Keeping full and accurate homeowner records is not only vital for claiming deductions on your tax return, but also for determining the basis or adjusted basis of your home. These records include your purchase contract and settlement papers if you bought the property, or other objective evidence if you acquired it by gift, inheritance, or similar means. You should also keep any receipts, canceled checks, and similar evidence for improvements or other additions to the basis.
Home equity represents a significant portion of the average retiree’s wealth. If you’re 62 or older and house-rich but cash-poor, a reverse mortgage loan allows you to convert part of the equity in your home into cash – without having to sell your home. You can use this cash to finance a home improvement, pay off your current mortgage, supplement your retirement income, or pay for healthcare expenses. A reverse mortgage is not without risk, however. Here’s what you need to know:
In most cases, gains from sales are taxable. But did you know that if you sell your home, you may not have to pay taxes? Here are ten facts to remember if you sell your home this year.
If you’re a savvy investor, you probably know that you must generally report as income any mutual fund distributions, whether you reinvest them or exchange shares in one fund for shares of another. In other words, you must report and pay any capital gains tax owed.
If you’re looking to sell your home this year, then it may be time to take a closer look at the exclusion rules and cost basis of your home to reduce your taxable gain on the sale of a home.
The IRS home sale exclusion rule allows an exclusion of gain up to $250,000 for a single taxpayer or $500,000 for a married couple filing jointly. This exclusion can be used over and over during your lifetime (but not more frequently than every 24 months), as long as you meet certain ownership and use tests.
Employees and small business owners often have questions about what to do with an employee’s home – and what the tax consequences might be – when they move to a new job location. Here are some answers:
The Tax Cuts and Jobs Act (TCJA) tossed an unwanted rule into Section 1031 by forbidding exchanges of personal property.
But before we move on, let’s clarify one thing: Section 1031 is not an “exchange,” which is defined by Merriam-Webster as a trade. In a tax code 1031 exchange, you generally would
- engage an intermediary to handle the money and the tax paperwork;
- sell your real property; and
- buy the replacement property.
The federal Rehabilitation Tax Credit, or rehab credit, offers significant financial incentives for owners or leaseholders of historic buildings to renovate those structures.1
What’s the big deal? Why are tax credits so exciting?
Tax credits, unlike deductions, reduce your tax bill dollar-for-dollar. If you spend $100,000 and get a 20 percent tax credit, you reduce your tax bill by $20,000. That’s Uncle Sam putting $20,000 in your pocket. And there’s more.
In general, income from renting a vacation home for 15 days or longer must be reported on your tax return on Schedule E, Supplemental Income, and Loss. You should also keep in mind that the definition of a “vacation home” is not limited to a house. Apartments, condominiums, mobile homes, and boats are also considered vacation homes in the eyes of the IRS. Tax rules on rental income from second homes can be confusing, especially if you rent the home out for several months of the year and use the home yourself.
Rent to Win: Understanding the Income and Tax Benefits of Rental Property
Have you thought about purchasing a rental property? Great! You have the opportunity to generate additional income, save for retirement, and improve your tax posture. To unlock the full income and tax benefits of rental property, it’s critical that you do the following 5 things first:
- Meet with a financial planner. Explore how owning a rental property will fit into your current and future financial needs.
- Carefully choose the right rental property! Do your homework. Research the neighborhood. Compare monthly rental rates for nearby properties.
- Consult with a lawyer. You’ll need an airtight rental contract to reduce your liability.
- Decide if you’ll manage the property or hire a manager. Don’t miss out on the tax benefits of rental property because you’re afraid managing real estate will take up all your spare time. Many owners of apartments and homes for rent will hire a property manager.
- Meet with a CPA who has real estate and rental property experience. Real estate taxes can get complicated…fast. However, here at Robert P Russo CPA, we work with everyone from couples who own a single rental property to landlords with dozens of apartments and homes for rent. Our goal is to maximize the tax benefits of rental property for our clients. Now, let’s take a closer look at those benefits…