Buyer Info • Seller Info • April 18, 2024

7 Types of Tax-Deductible Home Improvements

by Sue Lunsford

Here’s an overview of a few examples of tax-deductible home improvements. As always, you should consult a tax professional to understand more about who qualifies for deductions.

Energy-Efficient Upgrades

Homeowners can potentially qualify for an Energy Efficiency Home Improvement Credit(link is external) of up to $3,200 for energy-efficient improvements made after Jan. 1, 2023. The credit for 2024 is 30% of qualified expenses, but it has certain limits depending on the type of improvement.

Energy efficient upgrades can help reduce energy usage and strain on a home’s critical systems. Upgrades can include structural improvements to the home and the installation of new systems. Here are some sample projects:

A home energy audit may be eligible for a tax credit of up to $150. An auditor will help your clients understand where they’re losing energy and identify health and safety issues in their home. A home energy audit could help save up to 30% on energy bills, according to the Department of Energy. To qualify for the credit, the audit must be conducted by a qualified home energy auditor(link is external) or someone who is supervised by a qualified auditor. It also must include a written report prepared and signed by a qualified home energy auditor, and the report must be consistent with industry best practices. Find more information in Notice 2023-59(link is external).
Install ENERGY STAR’s Most Efficient(link is external) exterior windows and skylights for a credit of up to $600 based upon eligibility. Replacing windows can help improve insulation and reduce the need to run the HVAC system.
Install biomass stoves that meet ENERGY STAR’s requirements for up to a $2,000 credit. Biomass stoves must have a thermal efficiency rating of at least 75% to qualify, and costs may include labor to install. Biomass can consist of wood pellets and grasses. Although burning biomass can reduce energy usage, insurance experts recommend following wood-burning best practices(link is external) to help reduce fire and other health risks.

Clean Energy Upgrades

Homeowners could potentially qualify for the Residential Clean Energy Credit(link is external) if they install new renewable energy properties in their homes. There is no dollar limit for this credit except for fuel cell properties ($500 for each half-kilowatt of capacity).

Using clean energy can help lower reliance on traditional utilities and lower usage and bills. Systems like solar panels are generally easy to maintain, typically only requiring regular cleaning to prevent debris buildup. Here are some sample projects:

Installing a solar water heater(link is external) can help reduce strain on a traditional water heater and help prolong its life, depending on the type installed. For example, a two-tank solar water heater preheats water before it reaches a traditional water heater. Water heating is typically the second largest energy expense in any home.
Installing geothermal heat pumps(link is external) can help heat and cool a home more efficiently than traditional heating and cooling systems by transferring heat to the ground rather than generating heat. They tend to be expensive, but according to the Department of Energy, it could potentially see a return on investment for homeowners in five to 10 years depending on available financial incentives.
Battery storage technology helps store excess energy generated from clean energy sources. This gives a home a reliable energy source if the grid goes down.

Historic Home Upgrades

The Federal Historic Rehabilitation Tax Credit(link is external) could apply if homeowners are undergoing a renovation of a historic home. Historic homes can qualify for this tax credit and other grants since many organizations wish to preserve historical buildings. Taking advantage of these can help lower the financial burden of potential repairs while helping to restore a home’s original beauty. Here are some sample projects:

Upgrading or replacing old pipes may qualify for this tax credit and may be necessary to bring the home up to code and help prevent water damage.
Replacing deteriorated parts in the structure of a home, like posts or beams, may qualify for this credit. Replacement should be visually similar to the original and at least equal to the original’s load-bearing capabilities.
Fully replacing a deteriorating set of stairs using the same or compatible substitute material can make a home safer and also may qualify for this tax credit. The new set of stairs should look similar to the original.

Medically Necessary Upgrades

Homeowners could potentially include medically necessary home upgrades as a part of a medical expense deduction(link is external). These include improvements that help make a home more accommodating for a person with a disability, spouse or dependents that live in the home. The amount that can be included in a medical expense deduction depends on how the improvement impacts the home’s value:

If the home’s value increases as a result of the improvement, the medical expense is considered the cost of the improvement minus the increase in home value.
If the home’s value does not increase, it can include the entire cost in the medical expense deduction.

