Monthly Archives: November 2011

DIY Home Hardware Installation – How to Install Cabinet Knobs in Your Kitchen

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If the cabinets in the kitchen are new and have never had knobs installed in them before you will have to first measure and mark off where the cabinet knobs will go before drilling any holes. First, decide where the knobs will look the best on the cabinet. Some people prefer the center of the cabinet edge for the knobs while others prefer something that is off center. 3 inches above the bottom of an upper cabinet is generally a good place for kitchen cabinet knobs to be installed. Using a ruler and a pencil, make a small mark on the cabinet where the hole will be drilled for the knob. Make sure all of the cabinets have equal and accurate measurements so all of the knobs are equally placed and spaced. If upper cabinet knobs are placed 3 inches from the bottom of the cabinet, place the knobs 3 inches from the top of lower cabinets below the counter top.

Most kitchen cabinet knobs are attached to a screw or a cylindrical attachment that goes through the hole drilled in the cabinet. Before drilling any holes, inspect the size of the screw that is to go through the cabinetry and pick a drill bit of a coordinating size to drill the hole with. Following the marked off measurements previously made, drill a hole for each knob on the cabinet. Once the hole is made, the cabinet knob can be put through the hole and secured at the back.

If there are already knobs in the kitchen cabinet and you wish to replace the old ones with new ones the process is quite simple. Drilling is rarely needed because they can usually be unscrewed by hand or easily taken off with the help of a hand held screw driver. Once the old knobs are unscrewed and taken out, the new ones can be installed by putting them through the holes that the previous ones were in and securing them in the back.

Building a Home – Do You Really Need a Realtor?

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So, if you’re having a home built, what are the consequences of not using a Realtor? I learned from experience, and I want to share my knowledge with others. Currently, I am a Realtor, so you may think that I’m biased. However in 1998 (prior to becoming an Agent), just like many of you, I didn’t use a Realtor when I had my 1st home built. I thought the person in the model home would look out for my best interests. Below are some real life examples explaining what can happen if you don’t hire a Realtor to represent you.

1. Pay too much for the house – Realtors are in constant contact with builders about special promotions that are going on. You may not believe this. But, I know a buyer that went to a builder, and the sales agent in the model home quoted a high price. However, the Realtor knew that the builder was offering a promotion, and the price was actually supposed to be a lot less. If the Realtor wasn’t there, the home buyer would have overpaid for the house.

2. Negotiate the Contract – One thing to always remember is that the sales agent in the model represents the builder, not you (the buyer). Therefore, their job is to negotiate the contract in the best interests of the builder. If you hire a Realtor/Buyer’s Agent, it’s the Realtor’s job to negotiate the contract for your best interests. In other words, the Realtor will negotiate the following: sales price, earnest money deposit, down payment assistance, financing options, etc. I know buyers who were told they had to use the builder’s mortgage company even though that mortgage company didn’t have the best loan programs. So, the buyers wound up getting a higher interest rate. They were told that if they didn’t use the builder’s company, they wouldn’t receive the special incentives (like free upgrades, builder paid closing costs, etc). A Realtor can negotiate for you, so you don’t have to use the builder’s lender.

3. Incorrect Options – Building a home takes several months. Everyone’s human, and we all make mistakes. Sometimes, builders make mistakes and put the wrong options in your house. When I had my home built, the builder put in the wrong countertops. In another buyers’ house, the builder put in the wrong bathtub, the wrong light fixtures, and there was a lot of standing water on the lot. Your Realtor will monitor the building progress, and the Realtor will notify the builder immediately if a mistake is made.

4. Incorrect Paperwork at Closing – Realtors know what type of paperwork should be at the closing. I know a buyer that had a home built, and during the building process, the paperwork changed. Specifically, the sales price was lowered. However, when they got to the Closing, all the original documents were there with the higher price. No one could find the new paperwork. The Realtor was the only person who had it. So, without the Realtor, the buyer would have paid too much for the house.

5. Incorrect Settlement Statement – Realtors go over this statement in detail to make sure it’s accurate. If you’ve never heard of a Settlement Statement, that’s the form that you’re given at the Closing. It lists all your closing costs, and it states whether or not you have to pay money or get money back at closing. Well, I can’t count the number of buyers I know that encountered incorrect Settlement Statements. For example, at one of client’s closings, the Settlement Statement showed that my client had to pay over $200, but in actuality, he didn’t have to pay anything. Luckily, I was there, and I noticed that one of the fees on the statement was incorrect.

Now, you know the benefits of using a Realtor even if you’re having a new home built. Now, you don’t have to learn the hard way. The best thing about hiring a Realtor/Buyer’s Agent is that it’s FREE (in most states). Why would you not want someone to look out for your best interests (for FREE)?

Home Office Expenses of a ‘One Man’ Corporation

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As a self-employed sole proprietor you can deduct as an ordinary and necessary business expense the costs of a qualifying home office on Schedule C.

