Nevada County, California VA Loan Information

Table of Contents

  • What is the VA Loan Limit?
  • How to Apply for a VA Home Loan?
  • What is the Median Home Price?
  • What are the VA Appraisal Fees?
  • Do I need Flood Insurance?
  • How do I learn about Property Taxes?
  • What is the Population?
  • What are the major cities?
  • About Nevada County
  • Veteran Information
  • Apply for a VA Home Loan
  • VA Approved Condos

FAQ

What is the VA Loan Limit?

2021 VA Home Loan Limit: $0 down up to $5,000,000* (Subject to lender limits) /2 open VA loans at one time $548,250* (Call 888-573-4496 for details).

How to Apply for a VA Home Loan?

This is a quick look at how to apply for a VA home loan in Nevada County. For a more detailed overview of the VA home loan process, check out our complete guide on how to apply for a VA home loan. Here, we’ll go over the general steps to getting a VA home loan and point out some things to pay attention to in Nevada County. If you have any questions, you can call us at VA HLC and we’ll help you get started.

  1. Get your Certificate of Eligibility (COE)
    • Give us a call at (877) 432-5626 and we’ll get your COE for you.
  2. Are you applying for a refinance loan? Check out our complete guide to VA Refinancing.
  3. Get pre-approved, to get pre-approved for a loan, you’ll need:
    • Previous two years of W2s
    • Most recent 30 days paystubs or LES (active duty)
    • Most recent 60 days bank statements
    • Landlord and HR/Payroll Department contact info
  4. Find a home
    • We can help you check whether the home is in one of the Nevada County flood zones
  5. Get the necessary inspections
    • Termite inspection: required
    • Well or septic inspections needed, if applicable
  6. Get the home appraised
    • We can help you find a VA-Certified appraiser in Nevada County and schedule the process
    • Construction loan note: Construction permit/appraisal info
      1. Building permit
      2. Elevation certificate
  7. Lock-in your interest rates
    • Wait until the appraisal to lock-in your loan rates. If it turns out you need to make repairs, it can push your closing back. Then you can get stuck paying rate extension fees.
  8. Close the deal and get packing!
    • You’re ready to go.

What is the Median Home Price?

As of March 31st, 2020, the median home value for Nevada County is $477,219. In addition, the median household income for residents of the county is $63,240.

How much are the VA Appraisal Fees?

  • Single-Family: $600.
  • Individual Condo: $600.
  • Manufactured Homes: $600.
  • 2-4 Unit Multi-Family: $850.
  • Appraisal Turnaround Times: 7 days.

Do I need Flood Insurance?

  • The VA requires properties are required to have flood insurance if they are in a Special Flood Hazard Area.
  • In Nevada county, the mountainous terrain reduces flood hazard areas to small areas surrounding bodies of water.

How do I learn about Property Taxes?

  • Sue Home is the Nevada county tax assessor. Her office can be reached at 905 Maidu Avenue Suite 290 Nevada City, California 95959. In addition, her office can also be reached by calling 530-265-1232.
  • The state of California offers various incentive programs that expand statewide for new, growing, and relocating businesses. Two of these programs are California Competes Tax Credit which offers qualifying businesses tax credit and the New employment Credit program which offers a tax credit for taxpayers who hire full-time employees. These and many other programs help in further diversifying the state’s economy.

What is the Population?

  • The county’s population of 99,755 is 84% White, 9% Hispanic, and 3% two or more races.
  • Most county residents are between 18 and 65 years old, with 17% under 18 years old and 28% older than 65.
  • In total, the county has about 40,904 households, at an average of two people per household.

What are the major cities?

The county has two cities and one town, including Nevada City which serves as the county seat. The two other cities in the county are Grass Valley and Truckee.

About Nevada County

Formed in 1851, 13 years prior to the neighboring state of Nevada attaining statehood, Nevada County was actually the first area of the United States to include the stand-alone word Nevada in its name. The term’s etymology is from the name the Sierra Nevada, Spanish for snow-covered. Nevada County is known for its involvement in the California Gold Rush. The early years of California are featured prominently throughout the county. The Nevada Theatre, built in 1865 making it the oldest theater in the state continues to operate to this day. Many notable figures have performed on the stage at the Nevada Theatre, ranging from Mark Twain to Motley Crue.

