Capital Gains Rate – What Now?

Many people I spoke to prior to the end of 2010 wondered what would happen to capital gain tax rates on January 1, 2011.  Some even jumped through hoops to complete the sale of property before the end of the year.  As it turned out, the boys in Congress extended the capital gain rates in mid December; for at least for two years.  Thanks guys.

What to do now?  Do you understand how Congresses actions will affect you?  If not, you’re not alone.  Now that we are well into 2011, here are some details about what it all means.  I’m not an accountant by any means.  However, here is a brief summary of portions of the Tax Relief, Unemployment Insurance Reauthorization and Jobs Creation Act of 2010 (not surprisingly referred to as “the extension of the Bush Era Tax Cuts”) which are likely to impact real estate investors.

Capital Gain and Dividend Rates – Current rates were extended for two-years for all taxpayers with a maximum rate of 15% for both.
Personal Tax Rates – Current rates were extended for two-years for all taxpayers with the top rate remaining at 35%.

Social Security Tax – The employee tax rate of 6.2% on the first $106,800 of wages drops to 4.2% in 2011.

Alternative Minimum Tax – Current exemptions were extended for all taxpayers for two-years.

Estate Tax – An exclusion amount of $5 million and a tax rate of 35% for amounts in excess of the exclusion was established for two-years; the exclusion will become indexed beginning in 2012.

Gift Tax – Like the Estate Tax, a Gift Tax exclusion amount of $5 million and a tax rate of 35% for amounts in excess of the exclusion was established for two-years, with the exclusion being indexed beginning in 2012.

Other Extensions – The $1,000 child credit; an additional standard deduction for real-estate taxes; extension of 15-year cost recovery for certain leasehold improvements, restaurant buildings and qualified retail improvements (through 2011); and the extension of various energy credits (through 2011).

Although the legislation provides some certainty for two years, we will find ourselves dealing with this question again in 2012.  Since that is also an election year, it may be interesting. Stay tuned!

How Much Do You Pay In Taxes?

How much do you really pay in taxes?  Bet you have an idea but don’t know for sure.  How does the Beatles song Taxman go, “Let me tell you how it will be, there’s one for you, nineteen for me, Cause I’m the Taxman.”

Are you in the top 1% or the bottom 50% of all earners? Most of you know I really hate taxes, especially when my money is spent of dumb stuff, especially in the Seattle area.

I ran across this cool tool from Kiplinger the other day and thought I’d share with you.  Find out what portion of the tax burden you bear according to your income status.

How Your Income Stacks Up

How much do you really pay in taxes?  Bet you have an idea but don’t know for sure.  How does the Beatles song Taxman go, “Let me tell you how it will be, there’s one for you, nineteen for me, Cause I’m the Taxman.”

Are you in the top 1% or the bottom 50% of all earners? Most of you know I really hate taxes, especially when my money is spent of dumb stuff, especially in the Seattle area.

5 Property Tax Questions You Need to Ask

Let me tell you
How it will be.
There’s one for you,
Nineteen for me,

‘Cause I’m the taxman.
Yeah, I’m the taxman.

You guessed it – Lyrics to “Taxman” by the Beatles.  Great song and I’m sure the boys were not thinking about tax issues relating to buying and selling real estate when they wrote the song (or maybe they were) hmmm.

We I always consider tax issues when it comes to real estate and I encourage my clients to do the same.  Here are five questions you should ask about a property:

1. What is the assessed value of the property? Note that assessed value is generally less than market value. Ask to see a recent copy of the seller’s tax bill to help you determine this information.

2. How often are properties reassessed, and when was the last reassessment done? In general, taxes jump most significantly when a property is reassessed.

3. Will the sale of the property trigger a tax increase? The assessed value of the property may increase based on the amount you pay for the property. And in some areas, such as California, taxes may be frozen until resale.

4. Is the amount of taxes paid comparable to other properties in the area? If not, it might be possible to appeal the tax assessment and lower the rate.

5. Does the current tax bill reflect any special exemptions that I might not qualify for? For example, many tax districts offer reductions to those 65 or over.

Call me for more details about the “taxman” when it comes to real estate!

It's Official-The $8000 First Time Home Buyer Tax Incentive Can Be Used for a Down Payment

The first time home buyer tax credit can be used for a down payment all over the country.

Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, said that the Federal Housing Administration is going to permit its lenders to allow homeowners to use the $8,000 tax credit as a downpayment.
According to Donovan, the FHA’s approved lenders will be permitted to monetize the tax credit through short-term bridge loans. This will allow eligible home buyers to access the funds immediately at the closing table.
Call Dave today at 425-330-0663 to find out more about the program.

Why Do We Have To Pay?

Here is the question: Why are State Taxpayers on the hook for the bone head acts of some pathetic judge in Seattle?

Here is the story. A former Seattle Municipal Court employee said a presiding judge insisted on kissing and fondling her after she ended a sexual relationship with him, according to a $135,000 settlement agreement released by the City Attorney’s Office recently.

