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VA Loans

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VA Home Loans: What to Expect in 2020

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As one of the major benefits given to military veterans, it’s important you are kept up to date on the latest changes to VA home loans in 2020. If you plan on purchasing a home in 2020 with the help of one, then keep reading to see how 2020 is changing the way VA home loans affect you, the qualifier.

2020 VA Loan Funding Fee Change

In June 2019, the Blue Water Navy Vietnam Veterans Act of 2019 was signed into law but won’t be active until January 2020. With it comes several changes for VA Funding Fees.

Fee Changes

Temporary (2 year) change to the VA Funding Fee with an increase from 0.15 to 0.30% for Veterans and servicemembers.
VA Funding Fee will slightly decrease for National Guard and Reserve Members.
The Fee change will not impact Veterans with service-connected disabilities, some surviving spouses, and other potential borrowers.
Active Duty Service members who have earned a Purple Heart can have the fee waived if closing on their home while serving on active duty.

No VA Home Loan Limits in 2020

In 2019, a VA loan borrower who did not have a down payment was subject to receiving the guarantee price limit of $484,350 for a home loan. Now in 2020, to expand the benefits for more veterans, they are not capping the size of a loan a veteran can receive if they have no down payment. Thus, veterans can start scouting higher-value homes to live in.
Native American Veterans will benefit from this as well. The new law will remove the loan limit of $80,000 for a Native American Veterans using their entitlement for a direct loan to purchase or build a home on Federal trust land.

Financial Health

While these new changes for VA home loans are beneficiary, lenders will still be cautious. You still have to make the necessary amount of income to qualify. The doors may have opened for more veterans to pursue more homes, but that doesn’t mean that it’s easily attainable if you lack the sustainability and financial health to afford it. For veterans who can afford a higher mortgage, the loan process has now become a lot easier in 2020.

Future VA Home Loans

The waiting game of purchasing a home when the “time is right”, may be over now. You can now look forward to starting a fresh life in 2020. For new veteran homebuyers, this is an exciting time. With the restrictions being lessened in January, we can only look forward to what is to come for VA home loan borrowers. If you are curious about qualifications or need help getting started, give Devin Fahrner, a mortgage loan officer who specializes in VA Home Loans in Idaho, a call.

A suburban home bought with a VA Home Loan

Prepayment Penalties are No Problem

By | Financing, Home Loans, Housing, VA Loans | No Comments

Because of their service to this country, there are many support systems in place for veterans. The problem is that many veterans don’t know what is offered to them. Veteran Affairs provided a huge element of support for veterans when VA Home Loans were enacted in 1944 as an addition to the GI Bill of Rights. However, most homebuyers – veterans or not – have a hard time deciphering which loan will be best for their situation.

All too often, veterans do not take advantage of the benefits of a VA home loan because they do not understand what is actually provided within them. There are plenty of advantages worked into the VA home loan structure but one that can provide freedom and flexibility for their lifestyle is: no prepayment penalties.

Prepay Away

As is the case with most home loans, there are certain rules that lending organizations require the borrower to abide by. It is primarily structured this way so that the lender is ensuring a certain amount of revenue from interest-based on the term of the loan. However, organizations offering VA home loans can not penalize veteran-borrowers for paying back their loan before the term states.

How Is This a Benefit?

While prepayment might not seem like a big deal, it really is. Being able to pay back your loan before the term is up allows borrowers to relieve the financial burden that loans can instill. More importantly, it allows home loan borrowers to relocate, upgrade, downsize, or just find a home better suited to their needs without having to wait out a loan term.

This can grant veterans the opportunity to adjust to their lifestyle as time goes on. Maybe that means they can continue to grow their family with children or pets, build a business in or out of their home, relocate to a more accommodating neighborhood, move to a new state for work, or renovate the home their already and sell for profit. The opportunities are endless and would not be possible in a traditional home loan experience.

Other Home Loan Benefits

There are plenty of other benefits for veterans a part of VA home loans so speak with a home loan expert on what the VA can offer to you as you continue on your home buying journey. Be sure to ask which type of VA home loan will work best for you and your needs.