Homeowners can invest in upgrades that can help make their home more accessible and help prevent future maintenance issues (which is especially important if they plan to age in place). For example, lowering kitchen cabinets or installing pull-down shelves can help prevent potential falls and damage when straining for out-of-reach items. Here are some sample projects:

Installing modified smoke detectors and other monitoring systems can help alert those with a disability, like alarms with strobe lights for those who are hard of hearing. Smart monitoring systems, like water leak detectors, can also make it easier to detect issues early in hard-to-reach areas.
Grading, or leveling, the ground can improve accessibility and also help protect a home from water runoff. Grading can help reduce steep slopes and create more accessible pathways for those with mobility challenges. It can also help direct runoff away from a home and prevent standing water.
Bathroom modifications, like grab bars and railings, can help prevent slips and falls. These modifications also can help prevent water splashes that could lead to mold or mildew over time.

Home Office Repairs and Improvements

Homeowners may be eligible to deduct home office repair expenses(link is external) if they have a dedicated part of their home that they regularly use as their main place of business. The amount that can be deducted depends on whether the project impacts the entire home or just the office. Home office improvements are not tax deductible and would be categorized similarly to capital improvements. Here are some sample projects:

If installing a full home security system, homeowners could potentially deduct the cost of maintaining and monitoring the system that relates to the business part of their home.
Repairing damaged outlets and wiring may be tax deductible and, more importantly, a crucial project to help prevent electrical fires and potential damage to devices. Electrical distribution or lighting equipment (which includes wiring and outlets) was the leading cause of home property damage from 2016 to 2020, according to the April 2023 National Fire Protection Association Home Structure Fires Report.
Replacing home office windows with dual or triple-pane windows to help improve insulation and reduce noise also may be eligible. In addition to the tax benefits, homeowners may find it good for resale value, too, since this can help lower the need for cooling and heating and lower the strain on an HVAC system.

Rental Property Repairs

If homeowners rent out a part of their home, they may be able to deduct repair expenses(link is external) from the amount of taxable rental income they receive. Limitations apply, such as if they’re renting a space in their current residence.

Maintaining the parts of their home that they rent can help prevent issues from impacting the rest of their home. For example, issues like water leaks or drafts in one area can lead to bigger issues if left unaddressed. Here are some sample projects:

Repairing leaks in a tenant’s bathroom can help prevent long-term mold and mildew issues. Leaks also could impact a home’s structural integrity if drywall or floor joists are left wet over time.
Addressing air leaks in a tenant’s area can help improve insulation, keep them comfortable and lower the need to cool or heat that part of a home. Updating the weather stripping around windows and doors may also apply.
Routinely checking the air vents in a tenant’s part of the home can improve the chances of catching airflow issues early, including dirty vents or leaky ducts. Improved airflow can help boost indoor air quality and regulate temperature throughout your home.

Capital Improvements

Capital improvements are projects that extend a home’s life, add value or refit a home for new uses. These differ from home repairs, which are part of property maintenance but don’t necessarily add value (like fixing a leak). There are some limitations to the types of eligible improvements. For example, homeowners cannot include the cost of installing carpeting if they later remove it. They also cannot include energy-related improvements if they received subsidies or tax credits for those improvements.

Homeowners can add the value of qualifying capital improvements to the cost basis(link is external) of their home. When they sell their home one day, they may be able to subtract their adjusted cost basis from the sale price. This can help reduce the amount of capital gains taxes they may owe. However, they’ll also need to take into account the tax implications(link is external) of the capital gains from the sale of their home.

Seller Info • April 11, 2024

My Secret for Getting You the Most Offers on Your Home?

by Sue Lunsford

Would you like to know the secret for getting your the most offers on your home in the greater Puget Sound region?

List just below the market.

In my 15+ year of experience listing and selling homes, pricing too high can dissuade potential buyers, but pricing just below the market value?? It generates the buzz we’re looking for. Buyers are drawn to what they see as a good value or deal, leading to a spike in interest and oftentimes a bidding war.

But there’s more…

Pricing is one key component of a larger strategy to garner interest and receive strong offers from multiple contenders.

In reality, many integral puzzle pieces come together to get your home sold for top dollar.