The judge, the city of Seattle and the employee reached the settlement in November, with the city and Mamiya each paying $67,500, according to documents provided by the city in response to public-document requests by the media.

The good Judge said “I want to acknowledge my horrible lapse in judgment. I have no excuse for my role in this incident, and my actions have hurt many people important to me, including my wife, family and my community. I take full responsibility for my behavior.”

Our state’s updated revenue forecast came in recently. It projects that tax collections will be another half billion dollars below what was forecast – that pushes our state deficit up to over $9-billion. I’ll ask the question again: Why are State Taxpayers on the hook for the bone head acts of some pathetic judge in Seattle?

It just keeps getting better!

It seems like each week we bring you news you can use . . .and it just keeps getting better – in spite of the Media!
 
Buy a Home in 2009 – Get a check for $8,000 as part of their 2008 tax refund!!  The IRS has revised their form 5405 that allows a first time homebuyer to get a tax credit for $8,000. The most important part is they can claim it on their 2008 taxes!!

Yes you read it right.  If a buyer buys a home in 2009 they can check off a box that states they are collecting the $8,000 on their 2008 taxes and get the money immediately!  If they filed their 2008 taxes already they can revise their taxes with this form and resubmit.

This is a great incentive for anyone you know that hasn’t owned a home in the last three years.  Buy a home between now and December 2009, file an amended return for 2008 and get your $8,000 in a few weeks.  Share this important news with people you know that haven’t owned a home in the last three years as well as new home buyers.

Top 10 Songs To Do Your Taxes By

Were you jaming out to music while doing your taxes?  To ease the burden, I think listening to music eases the burden.

1. "Taxman" – The Beatles

If you drive a car, I’ll tax the street;
If you try to sit, I’ll tax your seat;
If you get too cold, I’ll tax the heat;
If you take a walk, I’ll tax your feet.

"Taxman" was one of three songs on the Beatles’ Revolver album that were written by George Harrison. Although most of us can’t relate to what inspired the song – the tax burden on people who earn too much money – we can relate to the underlying theme.

2. "Movin’ Out" – Billy Joel

You can pay Uncle Sam with overtime
Is that all you get for your money?

Don’t have a heart attack-ack-ack, but Billy Joel actually wrote "Movin’ Out" not to protest paying taxes, but to express disdain for the conventional definitions of success and achievement.

3. "I’d Rather Be Rich" – Chicago

I’d rather be rich, the truth of cash is tragic,
The system’s a bitch, but money works like magic

While Billy Joel decried success, Chicago seemed to embrace it with "I’d Rather Be Rich." Robert Lamm’s lyrics espoused the theory that everything’s okay if you have enough money.

4. "Money Money Money" – ABBA

I work all night, I work all day, to pay the bills I have to pay
Ain’t it sad
And still there never seems to be a single penny left for me
That’s too bad

At the time ABBA recorded "Money Money Money" in 1976, they had plenty plenty plenty of it. The song, however, deals with what it’s like to be poor “in a rich man’s world.”

5. "Money" – Pink Floyd

Money, it’s a gas.
Grab that cash with both hands and make a stash.

Pink Floyd’s "Money" may not rate high on your financial planner’s Top 10, but it’s great for getting psyched to file your tax return.

6. "Low Budget" – The Kinks

I’m on a low budget
I’m not cheap, you understand
I’m just a cut price person in a low budget land
Excuse my shoes they don’t quite fit
They’re a special offer and they hurt me a bit
Even my trousers are giving me pain
They were reduced in a sale so I shouldn’t complain

Given the number of songs they recorded on the subject, one gets the idea that money was something of an obsession for the Kinks. "Low Budget" is about the difficulty of living within one’s means.

7. "Sunny Afternoon" – The Kinks

The tax man’s taken all my dough,
And left me in my stately home,
Lazing on a sunny afternoon.
And I can’t sail my yacht,
He’s taken everything I’ve got,
All I’ve got’s this sunny afternoon.

In the same vein as The Beatles’ "Taxman," the Kinks’ "Sunny Afternoon" deals with the money woes of the rich and famous.

8. "Success Story" – The Who

Away for the weekend
I’ve gotta play some one-night stands
Six for the tax man, and one for the band

John Entwistle’s "Success Story" took a jab at the Who’s success, and how it took the fun out of playing music.

9. "Lap of Luxury" – Jethro Tull

The money won’t last forever.
Rent man called twice today.
I hope some day you’ll find me
In the lap of luxury.

The eternal quest for more than we have is the theme of Jethro Tull’s "Lap of Luxury."

10. "Carnival World" – Jimmy Buffett

But talk is cheap
It takes money to buy your freedom
And the tax man’s knockin’ on your door

Leave it to Jimmy Buffett to take a cynical view of the power of money. In "Carnival World" money is the root of everything BUT evil.