A fall decorated home, bought with a VA Home Loan

Veteran’s Fall Home Maintenance Checklist: 6 Things to Do Before Winter

By | Home Maintenance, Housing, VA Loans | No Comments

Rustling leaves, chilly wind, and colorful trees are all telltale signs that fall has reached your home. While it is tempting to kick back and relax this season, winter is right around the corner to wreak havoc on your home. If you’ve moved into your home recently using a VA home loan, don’t let the sudden snowfall catch you by surprise this year, be prepared by going through this checklist of 6 must-dos before winter.

Checklist Must-Dos

1. Check Your Roof

Your roof is an expensive part of your house that if not properly maintained, can cause water and snow to leak into the small cracks and crevices. Check for warning signs like loose or missing shingles, beams of light peaking into your house, minor leaks, and debris buildup.

2. Heat Your Pipes

Time to crank up the heat. Some people enjoy the cold more than others, but if you are wanting to keep your pipes from freezing, then let the hot air reach them. Even in the fall, your pipes can freeze and burst, so don’t let the holidays bring unwanted expenses.

3. Unclutter Your Gutter

We talked about roof maintenance checks, but your gutter should not be passed up during your roof inspection. Fall brings the leaves, and those leaves go into your gutter. A cluttered gutter can cause ice dams. Don’t let your leafy gutter cause your roof to degrade. The last thing you want is to clean your roof and have your gutter buildup reverse your hard work.

4. Fertilize Your Lawn

Just because your grass is buried in leaves or snow does not mean your grass isn’t active. The roots are still there and need some extra protection using fertilizer. By applying it in advance, your lawn won’t be a sore sight in the spring. You wouldn’t want to have the only yellow lawn in your neighborhood.

5. The Hearth of The Home

Fall mood includes a cozy fire to sit by with some hot chocolate in hand and the smell of cookies in the oven. Your fireplace should be inspected by a professional if you have never done it before. Don’t let the creosote accumulate and ruin the mood by lighting your house on fire. That would be anything but cozy.

6. Unwanted Guests

Your family isn’t the only family wanting to stay warm. Mice, squirrels and other critters can’t wait to make themselves at home in your house. Inspect your home for any openings or holes that are around your house. Plug these up before it really starts to get chilly, or you will be hearing some skittering in the walls.

Idaho Seasons

Idaho is one of the few US states that experiences all 4 seasons without drastic temperature and weather changes. For people moving to the area during the fall, especially veterans or active military members, be sure to talk to a home loan specialist so that you can move into a home that fits you. Idaho has amazing VA home loan information resources so you can make the transition a smooth one. I hope the checklist has got you prepped and excited for the snowy season!

A Home pin with american flag behind it.

Veterans and Active Military: Finding Your New Home

By | Financing, Home Loans, Housing, VA Loans | No Comments

The US is regularly plagued by natural disasters and crime. From California fires to hurricanes along the coast, there seems to be nowhere safe to go. Crime rates can be high in the US too; feeling safe in your home is important especially when trying to rejoin American society. If you or someone you love is a US veteran or active military member and has experienced the loss of a home, then we can help you. We will also go over low-crime-areas so that you can feel extra comfortable in your decision of choosing where to go next.

Naturally Safe

The last thing you want to have happened is to come home after service and have your home ruined by mother nature. It may be tempting to stay in the current state and find a new place to stay but in the event the natural disaster happens again, you don’t want to lose another home. Here are some amazing states that are considered the safest from natural disaster damage:

  • Montana
  • Maine
  • Colorado
  • Vermont
  • Minnesota

Publicly Safe

Not only are natural disasters a scary situation but being in fear of your community every day is a whole other beast. Especially for veterans suffering from PTSD, walking on eggshells every day is too much anxiety to handle. There are several states that you can make home so you can sleep easy every night knowing that your potential state has low crime. Here are the top safe states of 2019:

  • Maine
  • Vermont
  • New Hampshire
  • New Jersey
  • Idaho

After Choosing

As you can see some of the states do overlap in safety for both variables. If you have made your choice of where to live, then you may need some assistance in locking down your dream home. A great resource for veterans and active military is a VA home loan. You can get a home loan for $0 down, which is only one of the many benefits a VA home loan has to offer.