If you’re looking for more details on my selling strategy? Send me a message to access my Seller’s Guide and access to my playbook for turning your ‘For Sale’ into ‘Just Sold’

Buyer Info • Seller Info • March 15, 2024

What are the latest trends in the housing market?

by Sue Lunsford

Some Highlights

With the number of new listings going up and average days on market going down, buyers may have more options, but will still want to move fast.
For sellers, inventory is still low and houses are selling fast, meaning your house should stand out and may get multiple offers if you price it right.
If you want to know more about what’s happening in our area, let’s connect.

Buyer Info • March 8, 2024

What To Know About Credit Scores Before Buying a Home

by Sue Lunsford

If you want to buy a home, you should know your credit score is a critical piece of the puzzle when it comes to qualifying for a mortgage. Lenders review your credit to see if you typically make payments on time, pay back debts, and more. Your credit score can also help determine your mortgage rate. An article from US Bank explains:

“A credit score isn’t the only deciding factor on your mortgage application, but it’s a significant one. So, when you’re house shopping, it’s important to know where your credit stands and how to use it to get the best mortgage rate possible.”

That means your credit score may feel even more important to your homebuying plans right now since mortgage rates are a key factor in affordability. According to the Federal Reserve Bank of New York, the median credit score in the U.S. for those taking out a mortgage is 770. But that doesn’t mean your credit score has to be perfect. The same article from US Bank explains:

“Your credit score (commonly called a FICO Score) can range from 300 at the low end to 850 at the high end. A score of 740 or above is generally considered very good, but you don’t need that score or above to buy a home.”

Working with a trusted lender is the best way to get more information on how your credit score could factor into your home loan and the mortgage rate you’re able to get. As FICO says:

“While many lenders use credit scores like FICO Scores to help them make lending decisions, each lender has its own strategy, including the level of risk it finds acceptable. There is no single “cutoff score” used by all lenders and there are many additional factors that lenders may use to determine your actual interest rates.”

If you’re looking for ways to improve your score, Experian highlights some things you may want to focus on:

Your Payment History: Late payments can have a negative impact by dropping your score. Focus on making payments on time and paying any existing late charges quickly.
Your Debt Amount (relative to your credit limits): When it comes to your available credit amount, the less you’re using, the better. Focus on keeping this number as low as possible.
Credit Applications: If you’re looking to buy something, don’t apply for additional credit. When you apply for new credit, it could result in a hard inquiry on your credit that drops your score.

Finding ways to make your credit score better could help you get a lower mortgage rate. If you want to learn more, talk to a trusted lender. I can refer you to my preferred lenders, who have helped dozens of my clients.

Seller Info • February 19, 2024

It’s Time To Prepare Your House for a Spring Listing

by Sue Lunsford

If you’re thinking of selling your house this spring, now is the perfect time to start getting it ready. With the market gearing up for its busiest time of year, it’ll be important to make sure your house shines bright among the competition.

Here are some valuable tips you can use to get your house market-ready.

Declutter and Organize

First impressions matter, and if your house is a mess, that can easily turn off potential buyers. Before listing, take the time to declutter and organize each room. Decluttering is about more than just tidying up – it’s about creating a sense of space and openness that allows potential buyers to envision themselves living in your home. According to Moving.com:

“Decluttering and organizing your space will go a long way in appealing to potential buyers. . . .decluttering will help the buyers see themselves living in your home. Less clutter inside a home also helps a place appear larger and cleaner, which should attract more buyers.”

Deep Clean Your Kitchen and Bathrooms

The kitchen and bathrooms are focal points for many buyers, and often influence their overall opinion of the house. Ensure these spaces dazzle by giving them a thorough deep cleaning. Pay attention to details like scrubbing grout lines, polishing fixtures, and decluttering countertops. A sparkling kitchen and bathroom can leave a lasting positive impression on potential buyers.

Maintain Your Yard

Your home’s exterior is the first thing potential buyers see, so it’s important to make a good impression from the moment they arrive. A well-maintained yard not only enhances curb appeal, but also shows buyers the home has been well taken care of.

Take the time to spruce up your yard by mowing the lawn, trimming bushes, and clearing away any debris or dead plants. Remember, the goal is to create a welcoming environment that entices buyers to step inside and imagine themselves living there. U.S. News says:

“A beautifully landscaped front yard can elevate an ordinary house into a charming home and will help homes sell faster and for more money.”

