 5 x 18” (7.6 x 12.7 x 45.7 cms.) 
• 5 x 5 x 18” (12.7 x 12.7 x 45.7 cms.) 
• 3 x 10 x 18” (7.6 x 25.4 x 45.7 cms.) 
• 5 x 10 x 18” (12.7 x 25.4 x 45.7 cms.) 

How do I get a box?
You can rent one by going in person to the Credit Union, where you will sign a yearly

Inherited antique jewels and
valuables should be kept safe.

contract. The annual fee varies depending on the size of box you want to rent (this is the list of fees

Can I give someone else access to my box?
Yes, if you stipulate that on your contract. When you rent a box, you immediately receive two copies of your key, but the person who gains access to the box must be on the contract, and sign it. If you wish to give anyone else access after that second person, you will have to pay for the creation of an additional key.

Additional points to consider
If you wish to insure the contents of your safe deposit box, contact your insurance company.
Once you do have a safety deposit box, it’s also good to contact your home insurance company because usually, when you inform them that you have an external safe deposit box, and inform them of the things you are holding in it, they usually will lower your home insurance premium.

The gig economy

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When finding stable employment becomes hard, many people find that turning to self-

employment options can be the solution to having stable income. However, this type of employment comes at a cost.

These past five years have seen the rise of two ‘new’ types of economy: the sharing economy and the gig economy, and today I will talk about the second one.

The gig economy; it’s easy to picture when you think of it this way. Kids making extra cash during the holidays cleaning pools, working as waiters at Christmas parties, catering events. It used to be the employment for the people that had free time and weren’t looking for an actual job..

That’s no longer the case. In the past 10 years the gig economy of permanently self-employed contractors has exploded. Recent statistics in the UK show that 15% of all workers work on zero hour contracts; In the US, the Department of Labor doesn’t have yet a good tool to track the rise in self-employment but, recent studies in major US cities show that the number of self-employed in the transportation services alone (limo and goods transportation) just in one major US city has doubled in 15 years. These are scary statistics.

“Be your own boss”
Oftentimes this is the main appeal of this type of employment; it’s what draws people to the driver services like Uber; you get to pick your own hours. You work as much as you want, and get paid per job.

What the ads don’t tell you, for example, is that when Uber slashes prices, they do so without asking the drivers, and they are the ones who take the cut in income. They also don’t tell you that if you’re idle, waiting for work, your engine running, you are not getting paid for the work not done nor the gas your car is using up. Meaning to make a certain amount of runs per day can take you anywhere from a few hours to the whole day.

“Opportunities for advancement”
That’s another catch in these types of jobs. Many claim opportunities to become permanent employment, and opportunities of advancement via internal training to expand your skill set.

In a temp agency, this would bean honest offer. But it is not the case in the private

sector, where zero hour or contractor staff are treated differently, expected to learn on the job, and have no chances of being hired. During the research of this article I read the account of a nurse in the public healthcare system in Europe; her account of the zero-hour system is appalling.

Zero hour contracts
With this type of hiring, the employer doesn’t guarantee, at all, the number of hours the employee will work per week. Additionally, these jobs come with absolutely no benefits: the employee -in reality a contractor- has to pay his/her own taxes, has no paid holidays, no sick leave and no vacation. You don’t work, you don’t get paid.

Why would people work like this?
When regular employment becomes difficult to find, workers still need to eat; this is why this type of economy is now surging.

When it comes to having a roof over your head or feeding the family, many people need the work and will accept these jobs to stay ahead. They will do so at the cost of their own

health, now and future; the opportunities of saving for retirement for workers on these types of jobs are slim to none.

As hiring practices change, regular employment with (what were once considered normal) benefits are disappearing. Employers who need to meet the demand of their clients look for alternative ways to hire people to stay afloat. In come the temp workers, the zero hour contracts and the contractor offers; it’s the legalization of the old “getting paid under the table” jobs. That small and medium companies may do this to continue in business can be somewhat justified; the problem comes when large corporations and multinationals make it part of their business model. These are jobs that do indeed provide income, and legally, but at a cost to the employee and the government.

The government
Many nations -the United States included- have employer-paid taxes (per employee) that the self-employed do not pay. When companies hire contactors to do long-term work, this

comes at the expense of income that local and national governments never receive, while they continue to be responsible for providing basic public goods. This is why you can see, at a local level especially, the increase in taxes, the cutting of budgets and the curtailing of services that previously were a given. The same, to a degree, is happening with national governments, yet at that scale the impact is difficult to pinpoint without better statistics but if the look at national budget crisis around the world is to be examined, the issue is clearly a global one. Granted, the gig economy is but one of many, many factors impacting national budgets yet, as the gig economy grows, the tax income of every nation is sure to fall.

Why change is needed
A labor force deeply ensconced in the pattern of temporary employment with no benefits is extremely detrimental to the economy of a nation. In the long term, as workers age, they find themselves in need of public assistance for which they themselves have been unable to pay. Furthermore, these people will get closer and closer to retirement with no provisions made for it. It will lead to overwhelming poverty among retirees and unbearable pressure on the social benefits system. That’s because even if a government will not have obligation to pay out pensions to workers who have not accrued them, it will be bound to have to provide for them in other ways.

The solutions are limited. The best option is for workers in these fields to consider

unionizing. It’s a difficult process, but one that can provide leverage and protection for worker benefits in any field.

Another possible solution is for governments to enforce a basic wage provision for all temporary work; yet this solution is bound to bust the system and result in the closing of small companies that depend on this type of contracts and the long-term rise in unemployment again.

Ultimately, it comes down to the same solutions, the ones that nobody seems to want to implement: the government must find a way to tax corporations better; for this, the practice of expecting companies to have insane quarterly results has to change. We need to move focus away from this extreme obsession with pleasing shareholders, of squeezing every buck out of every corner, and move towards making sure employees can thrive. Only this will provide a long-term answer that works for companies, the economy, and the global workforce. And for the naysayers who say that this is impossible, think on this: the gig economy only started surging in the last 15 years. Before that, corporations cared for their earnings AND their employees. It’s only in the 21st century that they have started caring exclusively for their shareholders and the bonuses of their executive teams.