Further providing Nevada County notoriety is its place as the birthplace of Arcade Video games, with the inception of Pong. The creation of Pong led to the county being nicknamed the “Silicon Valley of the Sierras.” The first cell phone for commercial usage, with the capability of taking photos, was developed in the county seat of Nevada City. Currently, over 1,000 software designers and developers reside in the county.

Our nation’s 31st President, Herbert Hoover once lived in Nevada City, earning a living as a miner, fresh out of Stanford University.

The timber industry, government services, and tourism are the driving forces of the local economy.

Tourism based on the history of this country is reflected in many of the museums found in Nevada County. These museums put the history of the Gold Rush, mining, and the railroad at the forefront. The county is also home to numerous state parks including Malakoff Diggins State Historic Park, Grass Valley’s Empire Mine State Historic Park, and Donner Memorial State Park.

A veteran property tax exemption exists for veteran homeowners in Nevada County, amounting to $4,000. A disabled veterans exemption which is for a far greater monetary sum is accessible for disabled veterans with a total disability, blindness or the loss of use of more than one limb. This exemption is also available for the surviving spouses of disabled veterans.

Veteran Information

The county is currently home to 8,319 veterans, and they all have access to:

  • Nevada County is home to one VFW post:
    • Post-2655 Banner Mountian: 415 North Pine Street, Nevada City, CA 95959.
  • County Veteran Assistance Information
    • Nevada County Veteran Services Office: 988 McCourtney Road Grass Valley, CA 95949.

Apply for a VA Home Loan

  • For more information about VA Home Loans and how to apply, click here.
  • If you meet the VA’s eligibility requirements, you will be able to enjoy some of the best government guaranteed home loans available.  
  • VA loans can finance the construction of a property. However, the property must be owned and prepared for construction as the VA cannot ensure vacant land loans.

VA Approved Condos

Name (ID): THE BOULDERS (000151)
Address: 
10844 CINNABAR WAY
TRUCKEE CA 96161
NEVADA
Status: Accepted Without Conditions
Request Received Date: 05/13/2015
Review Completion Date: 06/02/2015

Oregon VA Loan Information: https://www.vahomeloancenters.org/oregon-va-home-loan-limits/

VA Loan Information by State: https://www.vahomeloancenters.org/va-loan-limit-maximum-va-loan-amount/

The post Nevada County, California VA Loan Information appeared first on VA Home Loan Centers.

Source: vahomeloancenters.org

First Time Home Buyer Programs for Veterans

Numerous programs exist to help veterans and service members who are first-time buyers with their closing costs and other expenses.

Indeed, it’s perfectly possible for those who are eligible for VA home loans to become homeowners with very little — or even nothing — in the way of savings.

Check today's VA rates by completing this quick online form.

Advantages of VA home loans for first-time buyers

The most famous housing benefit associated with the VA loan program is the zero down payment requirement. That can be hugely valuable for first time home buyers.

But it’s just one of a whole range of advantages that come with a VA home loan. Here are some more.

Low mortgage rates for VA loans

According to the Ellie Mae Origination Report, in October 2020, the average rate for a 30-year, fixed-rate mortgage backed by the VA was just 2.75%. That compares with 3.01% for conventional loans (ones not backed by the government) and 3.01% for FHA loans.

So VA home loans have lower rates. And that wasn’t just a one-time fluke. VA mortgage rates are lower on average than those for other loans — month after month, year after year.

Lower funding fees for first-time buyers

When you buy a home with a VA loan, you need to pay a funding fee. However, you can choose to pay it on closing or add it to your loan so you pay it down with the rest of your mortgage.

But, as a first-time buyer, you get a lower rate. For you, it’s 2.3% of the loan amount (instead of 3.6% for repeat purchasers) if you make a down payment between zero and 5%.

That’s $2,300 for every $100,000 borrowed, which can be wrapped into the loan amount. It’s a savings of $1,300 per $100,000 versus repeat buyers.