Find a Listing Agent

A skilled listing agent is your partner in minimizing stress when selling your home. Lean on your agent for advice on decluttering, staging, and enhancing your home’s appeal to potential buyers. Their insights into market trends and recommendations for reliable contractors and stagers are invaluable.

By decluttering, deep cleaning, and tidying up your house, you can create a welcoming environment that resonates with buyers and increases your chances of a successful sale.

Thinking about selling? Let’s connect on what you need to do to get your house ready to sell this spring.

Buyer Info • January 27, 2024

Why It’s More Affordable to Buy a Home This Year

by Sue Lunsford

That’s all good news if you want to buy a home buy a home because it means affordability is improving.

Buyer Info • November 4, 2020

How do Buyers WIN in a Seller’s Market?

by Sue Lunsford

The New Normal: A Strong Housing Market Expected to Continue into 2021

“2020 will be known for a lot of things, and a record-breaking year for real estate will certainly be one of its more unexpected legacies,” prominent economist Daryl Fairweather said.¹ And he’s right: most of us would have expected the housing market to suffer from circumstances like a once-in-a-hundred-years pandemic and historic inventory shortages.

But, rather than a slowdown, we are continuing to experience a surprisingly robust real estate market across the country. And experts estimate that these conditions are likely to last well into the new year. Fannie Mae Senior VP and Chief Economist Doug Duncan predicts that existing home sales will ultimately “be up a percent or more in 2021.” He believes home prices will continue to rise due to limited inventory, but he is confident the Federal Reserve will keep interest rates low into the future, which will be “very good for households.”²

Market conditions like fewer available listings, changing criteria for desired homes, and record-low mortgage rates are changing the way people buy and sell homes, most likely in a lasting way. But this sustained activity, even in the uncertainty that is 2020, proves that our country still views real estate as a sound investment. The only question now is how you can take advantage of the housing market’s “new normal.”

FEWER LISTINGS EQUALS A SELLER’S MARKET

Inventory, meaning the number of homes for sale, is at a record low across the country. The National Association of Realtors (NAR) reports there are fewer homes on the market today than the association has seen in data going all the way back to 1982.³Currently, the total housing inventory is about 1.47 million units, which is a decline of 19.2% from one year ago.⁴

Experts do predict some relief on the horizon. MarketWatch had previously anticipated housing starts would occur at a pace of 1.45 million and building permits would come in at a pace of 1.52 million.⁵But it turns out that the market exceeded expectations: compared with last year, housing starts are up 11% and permitting for new homes occurred at a seasonally-adjusted annual rate of 1.55 million. That represents a 5% increase from August and an 8% increase from a year ago.

For now, the fact that there are fewer listings creates an advantageous housing market for sellers. There are several reasons why.

For one, buyers have to act fast to snap up available homes. As a result, most properties that come on the market stay for an average of just 21 days before they are sold.⁶ “That is the fastest ever recorded in our monthly series,” says NAR Chief Economist Lawrence Yun.

Another benefit is that sellers are enjoying higher net returns on their listings. This is thanks to the tough competition for homes, which often results in bidding wars between buyers. Nationwide, the median home price in September rose to $311,800. That translates to about $40,000 (15%) more than just a year ago.⁷

This seller’s market is not simply a product of the pandemic. In fact, in the country’s top 100 metro markets, inventory has been dwindling since the first quarter of 2020.⁸ This means that even with increased construction, buyers can’t simply wait for things to go back to normal before reentering the market. Rather, all signs indicate that this is the new normal.

What It Means for Homeowners:

These higher home prices show that buyers are willing to spend more on a home right now than they did last year. So, if there ever were a time to list for top dollar—and expect to receive asking price quickly—that time is now. Ask us for a free consultation of your home’s value today.

What It Means for Homebuyers:

Due to low inventory, buyers could easily find themselves in a bidding war. Time is of the essence in a seller’s market, so you’ll need to get your financing in order and be preapproved for a loan before you begin your home search. We can connect you with a trusted mortgage professional to get you started.

BUYERS BENEFIT FROM LOW MORTGAGE RATES AND A BIGGER PLAYING FIELD

Don’t worry, homebuyers. This “new normal” of real estate has benefits for you too.

For example, people used to base their next home purchase on how far the commute was to work or in which public school district it was. But now, thanks to the pandemic shifting the locus of jobs and work, they are free to consider what they need from a home to make it a place they truly want to be in as they work, teach, exercise, cook, and live.