If you are an employee of your own one-man corporation, whether a regular “C” corporation or a “sub-chapter S” corporation, you have three choices for handling the costs of a qualifying home office.

* You can deduct the costs as an unreimbursed “employee business expense” under “Job and Most Other Miscellaneous Deductions” on Schedule A. Expenses in this category of itemized deduction are only deductible to the extent that the total exceeds 2% of your Adjusted Gross Income.

* The corporation can pay you rent for the home office.

* The corporation can pay you for the “out-of-pocket” costs of a home office under an “accountable” plan for employee business expense reimbursement.

The third option, being reimbursed under an accountable plan, provides the greatest tax savings. It is an excellent way to get money out of your closely-held corporation tax-free. The corporation can deduct the amount of the reimbursement and you do not have to report the payment as income.

This option is “more better” than having the corporation pay you rent for the home office. While your corporation can deduct the rent paid to you, you must report the rent as income on Schedule E. You can only deduct the pro-rated share of real estate taxes, mortgage interest and casualty losses against the rental income on Schedule E, expenses that are otherwise deductible in full on Schedule A. You cannot deduct the proportionate share of insurance, utilities, repair and maintenance, depreciation or any other indirect expenses.

To qualify as a home office, the space (it does not have to be an entire room) must be used regularly (on a continuous, ongoing or recurring basis) and exclusively (there can be no personal use – take out the tv) for your trade or business, and it must be your principal place of business or a place where you physically meet with patients, clients or customers on a regular basis. The space will be considered your principal place of business if it is used for performing administrative or management activities, such as billing, bookkeeping, ordering supplies, setting up appointments and writing reports, and there is no other fixed location where you regularly perform these activities.

As an employee the home office must be for the convenience of your employer. This means the home office is required as a condition of employment, it is necessary for the business to function, or it is necessary for you to properly perform your duties as an employee. If you do not have any other place of business, such as a rented office or storefront, your home office should qualify.

I used to rent an office for my tax practice. Even though I did administrative work in a “regular and exclusive” space at home, and on rare occasions met with clients there, I could not claim a home office deduction or be reimbursed for home office expenses. I have since given up the rented office and work exclusively out of my home. I now have a qualified home office.

For an expense reimbursement plan to be considered “accountable”, the expenses that are reimbursed must be for actual job-related expenses (you cannot reimburse personal expenses) and you, as the employee, must substantiate the expenses by providing your employer with receipts or other documentation.

You should create a monthly “Employee Expense Report” form for your corporation. This is a good idea even if you don’t have a home office. Start out with lines for business mileage and other out-of-pocket business expenses, such as postage, office supplies, parking and tolls, meals and entertainment, etc. Staple receipts for these items to the report.

Include a Home Office section in the report. Calculate the “business use percentage” of your home by dividing the square footage of the office area by the total square footage of the home. List each item of expense paid during the month, such as real estate taxes, homeowner’s insurance, oil heat, gas and electric, water and sewer, alarm or security service, garbage disposal, general repairs and maintenance, and mortgage interest (taken from the monthly mortgage billing statement or a loan amortization statement you can create online). Multiply the total of these expenses by the business use percentage to determine the amount to be reimbursed.

While there is no question that a self-employed person can, within limits, deduct depreciation on a home office, because depreciation is not an “out-of-pocket” expense it follows that your corporation cannot reimburse you for the depreciation of your home office. However, this issue is not clear.

Total up all the business expenses listed on the form, including the home office amount, and write a check from the corporation to yourself for this amount.

You must reduce the amount of your itemized deduction for real estate taxes and mortgage interest by the amount of reimbursement you receive from your corporation during the year for these items. If your real estate taxes for the year are $10,000, but in the course of the year you were reimbursed $2,000 by the corporation, you can only deduct $8,000 in real estate taxes on Schedule A.

Deducting, or being reimbursed for, a home office today will no longer turn around and bite you when you sell your personal residence, as had been the case in the past. If the home office is within the same “dwelling unit” as the residential portion of your home, you are treated as using the entire home as a principal residence.

If the office space was 10% of the total area of your home, you DO NOT have to pay income tax on 10% of the gain from the sale. You will be able to exclude the entire gain, up to the $250,000 and $500,000 limits, if you qualify, less any “post-May 6, 1997″ depreciation. You must report any depreciation you deducted on the home office after May 6, 1997 as “unrecaptured Section 1250 gain”, which will be taxed at the capital gains rates up to a maximum of 25%.

You are married and you sell your personal residence, which you owned and lived in for the past 4 years and in which you had a qualified home office that was 15% of the total area, for a net gain of $300,000. During the 4 years you lived in the home you were able to deduct $5,000 in depreciation on the home office portion. You can exclude $295,000 of the gain, and you will pay tax on only $5,000.00.

If you were not able to deduct depreciation on your home office, or were not reimbursed by your corporation for depreciation, there is no income to report and 100% of the gain, up to the limits, will be tax-free.

Copyright (c) 2005 by Robert D Flach LLC