Concepts & Responsibilities of Homeownership

Question 1

What are the 7 types of Homeownership?

Answer 1

1.) Single-Family Home
2.) Condominium
3.) Cooperative
4.) Townhouse
5.) Planned Unit Development
6.) Multi-Family Homes
7.) Timeshare

Question 2

Standalone house where the owner owns the house and land:

Answer 2

Single-Family Home

Question 3

Includes ownership of the unit itself and a share of the interest in the common elements, but not the land that the property sits on:

Answer 3

Condominium

Question 4

Rather than owning the unit itself, owners have shares of stock in the entity that owns the property:

Answer 4

Cooperative

Question 5

Owners own the dwelling & the land it sits on, but might also share common elements like condominium owners do. The major difference between this & a condominium is the conveyance of the land with the residence by the deed:

Answer 5

Townhouse

Question 6

Regular fees used to pay for things like the upkeep of common community areas, road repairs, and structural maintenance:

Answer 6

Assessments

Question 7

Monthly mortgage payments for repayment of the loan typically include PITI:

Answer 7

P: principal
I: interest
T: taxes
I: insurance

Question 8

Taxes on the profit a person makes by selling an asset, such as a house:

Answer 8

Capital gains taxes

Question 9

A benefit enjoyed by homeowners who sell their principal residence:

Answer 9

Capital gains exemptions

Question 10

Married homeowners may exclude up to the 1st $500,000 of profit on the sale of a primary residence & single homeowners may exclude up to the 1st $250,000

Answer 10

~ Universal exclusions provided by the Taxpayer Relief Act of 1997
~ Reusable every 2 years after the sale

Question 11

How can a taxpayer become eligible for the capital gains exclusion?

1 of 2 Ways

Answer 11

• Taxpayer must have owned & occupied the home as a principal residence for at least 2 of the 5 years preceding the sale
• Years may be aggregate - not necessarily continuous

Question 12

How can taxpayer become eligible for capital gains exclusion?

2 of 2 Ways

Answer 12

Homes sold for profit of < $250,00 or $500,000 for joint files don’t require the owners to file an info return reporting the sale of their principal residence

Question 13

This right is automatic and protects homeowners from claims by creditors being made against their homes, preventing any eviction by these creditors:

Answer 13

Homestead Rights

Question 14

What are the exemptions to the homestead rights?

Answer 14

~ Mortgage lenders b/c the homestead itself is used as collateral

~ Tax liens

Question 15

Interest paid in monthly payments is always paid in:

Answer 15

Arrears

Question 16

Means it is paid after it’s received/issued.

Answer 16

Paid in arrears

Question 17

What do owners in co-op buildings actually own?

Answer 17

Shares of stock in the co-op corporation

Question 18

Major difference between a condominium & a townhouse is that…

Answer 18

townhouse owners generally own the land below their unit

Question 19

How can the difference between a condo & a townhome be verified?

Answer 19

By the legal description in the deed

Question 20

Usually include the unit & the land:

Answer 20

Townhouses

Question 21

Usually include the unit only:

Answer 21

Condos

Question 22

A subdivision or development that includes single-family dwellings along with some common elements such as parks, pools, community recreational centers, and/or golf courses:

Answer 22

Planned Unit Development (PUD)

Question 23

What do PUD owners actually own?

Answer 23

Their lot & a share in the common elements

Question 24

Dwellings that are built in a factory (in accordance with federal building codes) and then delivered to the site once complete

Answer 24

Manufactured homes

Question 25

Buildings with more than four units:

Answer 25

Commercial real estate

Question 26

What type of property has multiple owners and is typically located in a recreational environment?

Answer 26

Timeshare

Question 27

How is timeshare ownership different from other kinds of ownership?

Answer 27

Owners only get the right of possession for a certain period of time.

