The president’s proposed 2024 budget would end the famous 1031 exchange, a popular tax rule that helps property sellers avoid capital gains tax. Basically, it’s a way of swapping one investment property for another. But Joe Biden’s budget calls it an “indefinite interest-free loan from the government.”
This tax loophole, as the White House describes it: lets investors “put off paying tax on profits from deals indefinitely…Real estate is the only asset that gets this sweetheart deal.”
But can the Biden administration end it?
Continue reading “The 1031 Exchange Helps Real Estate Buyers Avoid Tax. Joe Biden’s Not a Fan.”
“We don’t pay taxes. Only the little people pay taxes.”– Leona Helmsley
The Business of Unpaid Real Estate Taxes
Mortgage holders do pay taxes. Property taxes come right out of an escrow account held by the mortgage company, which the homeowner funds through monthly mortgage payments.
But some people do not have mortgages, and neglect the property tax bills. And some lose income or become overwhelmed with debt, so they default on their mortgage payments — including the tax portion.
When a homeowner doesn’t pay taxes, the government has a number of ways to recover its money. Depending on state law, it can place a lien on the title, or it can sell the house to recover the taxes — using a tax deed.
Below, we’ll look at tax liens, the use and abuse of tax liens, and tax deeds.
Continue reading “Tax Liens, Deeds…And Scams”
Many people sell their homes for more than they cost in the
first place. If you are in this fortunate situation, and your home has appreciated
in value, you could be required to pay capital gain taxes — not on the whole
sale, but on the profit your home has earned for you over time.
Homes are investments, offering an important path to financial independence.
Read more about the appreciation
of a home’s value on Deeds.com.
Now, the good news for many homeowners. The IRS allows the
seller to exclude a significant amount of a home sale profit from capital gains
This article offers general information on home sales and
taxes for the homeowner who is planning to sell. Note that your state may
regard some or all of your capital gains as taxable income. In this article, we
focus on federal law and policy.
Continue reading “For Home Sellers: Capital Gains Tax 101”
Owners of U.S. investment or business properties should know
about a key tax-deferral provision allowed by the Internal Revenue Service: the
1031 exchange. Also called a like-kind exchange, it’s a way of swapping
one investment property for another.
Upgrading to a more valuable investment property would
usually involve a taxable sale. But by carrying out a like-kind exchange under Section
1031 of the Internal Revenue Code, the property owner defers capital gains taxes.
This leaves more value for the investor to put into a replacement property.
Continue reading “For Property Investors: Six Steps to a 1031 Exchange”
Quitclaims are sometimes used to transfer property interests
from one family member to another, or between divorcing
spouses. Parents might wonder if they should use quitclaims to pass
property to children to avoid the probate process. It’s easy enough to do. The homeowner
signs the document with a notary, takes it to the county recorder of deeds, and
has it recorded. Simple. No wonder adding
someone to a deed or relinquishing rights through a quitclaim is
often (mistakenly) called a “quick claim” deed. But what does the Internal
Revenue Service think?
Continue reading “Is a Quitclaim Deed Subject to Tax?”
A new administration might bring real estate tax changes. No
matter what happens in this area, it’s worthwhile to know what’s going on that
might affect your plans to bequeath your real estate. So here we take a look at
taxes on capital gains, and then at one form of tax relief that’s now a complete
question mark: the stepped-up cost basis of real property for your heirs.
Continue reading “Real Estate Tax Changes Could Be Coming: Spotlight on Capital Gains and the Stepped-Up Cost Basis”
Homeowners pay taxes on their real estate to fund local
services. Renters, too, pay property taxes, as they’re rolled into monthly rent
charges. The property taxes we all pay go to sustain libraries and schools, emergency
services, environmental projects, sewer work and road maintenance.
How much is one property’s share? To determine this amount, an
assessor multiplies the local tax rate by a property’s value. Many assessors’
offices use discounted values of properties when coming up with their tax
assessments, not the full market price; still, property taxes often amount to
thousands of dollars each year. With local governments determining them, rates
vary from county to county, and big cities generally collect higher
property taxes than suburban developments or country towns do.
Home shoppers need to check the property tax when perusing a
listing, and include that tax in the cost of owning a particular home. Plus, they
should expect a possibly higher tax after buying the home, as there could be a
new assessment when the deed changes hands.
A homeowner’s mortgage account may hold money aside in
escrow. Of course, the owner pays into the escrow account — but this way, the
owner’s taxes will be continually kept up to date without the owner having to
remember to submit a payment each time local taxes are due.
Continue reading “How Not to Overpay Your Property Taxes”
Back Taxes Can Impact Your Real Estate Title. Here’s How to Deal With Them.
What happens when a taxpayer doesn’t pay tax? If the
Internal Revenue Service is slighted, it follows its age-old tradition and imposes
a tax lien on the person’s property. Boats, financial accounts, the house — an
IRS lien attaches to everything. And federal tax liens are resilient; they can
even stay on the title through a homeowner’s bankruptcy, if they were imposed
before the bankruptcy was filed.
With the lien, the government isn’t actually taking the
property. But if the homeowner wants to sell the property, the government will
take its cut from the sale proceeds.
Concerned you might have a lien? You can check with the
recorder of deeds in the county where your home is, or review your debt records
on the IRS website. If you find yourself dealing with back taxes, find a way to
make good on the tax bill, or get the relief you need.
Here, we delve into the most frequently asked questions
about the impact of a lien on a taxpayer’s home title, and steps the homeowner
can take to keep that title clean.
Continue reading “The Tax Lien Cometh”