VA Loan Benefits

  • No required down payment percentage
  • No monthly mortgage insurance premiums
  • The lowest average interest rate of all loan types
  • No prepayment penalty

Feel Safe

Whether you’ve lost your home or are simply looking for a safer place to live, knowing you have another perk from your military service is sure to ease your nerves. A VA home loan can help you financially and mentally so you can confidently plant your feet in a place you know is safe.

Before you speak with a local VA home loan specialist you can get a quote online if you want to buy or refinance your home. With a VA home loan, you can save up for furniture, relocate easily, and recover from disasters straightforwardly.

In State Specialist

As you noticed, Idaho is one of the safest states in terms of crime rate. For information on moving to Idaho and purchasing a home using a VA home loan, Devin Fahrner will be your best resource. She is an experienced mortgage loan officer that understands your situation and can guide you in the right direction for an Idaho VA home loan. See why Idaho is one of the best states to live in for military personnel, veterans, and military families.

A Dog in front of fireplace, with american flag in mouth

Considering a VA Home Loan?

By | Home Loans, VA Loans | No Comments

VA home loans are a beneficial and affordable method for veterans or active duty military to purchase a home. Before you go and apply, consider what you would like most in your future home before you jump into an empty one. Find trusted realtors and lenders that will help you in your search to find a beautiful Boise veteran home.

Amenities of a VA Loan

You have found your dream home for 0% down. You can’t wait to move-in and start your life. However, not all houses come with amenities. Consider the amenities you may want to purchase to spruce up your new home before residing in it. Some of the items to consider are a fridge, washer/dryer, microwave, dishwasher, and other furniture. Luckily you do not have to spend a fortune on these in the beginning because the VA home loan does offer a VA rehabilitation loan that can help you renovate these amenities later on. Why not just start with the rehabilitation loan? For the initial loan to be approved tacking on additional requirements may increase the processing time. If you have fallen in love with an older home and are excited to put your personal mark on the home, then the VA Renovation/Rehabilitation Loan is worth considering.
For more VA Home Loan info, Devin Fahrner is your local Boise VA home loan specialist that can offer advice when considering the initial loan and other loans associated.

Realtors & Lenders

Find yourself a Realtor who is familiar with VA home loans so that they can help you find homes that accept VA in the first place. You would not want to fall in love with a house you can’t have. Not only finding a Realtor is important, but also a Lender to move you through the process smoothly. Devin Fahrner is a VA lender that is authorized to conduct business in Idaho and has direct experience as a wife of a retired Air Force serviceman. She is a great example of the type of lender you would want to place your trust in for learning about the benefits of a VA loan. You may find connections through your local community about realtors and lenders that are familiar with each other. This can aid in the searching and processing of a VA Home Loan.

Sounds Like A lot of Work

It’s not. The VA home loan may sound like an intimidating process, but our Idaho VA loan specialists are here to make your life easier. With the large influx of people moving to Boise, the hardest aspect of getting your perfect veteran home would be choosing from the many housing options the area has to offer. Save yourself from dialing a bunch of extensions and being tossed around by larger companies that may not be in your same time zone and speak with someone who can relate and cater to your needs. For VA home loans it’s important to find a specialist that will make the experience more personal.

A clean kitchen from a home purchased with a VA Home Loan

VA Loans for Home Renovation

By | Home Loans, Home Renovation, VA Loans | No Comments

The VA offers endless resources for veterans and active military members. Some of these resources go unused by military servicemen – active, reserve, or retired. Especially as regular life begins to resume, we tend to forget about the continued support offered by the federal government through the VA.

One of these underutilized offerings are VA home loan. While the home loan sector has plenty of options available with a range of opportunity, the offerings from the VA are arguably unmatched because of its direct relationship with the federal government. As such, current and former military service members are able to access some of the lowest, most flexible rates, payments, and terms on the market.

Veteran Benefits Update

In April 2018, the Veteran Benefits Administration updated their policies and practices with regard to veteran benefits and home loans. This occurred in response to increasing interest from the military population as well as housing market demands.

“The Aging housing stock in the United States has contributed to the increased demand for alteration and repair loans. Due to the condition of this aged housing, homes are often sold as “cash or conventional financing” which does not allow Veterans to use their VA earned benefit. This guidance will allow Lender’s to make VA-guaranteed loans to Veterans who wish to purchase or refinance a home that is in need of alteration and/or repair. The terms alteration, repair, renovation, and improvement are interchangeable for the purposes.”
Veterans Benefits Administration, Circular 26-18-6

More opportunity was then accounted for within the VA guidelines on loan capacity, which can be found in the Circular 26-18-6 publication.

VA Loan Capabilities and Eligibility

A major misconception about VA home loans is that they can only be used for purchasing or refinancing. This, then, limits what military borrowers feel they are allowed to do. VA home loans can do much more, though. Some loans have cash-out options allowing borrowers to pay for outside costs or reinvest in their home. There are also supplementary terms that can be added to traditional VA home loans that provide specific support for borrowers pursuing home improvement actions. These are then known as renovation, or rehabilitation, loans.

Because rehabilitation loans are just an extension of normal VA home loans, they have the same eligibility requirements or qualifications. As a result, former or active military are given easier access to loan opportunities to purchase and improve their properties.

VA Home Loans: Rehabilitation

VA Rehabilitation Loans are typically used when a property is not completely move-in ready. These loan agreements may require more processing, which will tack on additional time and energies before the borrower can begin residing on the property. However, they can also serve to save the borrower money in the long run based on financial investment, renovation costs, and even property value.

Lender Oversight

It is important to remember that the process is different than a traditional renovation experience. The lender initiates and oversees the renovation process on behalf of the borrower. Because the lender is the general authority on the completion of work, they are in charge of supervising the contractor. This ultimately expedites the renovation process as opposed to the lengthier improvement repairs attempted by homeowners themselves. Lenders are also able to ensure that time is not wasted and the work is accomplished in an efficient manner.

Home Renovation Loan Options

As is the case with nearly every loan, there are term and agreement options that need to be carefully discussed and selected by the borrower. Some areas of adjustment that relate specifically to rehabilitation loans are:

  • Loan type
  • Minimum property requirements (MPR)
  • Contractor requirements
  • Repair/renovation operations
  • Notice of Value (NOV)

Understanding the opportunity and value of these variables will allow every borrower to have a satisfying loan experience. Working with loan professionals that understand industry standards as well as Veteran Affairs and military member needs will provide you with the expertise you need for a smooth transition into your new or renovated home.

Two Story Colonial House with American Flag

What Do VA Home Loans Offer Veterans?

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Buying a home is a careful, considerate process. In addition to the measures taken to keep the process controlled, there is also the added stress of financial burden and complicated loaning processes. Although, there are alternatives for home loans! On top of that, the veteran home loan experience has actually been simplified and organized into a very cohesive, flexible system.

VA home loans are not offered by every institution. However, it is because of this that the many institutions offering VA home loans are in competition with one another. This gives veterans a spectrum of loan options with adjustable features to suit their needs.

Unfortunately, a small minority of veterans are taking advantage of these loan opportunities. Loan institutions averaged 431 veteran home loans during the 2018 Fiscal Year. Of the 610,512 loans offered among all lending institutions in 2018, the average loan was $259,725 but almost half of these institutions offered more than this average.

While 600,000+ may seem like an exceedingly large amount of participating veterans, there are still an overwhelming amount of veterans not looking into VA lending options during their home loan search. This could be a result of a lack of awareness or even misconceptions about these lending alternatives. Below, we have listed some of the unmatched benefits that come with VA home loans.