Put down more and your funding fee drops whether or not you’re a first-time buyer. So it’s 1.65% if you put down 5% or more, and 1.4% if you put down 10% or more.

Although it might seem like just another fee, the VA funding fee is well worth the cost since it buys you the significant financial benefits of a VA home loan.

No mortgage insurance for VA loans

Mortgage insurance is what non-VA borrowers usually have to pay if they don’t have a 20 percent down payment. Private mortgage insurance typically takes the form of a payment on closing, along with monthly payments going forward.

That’s no small benefit since mortgage insurance can represent a significant amount of money. For example, FHA home buyers pay over $130 per month on a $200,000 loan — for years.

Mortgage insurance vs funding fee

Let’s do a side-by-side comparison of the mortgage insurance vs. funding fee costs of a $200,000 loan:

  VA Loan FHA Loan
Payable on closing $4,600* $3,500
Payable monthly $0 $133 per month**
Paid after five years (60 months) $4,600 $11,500

*First-time buyer rate with zero down payment: 2.3%. $200,000 x 2.3% = $4,600
** $200,000 loan x 0.8% annual mortgage insurance = $1,600 per year. That’s $8,000 over five years. $1,600 divided by 12 months = $133.33 every month

It’s clear that mortgage insurance can be a real financial burden — and that the funding fee is a great deal for eligible borrowers.

Better yet, that makes a difference to your buying power. Because, absent mortgage insurance, you’re $133 a month better off. And that means you can afford a higher home purchase price with the same housing expenses.

Ready to buy a home? Start here.

Types of first-time homebuyer programs for VA loans

You may find two main types of assistance as a first-time buyer:

  1. Down payment or closing cost assistance
  2. Mortgage credit certificates

Down payment and closing cost assistance

There are thousands of down payment assistance programs (DAPs) across the United States and that includes at least one in each state. Many states have several.

Each DAP is independent and sets its own rules and offerings. So, unfortunately, we can’t say, “You’re in line to get this …” because “this” varies so much from program to program.

Some help with closing costs as well and down payments. Some give you a low-interest loan that you pay down in parallel with your main mortgage. Others give “forgivable” loans that you don’t pay back — providing you stay in the home for a set period. And some give outright grants: effectively gifts.

Mortgage credit certificates (MCCs)

The name pretty much says it all. In some states, the housing finance agency or its equivalent issues mortgage credit certificates (MCCs) to homebuyers — especially first-time ones — that let them pay less in federal taxes.

The Federal Deposit Insurance Corporation explains on its website (PDF):

“MCCs are issued directly to qualifying homebuyers who are then entitled to take a nonrefundable federal tax credit equal to a specified percentage of the interest paid on their mortgage loan each year. These tax credits can be taken at the time the borrowers file their tax returns. Alternatively, borrowers can amend their W-4 tax withholding forms from their employer to reduce the amount of federal income tax withheld from their paychecks in order to receive the benefit on a monthly basis.”

In other words, MCCs allow you to pay less federal tax. And that means you can afford a better, more expensive home than the one you could get without them.

Speak with a mortgage specialist today.

Dream Makers program

Unlike most DAPs, the Dream Makers Home Buying Assistance program from the PenFed Foundation is open only to those who’ve provided active duty, reserve, national guard, or veteran service.

You must also be a first-time buyer, although that’s defined as those who haven’t owned their own home within the previous three years. And you may qualify if you’ve lost your home to a disaster or a divorce.

But this help isn’t intended for the rich. Your income must be equal to or less than 80% of the median for the area in which you’re buying. However, that’s adjustable according to the size of your household. So if you have a spouse or dependents, you can earn more.

It’s all a bit complicated. So it’s just as well that PenFed has a lookup tool (on the US Dept. of Housing and Urban Development (HUD’s) website) that lets you discover the income limits and median family income where you want to buy.

What help does the Dream Makers program offer?

