If you take out a mortgage for home improvement purposes, the IRS may ask you to prove the project was a “substantial improvement” that:

  1. Adds to the value of the home,
  2. Prolongs the home’s useful life, or
  3. Adapts the home to new uses.  For example, painting a room may not qualify, but an addition or new kitchen may qualify.


Keeping the receipts from your home improvement project would go a long way toward proving this. Also, keep in mind that the IRS gives you 24 months to reimburse yourself for improvements made in the past, or 12 months to complete future improvements. For more details, please reference IRS Publication 936, and see my article called, Three Things You Should Know About Pulling Cash Out for Home Improvement.

2: Ability to Reduce Your Capital Gains Tax:

Capital Gain is calculated by taking your sales price, minus your costs of selling the house, minus your “tax basis” (see illustration).  Tax basis is the total cost of buying, building or improving your house.  When you make a “substantial improvement”, the cost of the home improvement is added to your tax basis.  This reduces your capital gain when you sell the house, and it could save you quite a bit of money on capital gains taxes.  That’s another reason why it’s important to keep your home improvement receipts.

Please see a CPA for further details on the deductibility of mortgage interest or the capital gains tax in your specific scenario.  Contact me for further information on your mortgage options.

1: Ability to Deduct Your Mortgage Interest:

What States Give You the Most ‘Bang for Your Buck’?

What States Give You the Most ‘Bang for Your Buck’? [INFOGRAPHIC] | MyKCM

Some Highlights:

  • Thinking of moving across the country? How far will your money take you?
  • The majority of states in the Midwest and South offer a lower cost of living compared to Northeast and Western states.
  • The ‘Biggest Bang for your Buck’ comes in Mississippi where, compared to the national average, you can actually purchase $115.34 worth of goods for $100.


Finance and Savings for University Education Piggy Bank on Books

Section 529 of the Internal Revenue Code created a type of college savings plan that known as a “529 Plan”.  The 529 plan allows families to:

  • Invest funds after you’ve paid taxes on them (similar to a Roth IRA)
  • Grow the money tax-free over time (no taxes on dividends or asset appreciation)
  • Withdraw the money tax-free to pay for qualified college expenses

#1 – Each State Sponsors its Own 529 Plan(s), But You Can Invest in Any Plan that You Want
For example, if you live in Florida, you can invest in a New York plan and send your student to a college in California.  The plan is sponsored by the state, but the state hires a money manager to manage the plan and pick the investments.  There are several web sites that rank the various plans in each state, including Morningstar.com and SavingforCollege.com.  Click here to view a list of plans and how they rank as analyzed by SavingforCollege.com.  You can view the rankings over a 1-year, 3-year, 5-year or 10-year period of time.

Although you don’t get a federal income tax deduction for investing in a 529 plan, some states offer a full or partial tax deduction against your state income taxes (see a tax advisor for details).  Also, unlike other types of investment accounts, 529 plans don’t have restrictions based on income or age, and there are no annual contribution limits.  However, you can only contribute up to the amount necessary to provide for the qualified education expenses of the student.  Keep in mind that the plan can be funded by anyone, including parents, grandparents, friends and relatives.

#2 – The Investment Grows Tax-Free, and the Student Beneficiary Can Withdraw the Funds Tax-Free to Pay for Qualified Education Expenses
The funds in the account grow tax-free.  The student beneficiary can withdraw the funds tax-free to pay for tuition, fees, books, equipment, room and board at an eligible educational institution.  According to the IRS, “An eligible educational institution is generally any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U.S. Department of Education.” Click here to view a list of schools that are eligible institutions.

In conclusion, 529 College Savings Plans could be a great way for you to contribute to a child’s future.  Please see a financial advisor for more details.


What Would You Sacrifice to Buy A Home??

Saving To Buy A Home? What Would You Sacrifice? [INFOGRAPHIC] | MyKCM

Some Highlights:

  • 95% of first-time homebuyers are willing to sacrifice to make homeownership a reality.
  • The top thing that buyers sacrifice are new clothes at 54%.
  • Even repeat or experienced buyers say they sacrificed taking a vacation or buying a new car to buy their last home.

10 Rules for Children and Cell Phones


Last night my son preferred to use his mobile phone(no service just wifi – another story) than go to the movies or watch the Stanley Cup game(granted not a Penguins fan – I give him that)

The entire world has moved to the cell phone. It’s no longer a convenient tool to speak to someone when you are mobile. Now it is the town square. It’s the place to socialize, it’s the library, the arcade, the TV, the shopping mall, the remote control, etc. Kids know it and feel left out of the world when they don’t have one. So they will tell you that they need one and that everyone has one except them. A kid getting a smart phone today is similar to our generation getting a drivers license. [Tweet This] It is releasing them into a whole new world.

Unlike many other parenting topics, you cannot think back to how your parent handled the situation when you were a kid because cell phones were not around yet. Regardless of how old your child is when you decide it is time to give them one, here are 10 rules for kids and cell phones.

1. The Plan

Discuss with your child what their cell phone plan entails. Let them know how many minutes and text messages they have a month. Determine consequences for running over. One idea is to charge them for the price difference.

2. Picture/Video Messages

Let your child know if picture and video messaging is part of your plan. Tell them what is and isn’t appropriate. Discuss and forbid behavior such as sexting and let them know how inappropriate pictures can spread and ruin reputations.


Set rules on downloads. Require your kids to talk to you before downloading something. Use your discretion. There is no rating system for video games for cell phones.

4. Numbers to Avoid

Give your child a list of relatives to call or text sparingly. Also, warn them of incoming calls from unknown numbers who may be trying to get their information.

5. Driving and Cell Phones

Be familiar with the state laws to know if a headset is required for talking on the phone while driving and to know if texting while driving is illegal. Make your own rules for using the cell phone while driving.

6. Cell Phone Etiquette

Share with your child when it is not appropriate to use their cell phone. Examples include, in school, at the movies, on dates, during meals with people (especially family), during tests, at appointments, etc.

7. Cyber Bullying

Stop cyber bullying before it starts. Discuss with your child how painful it is for the victim and how there is no escape from cyber bullying once it starts.

8. Internet Usage

Tell your child if your phone plan covers internet usage or not. If it does, inform your child of any websites or applications you do not want them on.

9. Communicate Clearly

Explain to your child to write clearly over text messaging or if it is an important conversation to use the phone or even better, have it in person. Many conflicts are created using texting through miscommunication.

10. Attachment

Today, everyone has their cell phone attached to their ear or to their thumbs. Warn your child of becoming dependent on their cell phone and of becoming so attached they miss what is happening in front of them.

All Pro Dad