If you are selling property and involved in a 1031 exchange, you certainly want to know what your deferred tax liability is. The important thing to remember is that you are taxed on your gain, NOT on your profit and NOT on your equity. In other words, you can sell your property, have no profit and no equity, and still be subject to tax liability under the 1031 rules because there is a gain. How can you calculate what you might owe? Well, see an accountant. But if you’re stubborn and you refuse to go to your accountant, here’s a little formula that will point you in the right direction: First of all, you need to calculate your Adjusted Basis. To do this, take your original purchase price, and then add the cost of your improvements (assuming you have not already claimed them as expenses). Then subtract any depreciation you… read more →
Up until now, if you sold your principal residence, you could pocket up to $250,000 in profit, tax-free (or $500,000 if you are married filing taxes jointly) as long as you were living in it for at least two of the last five years. In other words, if you owned rental or investment property and you moved in and used the property as your principal residence for at least two of the last five years, you could receive substantial profits tax-free upon the sale of the property. You could sell your home and move into your vacation property or rental unit for just two years, and still avoid paying capital gains tax. Well, lawmakers have finally caught on. If you plan to buy, sell or live in an investment or rental property that you own after January 1, 2009, you will still be able to receive some of the profit… read more →
Periodically I come across a client who is interested in a land trust, but doesn’t know all that much about it. Well, here you go, land trusts in a nutshell: Land trusts are a fancy way to hold title to real estate; instead of holding title in your own name or in the name of your company, you can hold title in a land trust. There are basically two types of land trusts: 1) Land trusts that are administered by a bank (typically for an annual fee of a few hundred dollars) and 2) Land trusts that you can administer yourself, with the help of an attorney who can set it up for you. There are a number of advantages to having a land trust: 1) Land trusts can be useful estate planning tools, especially for smaller estates.2) Land trusts allow the transfer of property quickly upon your death. The… read more →
Congress passed a new bill last week, and if you’re buying a home and meet all of the following requirements, you’re in for a sweet deal: 1) You don’t own a home now, and have not owned a home in the last three years;2) You closed on the home you’re buying after April 9, 2008, or, if you haven’t closed yet, you will close before June 30, 2009;3) You are a U.S. Citizen or resident alien;4) You did not finance the property using a tax-exempt bond mortgage; and5) You are using the property you are buying as your primary residence. If you meet all of these requirements, you can can claim a credit of up to 10 percent of your purchase price, up to $3,750 (or up to $7,500, if you are married filing taxes jointly), on your 2008 or 2009 taxes. If your adjusted gross income is over $75,000… read more →