You’ll need a mortgage pre-approval or pre-qualification letter from an established lender to proceed. But then you stand to receive funds from the foundation as follows:

“The amount of the grant is determined by a 2-to-1 match of the borrower’s contribution to their mortgage in earnest deposit and cash brought at closing with a maximum grant of $5,000. The borrower must contribute a minimum of $500. No cash back can be received by the borrower at closing.”

So supposing you have $2,000 saved. The foundation could add $4,000 (2-to-1 match), giving you $6,000. In many places, that might easily be enough to see you become a homeowner.

You don’t have to use that money for a VA loan. You could opt for an FHA or conventional mortgage. But, given the advantages that come with VA loans, why would you?

The Dream Makers program is probably the most famous of those offering assistance to vets and service members. But there are plenty of others, many of which are locally based.

For example, residents of New York should check out that state’s Homes for Veterans program. That can provide up to $15,000 for those who qualify, whether or not they’re first-time buyers.

Start your home buying journey here.

State-By-State Home Buyer Assistance Programs

We promised to tell you how to find those thousands of DAPs — and the MCC programs that are available in many states.

It takes a little work to find all the ones that might be able to help you. But you should be able to track them down from the comfort of your own home, online and over the phone.

A good place to start is the HUD local homebuying programs lookup tool. Select the state where you want to buy then select a link and look for “assistance programs.”

Your best starting point is probably the state’s housing finance office though it might be called something slightly different. You should find details of programs or just a list of counties with phone numbers. Call the number where you want to buy, explain your situation and ask for advice. It’s their agents’ jobs to point you to local, state, or national programs that can help you.

If you look in the right place, you could secure some very worthwhile financial help to assist you in buying your first home.

Check today's VA rates by completing this quick online form.

Source: militaryvaloan.com

Homeowners Get a Tax Credit for Buying a House

tax credit for buying a house

 

Being a homeowner comes with all kinds of pros and cons that don’t come with renting. You have a yard, but you have to care for the yard. You have a payment, but you get to deduct your mortgage interest on your tax return! And while the Tax Cuts and Jobs Act (TCJA) reduced or eliminated many of the benefits homeowners used to enjoy, there are a few tax deductions you, as a homeowner, can still claim on your 2018 income taxes, including:

  • Home mortgage points
  • Property tax expenses
  • Mortgage insurance costs

American homeownership has long been subsidized by tax savings, and if your real estate agent didn’t tell you about them, we cover some here or an accountant or tax preparer can tell you more.

“The path to owning a home has a great deal of tax benefits, and a discussion with your tax professional will help to clarify the details,” says William Slade, a certified financial planner in California and enrolled agent licensed by the IRS.

Slade says he is regularly asked if home improvements, such as adding rooms, remodeling and landscaping help reduce taxes. “They don’t when they’re first done, but they may help when the property is sold by increasing the cost basis and lowering the gains tax on the sale,” he says.

Changes for the 2018 Tax Year

New homeowners should know that things have shifted a bit for the 2018 tax year. The standard home mortgage interest point deduction has been modified by the TCJA. More on that lower down.

What hasn’t shifted is that you still have to itemize income tax deductions in Schedule A in order to claim a deduction on home mortgage interest. Schedule A is more complicated than the standard deduction, which you may have taken in previous years. But the savings can make it worth doing.

Itemized deductions for new homeowners include more than just mortgage interest though. Property taxes, private mortgage insurance costs and even charitable contributions can be deducted. To get your mortgage interest deduction, you have to itemize with Schedule A. You can add up these other deductions there and get a bigger overall tax reduction.

Sadly, the previous moving expenses deduction is gone for all but those on active military duty. So, if you just moved in this past year and aren’t serving your country, too bad. No added deduction for you.

Tax Deductions Available for Homeowners

Tax breaks help cushion the impact of mortgage payments. So, take full advantage of those available to you.

The Mortgage Loan Interest Deduction

Mortgage points are prepaid interest on home mortgages. Under the home mortgage points deduction, mortgage loan interest is tax deductible if you itemize. The TCJA capped the deduction on interest paid on up to $750,000 for a qualified home loan taken out after December 15, 2017. Loans taken out before that date still qualify for up to $1,000,000 of deductible interest—the previous cap. Note:  if you use the Married Filing Separately status, you can only claim half of that amount on your own return.