Often, this equates to needing more space in different types of areas. Realtor.com consumer surveys show that people are desiring quieter neighborhoods, home offices, updated kitchens, and access to the great outdoors.⁹ The search for these criteria is driving residents out of densely populated metropolitan areas and into the suburbs.¹⁰ And this exodus from cities is good news for buyers: it opens up more possibilities for inventory that they could not have considered pre-pandemic.

Another advantage for buyers is the record-low mortgage rates. The average rate for a 30-year fixed-rate mortgage hit a record low in mid-October when rates fell to 2.81%. That’s the lowest since Freddie Mac began conducting the survey in 1971, and well below last year’s 3.69%.¹¹ Similarly, a 15-year fixed-rate mortgage can be had for as low as 2.35% compared to 3.15% a year ago.

Thanks to these rates, buyers are afforded the opportunity to buy nearly $32,000 more home than they could one year ago, while keeping their monthly payment the same.¹² So even though home prices are high now, it is currently more affordable to buy a home now than it was last year.

If you want to take advantage of these rock-bottom mortgage rates, you need to act fast. Though rates are projected to stay low, housing economists predict that the window of opportunity to get the best rate could be closing in the coming months. Mike Fratantoni, chief economist at the Mortgage Bankers Association, said he expects the average rate on a 30-year mortgage to rise to 3.5% by the end of 2021.¹³

What It Means for Homeowners:

Record-low mortgage rates offer you the opportunity to lower your monthly payment—or even take out some equity—with a refinance. With those additional funds, you could even choose to invest in a second home in a new desirable location. Reach out to us for a referral to a trusted mortgage professional or an agent in those markets.

What It Means for Homebuyers:

The time is now to determine how much home you can comfortably afford and make a plan to find it. We can set up a search for you to find homes that best meet your new needs, even if they’re in neighborhoods you wouldn’t have considered before.

A RECORD-SETTING YEAR FOR HOME SALES IS JUST THE BEGINNING

Despite the seemingly adverse buyer conditions, 2020 experienced a 14-year high number of home sales, NAR reports. Existing-home sales, which include single-family homes, townhomes, condominiums and co-ops, rose 9.4% in September to a seasonally adjusted annual rate of 6.54 million.¹⁴ That’s a 21% increase from a year ago!

Every region of the country has seen a surge in sales activity. According to George Ratiu, senior economist for Realtor.com, part of the reason for these continued sales is that the pandemic has created a paradigm shift in the patterns of real estate.¹⁵ For example, housing needs are typically resolved by late summer and early fall to coincide with the commencement of the new school year. With homeschooling and remote work, however, buyers have been freed to continue their home search into the traditionally slow winter months.

Another reason for the robust market is that Millennials are finally putting their money into homeownership. According to the U.S. Census Bureau, the homeownership rate for 25-to-34-year-olds rose to 40.7% by the end of last year.¹⁶This is significant because Millennials, the generation of people in their mid-20s to late-30s, currently surpasses Baby Boomers as the nation’s largest living adult generation. As the remaining percentage of this group starts investing in homes in the near future, demand will persist.

All of these factors indicate that the housing market is poised to remain strong as we head into the new year. And as Jonathan Woloshin, head of U.S. real estate at UBS Global Wealth Management, believes, they could “buoy the housing market for years to come.”¹⁷

What It Means for Homeowners:

It’s tempting to believe that homes will basically sell themselves in a market like this. But we’re still seeing properties that are overpriced and under-marketed sit unsold. We can help you optimize the process of selling your home so you can get the best possible offer.

What It Means for Homebuyers:

Preparation is key to success in a seller’s market like this, but don’t let yourself become paralyzed. We are here to answer your questions and offer sound advice to guide you through all the options that are available to you.

REAL ESTATE IS A SAFE BET

Your other investments might have been on roller coasters this year, but the real estate market has been steady, competitive, and strong throughout. That makes it a good choice for your financial future.

National real estate numbers can give us a pulse on the market, but real estate happens in our own backyard. As your local market experts, we can help you understand the finer points of the market that impact sales and home values in your own neighborhood.

If you’re considering buying or selling a home before the new year or in early 2021, contact me now to schedule consultation. I will work closely with you to develop an actionable plan to meet your goals.

Sources: