The Tax Man Cometh…

Tax TimeCongratulations! Your home is SOLD. Upon close of escrow you should have received a document called the Closing or Settlement Statement. It includes an itemization of all your debits and credits from your transaction and is of particular importance during tax preparation as some expenses may be considered tax deductions. These potential deductions apply if you sold a home, bought a home or refinanced your primary residence. Some of the items generally considered to be tax deductible include:

  • Any of your paid real estate taxes
  • Your paid loan origination fee
  • Private mortgage insurance cost
  • Any prepaid mortgage interest

If you don’t have this document handy, contact your real estate agent. It is important to seek advice from your tax attorney and/or your accountant to be certain about your eligible deductions. Unfortunately we are all faced with two unavoidable givens: taxes and death, but the deductions may make April 15th a little less painful.

Walnut Creek Investors – 1031 Exchange Class

A local 1031 Exchange Qualified Intermediary will be hosting a 1031 Exchange workshop on August 22nd, 2013.  The workshop is a must for any real estate investor or professional.  Topics discussed include:

  • 1031 Exchange Rules and Guidelines
    • Recent changes to the tax code and what it means for real estate investors.
    • How to complete a 1031 Exchange in today’s tight market.
    • When a “Reverse Exchange” might be a viable option.
    • How to get more time for your exchange

      Learn about the 1031 exchange in Walnut Creek

      Learn about the 1031 exchange in Walnut Creek

    Prior to serving Home buyers and sellers in the Residential real estate arena, I assisted high-net worth, accredited investors seeking access to institutional-grade properties nationwide. Many of our clients were looking to defer the taxes they would incur when selling an investment property. Who knew the IRS would create such a useful “tool?!”

Please contact me for details on this event.

Dayna Wilson 925-788-6582

Keller Williams Realty

BRE# 01781285

photo source: saturnism

Capital Gains Tax Increases for Some Taxpayers

To avoid the so-called “fiscal cliff”, on January 1st, 2013, Congress passed the American Tax Relief Act of 2012 (TATRA).   TATRA made no changes to the 3.8% Medicare surtax¹, which went into effect – as scheduled – January 1, 2013.  TATRA did, however, raise the top capital gains tax rate.  Effective January 1, 2013, the top capital gains tax rate will increase from 15% to 20% for individuals with adjusted gross incomes (AGI) above $400,000 and married couples filing jointly with adjusted gross incomes above $450,000.

Cap Gains Tax Increases for some...

Cap Gains Tax Increases for some…

The 3.8% surtax, combined with the capital gains tax, means that taxpayers with AGI’s over $200,000 for single persons and $250,000 for married couples will be subject to the 3.8% surtax on their capital gains. This is in addition to paying either 15% or 20% capital gains tax, depending on one’s federal tax bracket.

For more information, please contact your trusted tax advisor!

See IRS: http://www.irs.gov/uac/Newsroom/Net-Investment-Income-Tax-FAQs?elq=e41547131d7747d589af449c68b21322&elqCampaignId=204

photo source: JD Hancock

Home Tax Deductions for Rentals

The only certain thing in life...

The only certain thing in life…

Being a landord has its pros and cons. The good news is that you have complete control and responsibility and well, that also is the bad news. Tax deductions fall in the plus category.

Most of us landlords are seeking to get a positive cash-on-cash return for our troubles.  Many expenses related to our income properties are tax-deductible. Always save receipts!
In general, claim the deductions for the year in which you pay for the expenses, but there are exceptions. Here are some of the most common deductible expenses for  rental homes.

 

 

  • Advertising
  • Cleaning and maintenance
  • Commissions paid to rental agents
  • Home owner association/condo dues
  • Insurance premiums
  • Legal fees
  • Mortgage interest
  • Taxes
  • Utilities

For a complete list of deductions the IRS has Publication 527.  I am not licensed to give tax or legal advice and always recommend landlords, investors, rental property owners seek the advice of a seasoned tax professional to discuss your unique financial situation. I am happy to offer references upon request.

Dayna Wilson – Walnut Creek Realtor, SRES

photo source: numberstumper

Walnut Creek-Top 10 Things You Need to Know About the 3.8% Tax

1. When you add up all of your income from every possible source, and that total is less than $200,000 ($250,000 on a joint tax return), you will not be subject to this tax.
2. The 3.8% tax will never be collected as a transfer tax on real estate of any type, so you’ll never pay this tax at the time that you purchase a home or other investment property.
3. You’ll never pay this tax at settlement when you sell your home or investment property. Any capital gain you realize at settlement is just one component of that year’s gross income.
4. If you sell your principal residence, you will still receive the full benefit of the $250,000 (single tax return)/$500,000 (married filing joint tax return) exclusion on the sale of that home. If your capital gain is greater than these amounts, then you will include any gain above these amounts as income on your Form 1040 tax return. Even then, if your total income (including this taxable portion of gain on your residence) is less than the $200,000/$250,000 amounts, you will not pay this tax. If your total income is more than these amounts, a formula will protect some portion of your investment.
5. The tax applies to other types of investment income, not just real estate. If your income is more than the $200,000/$250,000 amount, then the tax formula will be applied to capital gains, interest income, dividend income and net rents (i.e., rents after expenses).
6. The tax goes into effect in 2013. If you have investment income in 2013, you won’t pay the 3.8% tax until you file your 2013 Form 1040 tax return in 2014. The 3.8% tax for any later year will be paid in the following calendar year when the tax returns are filed.
7. In any particular year, if you have no income from capital gains, rents, interest or dividends, you’ll never pay this tax, even if you have millions of dollars of other types of income.
8. The formula that determines the amount of 3.8% tax due will always protect $200,000 ($250,000 on a joint return) of your income from any burden of the 3.8% tax. For example, if you are single and have a total of $201,000 income, the 3.8% tax would never be imposed on more than $1,000.
9. It’s true that investment income from rents on an investment property could be subject to the 3.8% tax. But: The only rental income that would be included in your gross income and therefore possibly subject to the tax is net rental income: gross rents minus expenses like depreciation, interest, property tax, maintenance and utilities.
10. The tax was enacted along with the health care legislation in 2010. It was added to the package just hours before the final vote and without review. The tax will no doubt be debated during the upcoming tax reform debates in 2013.
I strongly encourage you to seek the advise of your tax and legal counselors. Please let me know should you need a referral of a trusted professional in your area.
Dayna Wilson – (SRES) Keller Williams Realty DRE 01781285
www.Day-RealEstate.com
Source: NAR