When you itemize your deductions, you can add your mortgage loan interest to the list if you purchased the home before December 15, 2017.  The deduction applies for up to $1 million for loans that you used to improve the home or buy a new home. Purchases made after this date can only deduct interest on $750,000 of the home acquisition debt. This is down $250,000 from previous years. These new tax laws are set to expire in 2025, and after that point, the $1 million limit may return.

Property Tax Deduction

State and local property taxes are still deductible on your federal tax return under the state and local taxes deductions, known as the SALT deduction. TCJA modified this one. For the 2018 tax year, the amount you can claim for your property taxes is limited to $10,000. For many taxpayers, that still covers you well. For those in states with high property taxes, it could dampen deductions considerably.

Mortgage Insurance Tax Deduction

Private mortgage insurance (PMI) is deductible still. There are changes here too though. PMI is used by people whose home loan or refinance loan is 80% or more of the purchase price, AKA their down payment lower than 20%.

To deduct your PMI for the 2018 tax year:

  • Your loan had to be taken out in 2007 or later
  • The home has to be your primary residence or a second home that you’re renting out
  • Your adjusted gross income (AGI) has been less than $109,000 for any deduction and lower than $100,000 for the full deduction—you can use Schedule A to calculate your deduction amount

Energy Credits

Another lesser-known credit for a homeowner is the energy tax credit, called the Nonbusiness Energy Property Credit. This deduction is getting reduced through 2021 but can be claimed using Form 5695. This tax credit is limited to 10% of the cost of your qualifying energy. Items that qualify under this credit include skylights, insulation systems, and certain qualifying appliances like water heaters and central air conditioners. Some restrictions apply.

You can also take advantage of the Residential Renewable Energy Tax Credit. This one is a credit for using solar, wind, fuel-cell and geothermal energy sources, including solar water heaters.

The Residential Energy Efficiency Property Credit can be used to deduct 30% of the cost of solar, wind, fuel-cell and geothermal equipment at your main home or wind, solar and geothermal equipment at a second home. The deduction is unlimited for all but fuel-cells, which are capped at $500 per each half-kilowatt of capacity or $1,000 per kilowatt.

How Much Can Homeowners Really Save?

The amount of money you can save on your annual income taxes depends on a number of factors including filing status, standard deduction amount, the other itemized deductions you’re claiming and total taxable income. Total savings are a mystery until you itemize while doing your tax forms.

There are also things you can’t deduct when filing your taxes too. These items include any dues you pay to your homeowner’s association, the home owner’s insurance on your home, the appraisal fees you paid when buying your home and the cost of nonenergy-related improvements. Some home improvements can reduce your taxes when you sell your home, but you’ll need to keep good records of everything and hold onto the receipts.

This article was originally published February 23, 2013, and has since been updated by another author.

Image: iStockphoto

The post Homeowners Get a Tax Credit for Buying a House appeared first on Credit.com.

Source: credit.com

A Comprehensive Guide to 2020 Tax Credits

Couple preparing tax returnsEvery year, people’s lives change in ways that affect their taxes. They may start a higher education program or have a child, and others take on elderly parents as dependents. These situations can change their eligibility for tax credits. In addition, federal, state and local governments sometimes adjust rules about credits, so it is crucial to understand what credits you can take. Navigating the world of tax credits and deductions can be confusing. That is why a trusted financial advisor can help you find every tax credit you are entitled to.

What a Tax Credit Is (and Isn’t)

Tax credits encourage people to spend money by giving them credit toward that expense. For example, one of the most common tax credits is the Child Tax Credit. Taxpayers who have children under the age of 17 receive a credit to help reduce the cost of raising a child. Another popular tax credit is the Lifetime Learning Credit (LLC). The LLC encourages people to pursue further education by crediting part of the overall cost back at tax time.

A tax deduction lowers one’s taxable income, thus reducing the tax liability. If a person receives a deduction, he decreases the amount from his income, which lowers his taxable income. The lower a person’s taxable income, the lower the tax bill.

