Real Estate Transactions Flashcards
(23 cards)
Types of filing status
singe, married-joint, married-separate, head of household
Tax return due date
April 15 but you can file for an extension which give you until October 15
Realized gain
gain on paper
Recognized gain
gain that you pay taxes on
Highest Federal Tax bracket on recognized gain
37%
States without income tax
Alaska, Florida, Nevada, South Dakota, Texas, Washington, Wyoming
Other ways for states without income tax to raise revenue
property tax, sales tax, various fees
New Hampshire tax
if you earn more than $2,400 single or $4,800 joint than there’s 5% flax tax
What happens if taxpayers sell a property after living there for more than a year?
recognized gain is taxed as capital gain which has a tax of 15% to 20%
What happens if taxpayers sell a property after living there for more than 2 out of the last 5 years?
recognized gain is not taxed at all
Tax Cuts and Jobs act of 2017
$10,000 cap on deducting real estate taxes as well as state and local income taxes, “qualifying taxes”
reduction from $1m to $750k in the amount of home mortgage interest that can be deducted
(change 2 out of 5 rule to 5 out of 8 but this failed to make it into the final version of the TCJA)
Line resulting from the July 2008 Housing and Economic Recovery Act
First-time homebuyer credit REPAYMENT
Form 1040, Schedule 2, Line 10
The Housing Assistance Tax Act of 2008
created a new fully refundable tax credit for first time home buyers, Form 5405
American Recovery and Reinvestment Act
February 2009, Obama, 10% of purchase price with max $8k home buyers credit, homes purchased on or after January 1 2009, don’t have to repay the credit if you live in the home 36 months
Housing and Economic Recovery Act of 2008
July 2008, Bush, 10% of purchase price with max $7,500 home buyers credit, homes purchased on or after April 9 2008, phase out rules single (75k to 95k) and married-joint (150k to 170k) based on AGI
Definition of first time home buyer
not bought a property and used it as a home during the last 3 years
Difference between 2009 credit and 2008 credit
2008 home buyers credit was an interest free loan while the 2009 home buyers credit was a true credit
Is the credit refundable
Yes
2008 Law Recapture rule
6 2/3% of the amount of the credit will be added onto the income tax owed for the recapture period (15 years) beginning with the second taxable year following the purchase of the residence
balance of the credit is due in the year in which the residence is sold but the amount of credit due may not exceed the amount of gain from the sale of the residence
Worker, Home Ownership, and Business Assistance Act of 2009
10% up to $6,500 for people who lived in a home for 5 of the last 8 years
Home purchased between November 7 2009 and April 30 2010
Need to live in the new home for 36 months
HELOC
a loan borrowed against the equity in a home
What is adjusted basis
basis + certain improvements to the home
Section 121
if the owner lived in a house for 2 out of the last 5 years then the gain from the sale of the property will not be added to the seller’s taxable income
