Rapid Exit, Suburban Influx: Are you Ready for the Move?

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Life in the midst of a global pandemic has forced us to take it day by day creating a “new normal” in our everyday lives. Nothing can be taken for granted anymore.

Unemployment at record highs and Federal interest rates at record lows has created a bubble that Americans were waiting for to burst. Although looking a lot like the market crash of 2008, it was apparent that the U.S. government was not going to let history repeat itself.

The real estate market is surprisingly stronger now than it ever has been. Advancements in technology have raised buyer and seller motivation through the roof. Rather than taking a personal day at work to tour a property, buyers are able to view a handful of properties in a minimal amount of time with virtual tours. Not only making the process efficient, but also enjoyable as there are so many tools at your disposal.

Current Market

According to a report by the Illinois Association of Realtors, Chicago currently has historically low inventory levels. This means that properties are on the market for a short period of time before being bought. Current inventory averages about one to two months of available market property.

In October, Chicago experienced a year-over-year sales increase of 21.9% while raising the median price 14.5%. For the entirety of the state, Illinois saw sales rise 39% with the median price up 14.2%.

Along with having the highest average rent, River North and River West have the highest rate of population leaving the city. A large population of Chicago is ready to give up their small condo for a large suburban house.

Leaving Chicago

Living in the big city has always been a hot commodity with all it has to offer (loop work locations, restaurants, nightlife, etc.) . However, that seems to be changing with the new society we have had to adapt to. Both individuals and families have been craving more space and expressing a need for backyards. Home offices have become the norm and privacy and security has been something many have been adding to their home search checklist.

March to September of last year showed a 10% increase in change of address forms from Chicago, revealed by the U.S. Postal Service. But where are these people all going? Some are saying goodbye to Illinois, but many are transitioning to life in the suburbs. Neighboring suburbs in DuPage County welcomed a large city population into their cities.

City life is all fun and active until you add a pandemic into the mix. People feel unsafe with the density of the population and quite frankly are looking for the flexibility the suburbs have to offer.

With the low interest rates mentioned earlier, home owners are taking full advantage of refinancing their mortgages allowing them to keep a little more cash in their pocket making home owners confident in the transition over to the suburbs.

Moving Forward

The real estate market is on no path to slow down anytime soon. Fear and uncertainty have decreased the number of listings forcing the current market to appreciate respectively. Along with that, properties are being sold quicker than they ever have been.

Are you ready to move out of the big city? Don’t worry, there is no rush. Although nearly 40% of adults are considering moving away from the urban setting, according to a recent Harris Poll, the bright city lights we all love, make the big decision a tough one.

Whether you are thinking about selling your city condo or moving to the suburbs, a real estate attorney is an essential role in the process. Contact Tannehill Law today if you are seeking professional legal guidance to assistance you in your next move today.

Written by Sean Tannehill with co-author Melissa Tannehill.

Three Important Tax Benefits of Owning Real Estate

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Tax season can be a stressful time for everyone. No matter how much you prepare, it’s not unusual to get to February and learn that you owe the Government more than you originally thought. This year is particularly complicated in light of COVID-19 and the extension of the new tax deadline to July 15, 2020. 

While there is no way to avoid the stresses of tax season this year, there are ways that you can make it go a little smoother next year. One of the most impactful things that you can do in the year ahead is purchasing a home. 

There is a handful of tax benefits that Illinois homeowners see around tax season including deductions, credits, and tax-free profits. 

Deductions

When you are looking to legally lower your tax liability, a deduction is one of the easiest ways to do so. When looking to deduct, you should consider what expenses you have incurred over the year, and subtract it from your gross income. When you own a home, there are a variety of ways to achieve this. 

  • Mortgage Interest Deduction

This allows you to deduct interest paid on your mortgage. There are different regulations and limits set on this depending on marital status and how you file. Taxpayers can deduct mortgage interest paid on up to $750,000 in principal. Investment property mortgages are not eligible for the mortgage interest deductions, although mortgage interest can be used to reduce taxable rental income. 

  • Mortgage Point Deduction

Many homeowners also have eligibility to deduct paid mortgage points from their taxes.  Mortgage points are fees you pay in order to decrease the interest rate. Each of these points costs 1% of the overall loan amount. If you choose to pursue this route, you can deduct the points over the life of the loan or in the year they were paid.

  • State and Local Taxes Deductions

When purchasing a home, it is important to consider the deductions for state and local taxes. This includes any property taxes that you pay on your home. There is a $10,000 limit per/household for these deductions. 

Many Illinois residents find this deduction cap to be a disadvantage because of the state’s higher property tax bills.

  • Home Office Deductions

If Americans have learned anything from the latest COVID-19 pandemic, it is that many jobs can function remotely from the home. If you are considering adding a home office to a new home, then this is another valuable item that you can to write off. 

In order to qualify for this deduction, the space that you assign as the office must be used regularly for business. The space must also be exclusively for business. This means that you cannot just add a desk to a bedroom and write off the entire space. 

Credits

In addition to the tax deductions that you can receive when you own your own home, you can also be entitled to credits that reward you for making your home more energy-efficient. The residential energy-efficient property credit will offer 22% to 30% of the cost back to you if you make improvements in the home that follow a more Green living standard. It is an incentive set in place to help encourage homeowners to make eco-friendly changes to the home. Some of these changes might include but are not limited to, adding solar panels, a solar water heater, wind turbines, or geothermal heat pumps. 

Tax-Free Profit

If you are looking to sell your home, you can still receive tax benefits in the coming year. Unlike most profits, the capital gains accumulated when selling a house can be tax-free up to $250,000 (if you are single) or $500,000 (if you are married filing jointly). In order to qualify for this benefit. The house must have been your primary residence for at least two out of five years before the final sales date.

Remember to bring your Settlement Statement to your accountant if you purchased or sold a real estate during the tax year. If you are looking to purchase or sell a home or investment property and would like to know more about tax benefits and consequences, contact your accountant and Tannehill Law today.