By contrast, a tax credit decreases the tax bill rather than a person’s taxable income. So, if a person has a $100,000 salary and has a $10,000 deduction, the taxable income will be $90,000. If the person in this example is taxed at a rate of 25%, the tax bill will be $22,500. If that same person has a $10,000 credit instead of a deduction, he will be taxed at 25% of their $100,000 income and owe $25,000 in taxes. However, he will then be credited $10,000 and owe only $15,000.

Some tax credits are refundable, but most are not. A refundable tax credit, which is different from a tax refund, can be given to taxpayers even if they do not owe any taxes. Additionally, a refundable tax credit can be given in addition to a tax refund. A nonrefundable tax credit means that a person will get the tax credit up to the amount owed. For example, if a person owes $2,000 in taxes and receives $3,000 in nonrefundable credits, that will simply erase her tax bill. If she gets $3,000 in refundable credits, she will receive a $1,000 tax refund.

Some common tax credits for individuals include:

  • Child Tax Credit
  • Earned Income Tax Credit
  • Credit for Other Dependents
  • Adoption Credit
  • Low-Income Housing Credit
  • Premium Tax Credit (Affordable Care Act)
  • American Opportunity Credit
  • Lifetime Learning Credit

Child Tax Credit

The Child Tax Credit is a refundable credit up to $1,400 and offers up to $2,000 per qualifying child age 16 or younger. Parents of children who are 16 or younger as of Dec. 31, 2020, can qualify for this tax credit. For someone to be eligible for the Child Tax Credit, the modified adjusted gross income must be under $400,000 if the parents of the child(ren) file jointly and $200,000 for any other person filing.

Additional requirements to qualify for the child tax credit include that the person filing must have provided at least half of the child’s support in the calendar year, and the child must have lived with the person filing for at least half the year. There are some exceptions to this rule, and it is best to discuss the child tax credit with a tax advisor.

Child and Dependent Care Credit

The cost of childcare, eldercare and other in-home care in the U.S. is high and tends to rise each year. If a couple is married and files jointly and has paid expenses for the care of a qualifying child or dependent so that one or both can work, they are likely eligible for the Child and Dependent Care Credit.

To qualify for the Child and Dependent Care Credit, the taxpayers must have received taxable income. This is because the credit is designed to help individuals who need to hire a caretaker to stay in the workplace.

Additionally, there are several qualifiers on the person being cared for. A child must be under age 13 when the care was provided. A qualifying spouse must be unable to take care of himself and have lived in the taxpayer’s home for at least half the year. A qualifying dependent must be physically or mentally incapable of caring for himself, have lived with the taxpayer for at least half the year and is either a dependent or could have been a dependent of the taxpayer. A taxpayer can claim up to $3,000 of expenses for one child or dependent and up to $6,000 for two or more children or dependents.

There are limits on who can provide care to qualify for this tax credit. The caregiver must not have been the taxpayer’s spouse, a parent of the child being cared for or anyone else listed as a dependent on the tax return. Additionally, the caregiver can’t be a child of the taxpayer.

Any child support payments you’ve received won’t be counted as taxable income. And if you’re the one making the child support payments, the income you used to do so won’t be tax deductible.

Federal Adoption Credit

Families that grow through adoption might be eligible for the Federal Adoption Tax Credit. Adoption can be an expensive process, and as families take on the burden of legal fees and more, the Federal Adoption Credit can help to decrease the burden when filing taxes.

To be eligible for the full credit, adoptive parents must earn $214,520 or less, regardless of their filing status. The credit is up to $ 14,300 per eligible child. An eligible child is any person under the age of 18 that is mentally or physically unable to take care of themselves. Eligible expenses include court costs, attorney fees, home studies and other travel expenses related to the adoption. The Federal Adoption credit is nonrefundable, so it will not produce a refund.

There are several rules for the Federal Adoption Credit, so it is important to speak with your tax advisor before claiming this credit. For example, if you received employer-provided adoption benefits, you may not claim the same expenses that were covered by your employer for the Federal Adoption Credit.

