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Ask The Expert

Common Questions On What’s Changed With Tax Reform

By Jennifer Verhey

This is the first filing season after the biggest tax reform in more than three decades. With the numerous tax law changes, this is the year to seek professional tax advice and planning. A professional can assist you with maximizing deductions, tax planning, and minimizing your tax liability.

Below are some of the common areas of concern we have been hearing:

Yes, you still can deduct your mortgage interest, real estate taxes, state income taxes, and charitable donations. The increase in the standard deduction means many may no longer benefit from itemizing these deductions. A good tax professional can assist you in planning to make the most of these changes.

I found this an interesting fact about the most talked about change, the $10,000 limit on deducting state and local taxes (SALT). According to the IRS, half of all SALT deductions came from just six states: California, New York, New Jersey, Illinois, Pennsylvania and Texas. A third of the total value of the deductions went to residents of California and New York. We are lucky to live in a fiscally responsible state.

Another area of concern is the shared responsibility payment. This is the penalty imposed on taxpayers who went without health insurance during the year. Tax reform reduced the penalty to zero, but not until 2019. For 2018 tax returns, the penalty is still in place unless you qualify for an exception.

What about refunds?

According to the Tax Foundation, 80 percent of taxpayers will have a decrease in their tax liability, 15 percent of taxpayers will see no change and 5 percent will see a tax increase. A tax refund is not a good measure to determine if your taxes went up or down. It is only a measure of how much you under- or overpaid Uncle Sam. Ask your tax professional to assist you in comparing last year’s tax bill to this year to see if you are one of the 80 percent who saved on taxes.

The treasury department changed the withholding tables. These tables inform employers how much should be withheld from each paycheck to cover income taxes. The change in tables, resulted in less money being taken out of each paycheck and handed over to the government. While it was great to have more take-home pay each paycheck, it did lower the overall amount of taxes withheld. If you are a person who wants to have a certain refund to cover property taxes, vacations, etc., a good tax advisor can assist you in W4 planning to ensure you receive the refund you want to have.

Contact Vantage Certified Public Accountant LLC (formerly American Eagle Tax and Accounting LLC) at 303-422-1996.

Divorce And Mortgages

By Wanda Norge

There are many things to consider when going through a separation or divorce. When mortgage financing is involved, it is really important to work with a Certified Divorce Lending Professional, or CDLP.

Guidelines and documentation requirements vary among lenders based on the type of loan being considered.

Knowing what is required to qualify to retain a home or purchase a new home before, during or after the divorce is a key item in structuring the agreements. Lawyers may not realize how a lender counts “qualifying income” and how long it has to be received or is expected to continue, especially when children are reaching the age of 18 or 19 when payments for child support, maintenance and social security can be reduced or eliminated.

A finalized divorce decree or separation agreement is going to be one of the items a lender will require since it outlines responsibility for current debts, properties, child support, maintenance payments and even refinance closing costs.

Joint Debts

The agreement will assign joint debt to one party or the other and the lender will count it against the person assigned. This is a contingent liability since the creditor has not released that party from their obligation. If that joint account is not paid in a timely manner by the person responsible for it, it can impact the other person’s credit scores. Ideally, joint accounts should be frozen and closed out as soon as possible.

If the mortgage is one of those joint accounts assigned to one person, the lender does not have to count that payment against them if proof of transfer of title is obtained.

Title

Typically, the person that wants to remain in the house and buy out the other party may need to be on title for at a specific timeframe prior to the application date of a refinance. However, divorce awarded properties can follow different rules where these timeframes are waived.

Transfer Of The Marital Home

There are ways to transfer the marital home in a divorce, but it will depend on who holds title to the property and if there is a current mortgage associated with it.

Refinancing the current loan to remove one spouse from the loan and title is the most frequently used way of transferring ownership. This equity buyout typically involves a payout to the spouse not staying in the marital home. Cash out limits are based on the available equity.

Assumable loans are possible to transfer between parties but the individual still needs to qualify for it. These are typically FHA or VA, so most conventional loans are not assumable.

Transfer of ownership is possible with various warranty deeds.

Also consult your financial planner, and tax consultant for tax-related impacts.

Wanda Norge is a member of the National Association of Divorce Professionals, Mortgage Consultant, Certified Divorce Lending Professional (CDLP), Equilane Lending, LLC (NMLS: 387869), 15 years experience. Phone: 303-419-6568, loans@wandanorge.com, www.wandanorge.com. NMLS:280102, MB:100018754