Buying/selling property, deductions

Question 1

What are the charges for a first-time homebuyer?

Answer 1

Mortgage interest, property taxes, IRA withdrawals for first-time homebuyers

These charges are common expenses faced by first-time homebuyers.

Question 2

Can a person receive benefits on a federal income tax for their primary residence?

Answer 2

Yes

Homeowners can benefit from certain tax rules related to their primary residence.

Question 3

What are the tax benefits to homeowners?

Answer 3

• Interest in home equity loans is deductible
• mortgage origination fees are deductible

These deductions can significantly reduce taxable income for homeowners.

Question 4

What is the ‘adjusted basis’ when it comes to selling real property?

Answer 4

• the adjusted basis is the original cost + increases/decreases
• increases are capital improvements,
• decreases are depreciation you’ve claimed on tax returns

The adjusted basis is crucial for calculating capital gains tax.

Question 5

What is the ‘amount realized’ when it comes to selling real property?

Answer 5

• The total value you receive from the sale
• the selling price minus the costs associated with making that sale happen

Costs can include real estate agent commissions, advertising costs, legal costs, title insurance payment, and recording fees.

Question 6

What is the ‘Capital gain’?

Answer 6

The profit from selling the property after you subtracted out all the costs

Capital gains are subject to taxation under the current tax laws.

Question 7

What is the exclusion of gain from the principal residence?

Answer 7

A U.S. tax rule that allows homeowners to sell their main home and not pay federal income tax on the profit up to $250k (single)…for a married couple, up to $500k (joint return)

This exclusion represents a significant tax break for homeowners selling their primary residence.

Question 8

___% of the amount realized on the sale of real property by a foreign seller must be withheld (by the closing agent) at closing to be sent to the IRS.

Answer 8

15%

This withholding is part of the Foreign Investment in Real Property Tax Act (FIRPTA).

Question 9

Licensees should advise buyers and sellers to speak with the IRS or a ___ specialist.

Answer 9

Tax specialist

Consulting a tax specialist is essential for understanding the tax implications of real estate transactions.