Posts Tagged ‘federal taxes’

Where does YOUR Money Go?

April 12, 2011

Tax season is in full swing and the deadline for submitting your portion is fast approaching.  This year the deadline for filing your federal taxes has been extended by three days to April 18.  (In case you were wondering why, it is in observance of Emancipation Day in the District of Columbia.)  Your state taxes however, may still due by April 15.  Check with your state government office for your exact deadline.

The history of taxes and taxation take us back to our colonial days and part of the reason for our succession from Great Britain.  The beginning purposes of federal taxes in the United States though were to fund our war effort in the American Civil War.  Today besides funding war efforts, taxes pay for a wide variety of expenses and programs.  Not surprising though, most of us really don’t know where our tax dollars go within the federal budget.

We thought you might be curious.  Take a peek:

Social Security 20.4%
Defense 20.2%
Medicare 13.1%
Low-income Assistance 9.3%
Medicaid 7.9%
Net interest Payments 6.6%
Unemployment Compensation 4.7%
Veterans Affairs 3.1%
Education 2.9%
Law Enforcement & Homeland Security 2.4%
Transportation 2.3%
Health (not Medicare or Medicaid) 2.0%
Management of Federal Employees & Buildings 1.4%
Environmental Protection & Natural Resources 1.0%
Space & Science 0.7%
Agriculture 0.7%
Housing & Community Planning 0.6%
Social Services 0.6%
Foreign Aid 0.6%
Workplace Safety & Rights 0.5%
Diplomacy & Embassies 0.4%
Internal Revenue Service (IRS) 0.4%
Energy 0.4%
Statistics & Weather 0.3%
Telecommunications 0.3%
Trade & Economic Development 0.3%
Native Americans 0.2%
Congress 0.2%
Post Office 0.1%
Arts & Culture 0.1%
District of Columbia <0.1%
White House <0.1%
Bailouts, Currency & Financial Regulation -3.7%

If you would like to know how this specifically applies to you.  Visit: thirdway.org/taxreceipt.  You can enter the amount of your federal taxes paid in 2010 to see exactly how much went to each category.  You can also review each category for a sub-list of what is included in each one and how those areas are divided.

Incidentally, as of January of this year our national debt was $14,025,215,218,709 of which every American has a share of $48,382.  Unfortunately, that amount is $5,768 more than it was in 2009.

If this information concerns you, get involved!  You can easily find out who your elected officials are and how to contact them by visiting: congress.org and simply entering your zip code under the “Get Involved” section.

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Common Homeowner Tax Deductions

March 23, 2010

Owning a home is the American dream and a source of tremendous pride for you and your family.  Another advantage to buying real estate is the ability to shelter a portion of your income from federal taxes.  Following are some of the more common deductions available to home owners.  Along with some basic information on each are links (bold type) to the IRS website where detailed information can be found.    

As always, consult with the IRS or your tax professional for current guidelines and qualifying criteria on tax related matters.  For information about a home loan to meet your needs and goals, contact one of our licensed Loan Officers.

Mortgage Credit Certificate Program  –  The MCC program is a Federal tax credit of up to 20% of the interest you pay on your home loan over a calendar year, and is available in select states.  While this does not reduce your monthly payment, it is a dollar for dollar reduction in the amount of your Federal income tax liability.  In effect, you are lowering your home loan interest rate by a full percent.  The MCC program will remain in effect for as long as your home remains your primary residence and the original home loan remains in place.  Awareness Home Funding is a lender that does help our clients with this program.    

Home Buyer’s Tax Credit  –  Home buyers may be eligible for a tax credit of 10% of the purchase price of their newly acquired home.  First-time buyers may be able to claim up to $8,000; existing home owners may qualify for up to $6,500.  We have provided some information on this program in two separate articles (No Time Like the Present and The Other Side of the Coin).

Mortgage interest  –  Interest, in general, is defined as an amount paid for the use of borrowed money.  In order to deduct interest on your home mortgage loan, you must be legally liable for the debt that is secured by your main or secondary home.  This amount is generally reported to you on Form 1098 by the lender you have made payments to.  This form should also detail any prepaid interest you have paid.   

Points or Discount Points  –  Points refer to specific charges you may pay in order to obtain a lower interest rate for your home mortgage loan.  Fees associated with preparation costs, appraisals, inspections or notaries do not typically qualify as points.   

Mortgage insurance premiums  –  These expenses are paid to allow a buyer to pay a lower down payment than the 20-25% requirement of a Conventional loan and also protect the lender in the unfortunate event of default on the loan.  Qualifying mortgage insurance may be provided by:

  • The Federal Housing Administration in both an upfront and annual fee.
  • The Department of Veterans Affairs as a one time funding fee
  • The Rural Housing Service as a one time guarantee fee

The amount which can be deducted is reported on Form 1098 by the lender you have made payments to.   

Real estate taxes  –  These are taxes charged on real property based on taxable value.  The IRS highlights what specific taxes associated with your property are deductible.  

Home offices  –  If you use a portion of your home for business purposes, you may be able to deduct certain expenses.  Typical items that may be deductible include the business portion of real estate taxes, mortgage interest, rent, utilities, insurance, depreciation, maintenance and/or repairs.   

Moving expenses  –  If you moved due to a change in employer or occupation, you may be able to deduct your moving expenses.  The two qualifiers used to determine whether this deduction applies to your situation are distance and duration.   

Energy improvements  –  Occasionally, government supported programs allow specific home improvements to qualify for a federal tax credit or a partial rebate of the sales price to the homeowner.  These items are usually of an energy efficient nature for products such as appliances, windows or insulation for the home.   

Health related improvements  –  Home improvements made as a result of a health issue are expenses that may be deducted for the tax year they were paid.  The IRS considers these as Capital expenses and explains what may be included and how to claim these items. 

As always, consult with the IRS or your tax professional for all the current guidelines and qualifying criteria in order to take advantage of these tax deductions.  For information about a home loan to meet your needs and goals, contact one of our licensed Loan Officers.