Isn’t real estate all about buying and selling property? Well, yes, that is a large part of what real estate is about. However, there is a bit more to it beyond its most basic definition. Real estate is a complex form of equity venture that comes with many alterations and modifications to the traditional approach. Such differences in approach are clearly visible in the realm of a 1031 exchange.
So what exactly does a 1031 exchange entail?
The number 1031 refers to a section of the internal revenue code that deals with real estate tax issues. Specifically, this code deals with the exchange of property based on the deferred recognition of capital gains or losses when the property is exchanged. This means taxes on capital gains are deferred and not due. For those not familiar with the term capital gains, this is basically the amount of profit you have earned on the home due to increased equity or value. The reason for this is that no money has changed hands as the property has not been sold. Instead, one property has been exchanged for another. (more…)
The federal government has recently begun a history making incentive to help first time home-buyers make real estate purchases. If you qualify for the new tax credit, you can get $8000 toward the purchase of your home.
First, in order to qualify for the tax credit, you have to purchase and make closing on your home by December 1,2009. If you have built a new house, you must be living in it by December 1, 2009. Your home buying experience, must have taken place between February 1, 2009 (when the credit was first enacted) and December 1, 2009 (the scheduled end date for the credit) to qualify. It is likely Congress will extend the end date, but you should not rely on that at present.
While the tax credit is stipulated for first time home-buyers, that categorization is not exact. You will qualify as a first time home-buyer if you have not owned a home threes years prior to buying this one. If, for instance, if you owned a home and sold it five years ago and have not owned a home since, you qualify as a first time home-buyer under this credit. (more…)
Homeowners have to spend a lot on many things towards their home. Here are some of them:
1 Deductions for local taxes
Annual property tax is paid by any homeowners on the basis of value their home has. But many of us don’t know that these local property taxes are allowed as legal deductions by the federal government and hence are totally tax deductible.
2 Doing business from home
If you own a business which you are maintaining from your residence and thus it is your home office, you can deduct the home office expenses. But this process of home office deduction is better handled if you prefer to consider consultation from tax CPA. This way you can appropriately deduct the expenses incurred for maintaining your home office. (more…)
Of course you know that you probably have to pay taxes when you inherit property from a will or as a gift. You will also have to pay taxes when you sell that property. There are key things to know about the sale of property from an inheritance and taxes, and it is best to know them before you decide to sell the property.
First of all, it does not matter what the decedent paid for the property, it will be taxed at today’s fair market value. So, if your grandfather paid $10,000 for a house and left it for you, you need to know its current value because that’s what you will be taxed on. Let’s say you have that house appraised at $100,000 – that is what you will pay taxes on, not the appreciated value. The house appreciated $90,000 but you will be taxed on the full $100,000 because gifts are calculated only on your gain or loss, not your grandfather’s. (more…)
When you are looking at buying a home or selling your home, some people are under the impression that the assessed value on your property tax bill is a good way to figure out the value of a property. Typically, property tax assessed values are updated periodically, but might not take any market conditions into consideration, like an appraisal does.
In the past years, when homes were going through dramatic appreciation, it was better to have a lower assessed value because your property taxes weren’t so high. Now, many companies are specializing in getting assessed values lowered to reflect current market values, which can make a difference on your property tax bill.
Whether you are buying or selling a home, it is important that you realize that an assessed value is not necessarily reflective of a home’s market value at the present time. In fact, if your home was assessed at a new value a couple of years ago, you might want to consider having the county re-assess it because market values have dropped, especially in some areas where values have dropped as much as 50%. This can help you save money on your property tax bill, but if you have to pay for an appraisal to prove the decrease in market value, this might cost you a few hundred dollars. (more…)
It’s The Taxman! Taxman!
Should five per cent appear too small
Be thankful I don’t take it all
Cos I’m the taxman, yeah I’m the taxman
Beatles, Taxman
I always was amazed at the power of the taxman. How can he get away with taking all of my money? Many a night could be pondered on this terrible, terrible mysterious man. So, how have we evolved past the taxman? Well, let’s talk about how we can fight the taxman. First a little bit of disclosure. I am not a CPA, so please check for your personal taxes with your accountant. Now that I got the disclosures out of the way, let the fight begin.
What I want to focus on today is how to combat your property taxes. Most people dread that time of year when they have to pay their local taxes. However, there is good news. You can challenge these taxes. How do you do this? Most property taxes are based upon property value. So if a property is worth $100,000 they will pay less than a property worth $200,000. This value is called the assessment value, and is determined by the county. (more…)
Being a landlord can have its advantages, tax wise. Owning rental properties entitles you to tax breaks and deductions. As a landlord, it is important for you to take advantage of these tax breaks and deductions in order to lower your personal tax liability.
Rental properties are considered to be tax-deductible by the Internal Revenue Service. So, all expenses related to your property are, potentially, tax deductions. If, however, you claim deductions that exceed the income from your rental properties, you are likely to find these deductions will be denied.
Interest payments are one of the biggest tax deductions for people owning rental properties. You can deduct the interest on your mortgage payments, loans for repairing or improving property, and even the interest on credit card purchases you made for anything regarding the properties you rent. (more…)
Being a landlord can have its advantages, tax wise. Owning rental properties entitles you to tax breaks and deductions. As a landlord, it is important for you to take advantage of these tax breaks and deductions in order to lower your personal tax liability.
Rental properties are considered to be tax-deductible by the Internal Revenue Service. So, all expenses related to your property are, potentially, tax deductions. If, however, you claim deductions that exceed the income from your rental properties, you are likely to find these deductions will be denied.
Interest payments are one of the biggest tax deductions for people owning rental properties. You can deduct the interest on your mortgage payments, loans for repairing or improving property, and even the interest on credit card purchases you made for anything regarding the properties you rent. (more…)
The methods that local governments use to assess property tax differ from municipality to municipality. The first thing you need to do, in order to find ways to lower your property taxes, is to find out how the municipality in which you reside determines property value.
Review you property tax information. The municipality that governs your property tax, in most instances this is the county or parish, keeps records on your property. These records include things like lot size, square footage, number of rooms, additions or modifications, and architectural style of the home. Review this information to be certain its correct. If you have had recent additions or improvements that you do not see recorded here, you may want to avoid asking about it, because making them aware of these improvements could actually raise your property taxes.
If you are thinking of making major home renovations like building a pool, adding a deck, or even constructing a shed, remember that these improvements will, no doubt, raise your property taxes. In some areas this list extends to include property improvements like replacement windows, aluminum or vinyl siding, painting, and fencing. (more…)
The 1031 Real Estate Exchange is a dynamic tool for real estate investors and helps to defer the capital gains tax for a long while.
The 1031 Real Estate Exchange is applicable when using the sale of income property to purchase another income property. The sale and purchase must be completed in a specified time period.
You, as the real estate investor can never have any control over the proceeds from the real estate sale. The money from the sale of the first property is placed in trust with an intermediary. This intermediary is supposed to collect and hold the money from the buyer of the first property and transfer it to the seller of property number two. In recent years, however, there have been problems with the intermediaries. (more…)