Credit for Other Dependents

Form 1040

The Credit for Other Dependents is a tax credit available for taxpayers who do not qualify for the Child Tax Credit. For example, someone who has a child age 17 or older or has other adult dependents with an Individual Taxpayer Identification Number might qualify for this credit. This tax credit amount is $500 for each dependent that qualifies for the tax credit. The credit is available in full to a taxpayer who earns $200,000 or less and decreases on a sliding scale as that person’s income increases.

An example of someone eligible for the Credit for Other Dependents is a single person filing who has a child dependent that is 17 years old and another child who is 21 and in college. Both children would likely qualify as dependents, and each would be eligible for the $500 credit. Another example is if someone has an adult relative living with him listed as a dependent on his tax return. In any case, the dependent must be a U.S. citizen, national or resident alien.

Lifetime Learning Credit

To promote education in the United States, the IRS created a tax credit called the Lifetime Learning Credit (LLC). This credit is for qualified tuition and expenses paid for qualified students at qualified institutions in the United States.

To claim the LLC, a person, their spouse or their dependent must pay qualified higher education expenses. Additionally, the student must be enrolled at an eligible educational institution. Eligible educational institutions are colleges, technical schools and universities offering education beyond high school. All qualified educational institutions are eligible to participate in a student aid program run by the U.S. Department of Education. The IRS publishes a list for people to search if their school is a qualified educational institution.

To receive the LLC, a person must have received a 1098-T tuition statement from the higher education institution. The credit is worth 20% of the first $10,000 that a person spends at the higher education institution. For example, if a person started school at a university in the fall semester and tuition cost $10,000 or more, that person would receive a credit of $2,000. The LLC is not refundable, so a person can use the credit for taxes who owe but will not receive the credit as a refund.

Additionally, the LLC has income limits. In 2020, a person’s income must be $69,000 or lower if filing single and less than $138,000 if filing jointly to receive any of the LLC. To be eligible for the full LLC amounts, a person can earn up to $118,000 filing jointly or $59,000 filing single.

The Retirement Contribution Savings Credit

The Saver’s Credit, or the Retirement Contribution Savings Credit, has been around since the early 2000s. It was created to help low- and moderate-income individuals save for retirement. Depending on a taxpayer’s income, the Saver’s Credit is worth 10%, 20% or 50% of her total savings contribution up to $1,000, or $2,000 if a person is filing jointly.

For example, if a person is filing single, her income qualifies her for the 50% credit tier, and if she contributes $2,000 to an IRA, she can receive a credit of $1,000. The maximum credit is $1,000, so if the same person decides to contribute $2,500 to an IRA, she will still receive a $1,000 tax credit.

Earned Income Tax Credit

An Earned Income Tax Credit (EITC) reduces the tax bills for low- to moderate-income working families. The credit ranges from $538 to $6,660 depending on a taxpayer’s filing status, how many children they have and their earned income. This amount changes every year, so be sure to verify the EITC with a tax advisor or verify with the IRS.

To qualify for the EITC, a taxpayer must have earned taxable income from a company, running a farm or owning a small business. People who do not earn an income, are married filing separately or do not have a Social Security number are not eligible for this credit. Additionally, people who earned over $3,650 in investment income are ineligible for this tax credit.

To earn the maximum EITC, a single filer can earn $50,594 or less, and a joint filer can earn $56,844 or less and have three or more dependent children. The amount of the EITC credit decreases if a taxpayer has fewer children.

American Opportunity Tax Credit

The American Opportunity Tax Credit (AOTC) is available to eligible students in the first four years of higher education. Students must be pursuing a degree or other recognized credential, be enrolled at least half time for at least one academic period or semester, not have received the AOTC or the Hope credit for more than the past four years and not have a felony drug conviction at the end of the tax year.

Students may receive up to $2,500 of credit for the AOTC. The credit is refundable up to 40%, so if a student is eligible for the full $2,500 and receives a tax return, the student can receive up to $1,000. The credit is awarded for 100% of the first $2,000 of qualified educational expenses and 25% of the next $2,000 of educational expenses. Therefore, if a student pays at least $4,000 in educational expenses, he will receive the full $2,500.