Qualifications for VA Loans

Much like any lending experience, the qualification process tends to be an extensive one. For veteran home loans, there are more flexible terms.

Veterans and active military members are given a little more leniency as far as credit scores are concerned. The threshold for credit is much more permitting.

Ultimately, those interested in VA home loans just need to complete a Certificate of Eligibility (COE) and wait for approval to continue with the lending process. Speaking with your lending officer or representative about what documents are required for their specific institution will get the ball rolling much quicker.

Down Payment

There is no down payment required for qualifying veterans or active military service people. Down payments are easily of the biggest concerns for homebuyers. They tend to put stress on the buyer with a hefty chunk of change that is immediately absorbed. Veterans and active military members, however, do not need to be concerned with this because of the safety net that VA home loans provide. As long as the loan requirements are met, they are able to start a life in a new home now – not after years of saving up for just the down payment.

Interest Rates

There are homebuyers not pressured by the down payment element of the home buying process that exists in today’s world but, typically, these buyers do bare the financial weight of high-interest rates. For military members, interest rates are also protected. While there is not a set interest rate cap, institutions generally keep VA home loan rates much lower than traditional or FHA loans.

Foreclosure Protection

There are clearly some preparatory benefits but foreclosure measures are often an afterthought for home buyers. No one anticipates for hard times to hit but they do happen occasionally. VA home loans also provide homeowners with the peace of mind that there is a secondary security measure for them to fall back on when the unexpected becomes reality.

Fine Print

There are quite a few fine print elements of every home loan that come up as surprises to potential home buyers. Fortunately enough, many of these are simplified or completed excluded in veteran home loans.

Most home loans lenders use the following measures as a safeguard for the lender, borrower, or both: mortgage insurance, uncapped closing costs, and prepayment penalties. For qualified applicants, none of these apply because veteran borrowers are not expected to pay for mortgage insurance, the VA actually restricts what lenders can charge in closing costs, and veteran borrowers are also not penalized for early repayment of their loans. All of these act as support for veterans and active military members in order to offer a more simplified, less expensive loan experience.

Clearly, there are many details even in veteran home loans but the general process has been streamlined as much as possible. Speaking with loan representatives with as much experience as possible will keep you informed and updated about any changes and options.

Why VA Loan Refinances Are Some Of The Best Deals Around

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The benefits of Veterans Administration (VA) home loans don’t stop with the purchase of a property. Veterans and service members have access to streamlined refinancing that can save them money every month and provide cash for home improvements, debt consolidation or major purchases. Veterans who have conventional loans can even refinance into a VA loan to take advantage of the benefits they earned.
Are you considering a VA loan refinance? Then you need to know the answers to the frequently asked questions below.

What is Refinancing?

Refinancing a mortgage simply means paying off an existing mortgage using a new one. Since time and expense are involved in a mortgage refinance, there must be a benefit to the borrower. Common benefits of refinancing include a lower interest rate, a lower monthly payment, cash out for home improvements and cash out to pay off higher interest debts. Closing costs can be substantial – with the exception of VA home loan refinances. The VA’s streamlined process allows veterans and service members to refinance with little cost or inconvenience.

What is VA Loan Refinancing?

Refinancing VA loans provides borrowers with the opportunity to save money without paying heavy closing costs. The cost savings result from the streamlined process. The streamlined process begins with the borrower completing a pre-qualification application. This application verifies the borrower’s eligibility for a streamlined process and determines if the refinance has a benefit to the borrower. If the loan has no benefit, the application process stops. The prequalification also determines if the borrower has sufficient income to afford the new loan, which is particularly important in cash-out refinances.
How does the VA Loan Refinancing Application Process Work?
The VA streamlined refinance program serves only those who previously qualified for a VA loan, so the process proceeds quickly with little paperwork. Most applications require no appraisal, which saves time and money while increasing the chances of approval. The loan officer will complete the application and collect needed documents, including driver’s license, proof of social security number, homeowners insurance and the current note. The borrower signs the legally required disclosures and the application process is complete. Approvals generally take about two weeks.

What is an IRRRL VA Refinance?

An interest rate reduction refinance loan (IRRRL) refinance provides veterans and service members the opportunity to refinance their VA loan into another VA loan at a lower interest rate. IRRRL refinances become popular when interest rates decline. In choosing whether to proceed with an IRRRL refinance, borrowers calculate the savings each month and compare it to the costs. If the time it takes for the savings to outweigh the costs is shorter than the time the borrower plans to stay in the home than the IRRRL provides substantial long-term savings.

What is a Cash out Refinance VA Loan?

The VA allows cash-out loans of up to 90% of the home’s value. For example, if a home’s value stood at $100,000 and the loan balance plus refinance fees came to $80,000, then the borrower could cash out a maximum of $10,000. Cash-out refinances work best when the funds are deployed for home improvements or to pay off much higher interest debt, such as credit cards. Home improvements increase the value of the property, so the borrower regains the equity once improvements are completed. When used to pay off high-interest credit cards, the borrower saves on interest payments and reduces overall debt far faster than without using the cash-out refinance option.

Refinancing into a VA Loan

Qualified veterans who have conventional loans are often surprised at how much money they can save by refinancing into a VA loan. VA loan interest rates are very competitive, and the refinance fees are much lower than conventional loan programs. As a result, all veterans with conventional loans should compare refinancing VA loan against a conventional refinance.
The VA loan program has helped millions of military and veteran families achieve homeownership. By taking advantage of refinance options, veterans can gain even more benefits. VA loan refinances provide veterans with a fantastic opportunity to reduce expenses, make home improvements and manage debt for a financially secure future.

American Flag with VA Homes behind it

How VA Loans Provide Service Members and Veterans with the American Dream

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Veterans Administration (VA) loans provide one of the most valuable benefits to those who have served in the United States military. It provides them with a path to homeownership, both while actively serving and after discharge. The program is similar to the Federal Housing Administration (FHA) loan program except it is open only to qualified veterans and provides more extensive borrower benefits. It is one of the few options for borrowers without a down payment that also provides relaxed underwriting standards.

Are you curious to know more about VA mortgage loans? Here is a list of the most frequently asked questions regarding this popular loan program.

What is a VA Home Loan?

A VA home loan is a loan that the government backs in case the borrower defaults. In cases where the borrower fails to make payments and the bank forecloses on the home, the VA reimburses the lender for most of its losses. Because the government backs the loan, lenders offer much more generous terms than available in the general mortgage market. Better terms include no down payment requirement, lower interest rates, acceptance of lower credit scores and lower waiting periods after life events like bankruptcy. VA home loans offer the unique benefit of no mortgage insurance requirement, though borrowers must pay a 2.15% funding fee, which can be financed.

How did the VA Home Loan Program Begin?

The U.S. Congress created the VA loan program in 1944 as part of the Servicemen’s Readjustment Act, also known as the GI Bill of Rights. The government created the GI Bill of Rights to help World War II veterans re-start their civilian lives and develop the post-war economy. In addition to the VA loan program, the bill also provided veterans with funding for post-secondary education, health care, and other important life benefits.

Who Qualifies for a VA Home Loan?

All military personnel and veterans with six months or more of active duty are eligible. Veterans with a dishonorable discharge are disqualified. Spouses of personnel who died during military service are also eligible. VA loans require no minimum credit score, though lenders often impose a minimum FICO requirement between 580 and 620. Borrowers with a previous bankruptcy or foreclosure must wait two years from the end of those events. If a previous foreclosure was a VA loan, in some cases the borrower needs to reimburse the government for losses before a new VA loan origination can take place.

How to get a VA Home Loan

The first step toward getting a VA loan is obtaining a Certificate of Eligibility (COE). The Veterans Administration issues COEs after it verifies the borrower’s eligibility. Applicants need to submit documentation of their military service to the VA. Alternatively, a VA loan qualified lender can obtain the COE on behalf of the borrower. Once the COE is issued, the borrower completes the mortgage application.