Question 28

Provides ownership of the unit itself:

Answer 28

Condominium Ownership

Question 29

The homeowners own individual units and have joint ownership of the common areas:

Question 30

The form of ownership is stock:

Answer 30

Cooperative Ownership

Question 31

Mobile homes, doublewides, and trailers:

Answer 31

Manufactured Homes

Question 32

Dwellings built in a factory and then delivered to the site once complete

Answer 32

Manufactured Homes

Question 33

Residents receive a proprietary lease for one of the units:

Answer 33

Cooperative Ownership

Question 34

The homeowners own individual units and have joint ownership of the common areas:

Answer 34

Condominium Ownership

Question 35

The building and the land are owned just as in a single family dwelling; however, there are separate residences in the building:

Answer 35

Multi-family Homes

Question 36

Describe the IRA withdrawal tax benefit for 1st time homebuyers

Answer 36

1st time homeowners may be able to w/draw up to $10,000 penalty free from their tax deferred individual retirement account to go towards down payment

Question 37

The profit received from selling a capital asset

Answer 37

Capital Gains

Question 38

What is a benefit enjoyed by homeowners who sell their primary residence

Answer 38

Tax exemptions on capital gains

Question 39

The loss incurred from selling a capital asset is referred to as...

Answer 39

Capital Loss

Question 40

Include all of taxpayer's tangible property - real estate, investment properties, & equipment

Answer 40

Assets

Question 41

The IRS imposes taxes on all forms of _______

Answer 41

Capital Gains

Question 42

How do you calculate capital gain in real estate?

Answer 42

Sales Price - (purchase price + cost of improvements) + Total Depreciation - Expenses = Gain

Question 43

Why is depreciation omitted when calculating capital gains on the sale of a primary residence?

Answer 43

B/c homeowners get a tax break on the sale of a primary residence

Question 44

The length of time a property is held is referred to as:

Answer 44

the holding period

Question 45

The amount of time between the day a property is bought & the day it is sold:

Answer 45

The holding period

Question 46

Holding period is shorter than 1 year

Answer 46

Short-term holding period

Question 47

Determines whether a capital gain is taxed as a short-term or long-term gain

Answer 47

The holding period

Question 48

Who is eligible for capital gains tax exemptions?

Answer 48

Homeowners selling their primary residences

Question 49

Created certain exclusions from capital gains taxes for homeowners:

Answer 49

The Taxpayer Relief Act of 1997

Question 50

Lets an investor sell a property, reinvest the proceeds in a brand new property, and defer all capital gain taxes:

Answer 50

1031 Exchange

Question 51

~ Calculated according to the assessed value of real estate: ~ They are collected from each property owner to create revenue to run the local governmental agencies and provide benefits to residents of the community:

Answer 51

Ad valorem taxes

Question 52

The value placed on a property by a governmental unit for use in levying annual real estate taxes:

Answer 52

Assessed value

Question 53

Removes a percentage or an absolute dollar amount from the assessed taxable value of the property.

Answer 53

Exemption

Question 54

This homestead tax exemption will reduce the amount of ad valorem taxes paid on the homestead:

Answer 54

Homestead tax exemption

Question 55

How many homesteads can an owner claim under the homestead tax exemption?

Answer 55

1

Question 56

Texas law requires school districts to offer a ___________ tax exemption on residence homestead.

Answer 56

$100,000

Question 57

Counties are required to offer a _________ exemption if the county collects ______ __ ______ ______ ______ or ______ _______ _______.

Answer 57

~ $3,000 ~ farm-to-market road taxes or flood control taxes

Question 58

If a homeowner files a homestead exemption for reduced ad valorem taxes, the state of Texas requires the school district to supply an exemption value of:

Answer 58

$100,000

Question 59

For homeowners aged 65 or older, the tax authority will establish a based on the previous two years of taxes.

Answer 59

"tax ceiling" based on the previous 2 years of taxes

Question 60

Texas law requires school districts to offer a ___________ ___________for people who are over the age of 65 or those who have a disability.

Answer 60

$10,000 exemption

Question 61

Ordinary expenses that a person pays in a taxable year that may be subtracted from their taxable income, thus reducing the tax liability on that income:

Answer 61

Deductions

Question 62

Most insurance policies cover loss or damage from flooding.

Answer 62

FALSE

Question 63

What can a seller typically expect to get when they cancel their insurance after selling their house?

Answer 63

A refund