To prove they are eligible, students must receive a 1098-T from their educational institution. A taxpayer’s modified adjusted gross income must be $80,000 or less, or $160,000 or less for a married couple filing jointly to receive the full AOTC. If the student is a dependent, the taxpayer may claim the AOTC when filing taxes.

An example of someone claiming the AOTC is a parent who earns $79,900 and has a student in the first four years of a degree program. Another example of someone eligible is a student who is not a dependent of anyone and works part-time, earning $80,000 or less. If you are unsure if you or your family qualifies for this tax credit, be sure to speak with a tax advisor.

The Takeaway

IRS buildingThere are many tax credits that American taxpayers can take advantage of. These credits were created to encourage spending in specific areas of the economy and help low- and moderate-income families prosper. In addition to tax credits, there are plenty of other ways to keep more money in your pockets during tax season. Be sure to check out the IRS website to learn more about other tax credits, including the Residential Energy Efficient Property Credit, Foreign Tax Credit and more.

Tips on Taxes

  • Navigating the world of tax deductions and credits can be cumbersome and confusing. That is why it is so valuable to work with a financial advisor. Finding one doesn’t have to be difficult. SmartAsset’s matching tool can connect you with several financial advisors in your area within minutes. If you’re ready, get started now.
  • Using a free tax return calculator can help confirm that you did your arithmetic correctly … or indicate that you may have missed a credit or deduction.

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5 Reasons to Buy an Electric Car

5 Reasons to Buy an Electric Car

We’ve been hearing about electric cars for a while, but it sometimes seems that the only people who buy them are either very into being energy efficient or very wealthy. But there are a lot of good reasons for you to consider buying an electric car. They are good for the environment, but they can also be good for your pocketbook. And who doesn’t want to satisfy the demands of their conscience and their bank account at the same time?

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1. Electric cars help the U.S. with energy independence.

The United States spends about $300 billion importing oil into the country. That’s two-thirds of the U.S. trade deficit. Being dependent upon foreign oil leaves the United States more vulnerable to international problems and fluctuations in the supply of oil abroad.

2. Electric cars are more efficient. 

5 Reasons to Buy an Electric Car

With an electric car you never have to stop for gas. You can charge your electric car in your own garage overnight and be ready to travel wherever you want to go in the morning. In addition, you won’t be wasting any time or money buying snacks or pumping gas at the gas station.

3) You’ll likely save money.

Even though oil prices are the lowest they’ve been since 2008, electricity is still the less expensive option. Right now, if you purchase an electric car, recent data shows you will spend $3.74 worth of electricity to travel 100 miles. However, if you purchase a comparable car that uses gasoline, it will cost you about $13.36 to travel 100 miles. In addition, gas prices have a way of rising (or at least being unpredictable), so that journey of 100 miles can quickly get even more expensive for people with conventional cars.

4) You can get paid to buy an electric car .

5 Reasons to Buy an Electric Car

Right now, the federal government offers a tax credit that can reduce the cost of a new electric car by up to $7,500. That can effectively eliminate the cost difference between a gasoline-powered car and an electric car. Sometimes it can even make the cost of buying a gasoline-powered car more than the cost of buying an electric car. However, the tax credit offer might not last forever, so you might want to buy an electric car sooner rather than later if that’s an important factor for you.

Related Article: 3 Tips for Claiming the Energy Tax Credit

5) They’re Low Maintenance

With an electric car you’re not going to have to take your car to the mechanic as often. Although all cars may have problems, electric cars generally have lower maintenance costs than gasoline-based car. With an electric car you’ll also spend less time worrying about how to get by while your car is in the shop, or waiting around at the garage for the maintenance to be performed.

Bottom Line

You don’t have to be a hippie or a billionaire to opt for an electric car. There are advantages for anyone who takes relatively short car trips and has access to charging facilities.

Photo credit: Â©iStock.com/Anna Bryukhanova, ©iStock.com/Drazen Lovric, ©iStock.com/stockvisual

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