How to apply for a VA Home Loan

Since VA loans are issued by most mortgage companies across the country, borrowers can apply at any number of banks, mortgage brokers or credit unions. The USAA Credit Union specializes in VA loans and other financial products for servicemembers and veterans. Most mortgage brokers and banks also have departments and loan officers who specialize in VA mortgage loans. Borrowers can complete applications online and send in the documentation or seek the assistance of a loan officer in completing the application. Working with a loan officer is a good idea because they understand what’s needed for the application’s approval.

How does a VA Home Loan Work?

From the borrower’s perspective, a VA mortgage works like any other. The only difference is the easier qualification standards, no down payment option and no mortgage insurance requirement. VA loan limits range between $484,350 and $726,525, depending on housing values in the county where the property is located.

VA home loan requirements make it far easier for veterans and servicemembers to achieve the American dream. As a result, the program is immensely popular. Veteran home loan applications have increased by 370% since 2007, largely because credit standards for other types of loans were tightened since 2007. The VA loan program allows those who have served our country to still achieve home ownership despite the difficulties of the mortgage market. For over 70 years, the VA loan program has made millions of veterans proud homeowners.

Obtaining and Maintaining Tax Exempt Status

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You’ve finally incorporated your nonprofit organization. Great! Obtaining a federal tax-exempt status is a critical and logical next step when forming a nonprofit organization. And obtaining a tax-exempt status comes with significant benefits. Some of those benefits include federal, state and local tax exemption, the ability to receive donations, qualifying for special grants and even government funding. Obtaining a non-profit status is not extremely difficult, but maintaining it is no easy task. There’s a lot of issues and opportunities to considerthat you probably aren’t aware of yet. Today, we’re going to explain how to legally obtain and maintain your tax-exempt status with the help of a qualified attorney.

Obtaining Your Tax-Exempt Status

apply for tax-exempt status, you have to complete the IRS Form 1023, Application for Recognition of Exemption Under Section 501(c)(3) of the Internal Revenue Code. Completing this form can be a complicated task due to the legal and tax complexities that must be understood. This is why hiring an attorney is a great idea.

You should file the Application for Recognition of Exemption Under Section 501(c)(3) within 27 months of the date you file your nonprofit Articles of Incorporation. If you file within this time period, all of the donations you received from the date of incorporation on are now tax deductible!!! If you file Form 1023more than 27 months after incorporating without reasonable cause for the delay, your tax-exempt status will begin as of the postmark date on the IRS Form 1023. Most organizations pay the standard $850 filing fee when sending their application to the IRS, but so that you’re aware, organizations planning for less than $40,000 in gross revenue during their first four years of operations can pay a reduced filing fee of $400.

Maintaining Your Tax-Exempt Status

Once your nonprofit receives its tax-exempt status, there are some important steps that an organization must take to retain that status. Most tax-exempt nonprofits are required to file annual information returns with the IRS. The nonprofit will file either a Form 990,990-EZ, or 990-N, depending on its gross receipts and total assets. However, there are some organizations that are not required to file. For instance, a church does not have a filing requirement. Also, if your nonprofit is required to file an information return for three consecutive years, and you fail to do so, the IRS will revoke your nonprofit’s tax exempt status.

If you are receiving donations from individuals or businesses, your nonprofit must provide a written receipt, and also register and file annual reports with the state in which it is incorporated. A donor should be given a written acknowledgement of any gift valued more than $250 in order to take a tax deduction on their own taxes. Additionally, your nonprofit must provide documentation that identifies the fair market value of any goods and services that were donated.

Lastly, if you plan on keeping your tax exempt status, your organization’s activities must serve the public and not your private interests. Avoid engaging in lobbying, and refrain from all political campaign activity, or you may face the removal of your tax exempt status.

Overall, just obtaining and maintaining a tax exempt status can be extremely time consuming, but with our help, your nonprofit will be on it’s way to success in no time!