Most investors do a great job researching and analyzing several properties to ensure they get the property that suits their investment strategy for the best price. Sadly, too many of those same investors allow too much of their hard earned dollars to end up in the hands of the IRS simply because they don’t involve their tax expert before they make investment decisions.
Properties are sold by investors for several reasons. Some want to continue in real estate investment, but want to upgrade their properties, or find the current neighborhood deteriorating. Others want to reduce their investment holdings. For these transactions, there are three ways to significantly avoid paying unnecessary taxes: like-kind exchanges, installment sales, and turning the rental property into your personal residence. This article focuses on like-kind exchanges. Future articles will address installment sales and conversions to personal residences.
When investors decide to upgrade their properties, or sell in an area where the value has peaked and buy where the value is starting to increase, the best way to avoid paying taxes is to do a like-kind exchange. The investor normally has to pay a capital gains tax of up to 24.55% (15% federal and 9.55% state) on the profits from the sale of the property. (And taxes are only going to get higher in the near future.) If your intent is to reinvest in another property, you can defer those taxes by doing a like-kind exchange.
By going through a qualified accommodator, who holds the money from the sale of the investor’s property, no taxes are owed, as long as no money or other value is received by the seller. This allows you to use all of your investment for the new property rather than having to settle for less due to paying taxes.
The timing has to be done to IRS specifications. Make sure your real estate agent has done several exchanges and that the accommodator has a good reputation and is financially solid. Some accommodators have recently fallen on difficult times, causing a freeze on investor money which has resulted in failed exchanges and taxes owed!
Richard Lagomarsino, EA is the president of FTMS Inc, and is an enrolled agent who is able to represent and help solve clients’ problems before the IRS. If you wish to avoid or prevent paying unnecessary taxes, call 916-773-1200 or visit www.ftms.net.
Showing posts with label rental. Show all posts
Showing posts with label rental. Show all posts
Monday, September 6, 2010
Tuesday, August 14, 2007
Disability Guidelines - Part One (Department of Justice Disability Guidelines)
On May 17, 2004, the United States Department of Justice presented guidelines regarding landlords (housing providers) making reasonable accommodations available to tenants and others under the Fair Housing Act (the “Act”). The Department of Justice and the Department of Housing and Urban Development (HUD) are jointly responsible for enforcing the federal Fair Housing Act which prohibits discrimination in housing on the basis of race, color, religion, sex, national origin, familial status, and disability. One type of disability discrimination prohibited by the Act is the refusal to make reasonable accommodations in rules, policies, practices, or services when such accommodations may be necessary to afford a person with a disability the equal opportunity to use and enjoy a dwelling.
Prohibited acts: The guidelines state that “The Act prohibits housing providers from discriminating against applicants or residents because of their disability or the disability of anyone associated with them and from treating persons with disabilities less favorably than others because of their disability. The Act also makes it unlawful for any person to refuse to make reasonable accommodations in rules, policies, practices or services, when such accommodations may be necessary to afford persons with disabilities equal opportunity to use and enjoy a dwelling. The Act also prohibits housing providers from refusing residency to persons with disabilities, or placing conditions on their residency, because those persons may require reasonable accommodations. In addition, in certain circumstances, the Act requires that housing providers allow residents to make reasonable structural modifications to units and public/common areas in a dwelling when those modifications may be necessary for a person with a disability to have full enjoyment of a dwelling.”
In Part Two of this continuing series of articles regarding disability accommodations, we will discuss who is responsible for complying with the Act.
By Gary Link, Attorney at Law
Gary Link, Attorney, is President of the Law Office of Gary L. Link, Inc. Since 1979, Mr. Link has represented landlords in over 35,000 eviction cases and litigated over 10,000 eviction trials. He is a member of the California Apartment Association, the Rental Housing Association, as well as a member of the local, state, and national bar associations. For questions relating to this article, call the law office at 916-447-8101. The information in this article is applicable as of 2007. Because laws may change please contact the law office to affirm continuing validity of the contents of this article.
For more information regarding RNB Property Management, Inc. please call
916-435-2424 or visit us online at www.RNB2day.com or
Property Management Rocklin
Prohibited acts: The guidelines state that “The Act prohibits housing providers from discriminating against applicants or residents because of their disability or the disability of anyone associated with them and from treating persons with disabilities less favorably than others because of their disability. The Act also makes it unlawful for any person to refuse to make reasonable accommodations in rules, policies, practices or services, when such accommodations may be necessary to afford persons with disabilities equal opportunity to use and enjoy a dwelling. The Act also prohibits housing providers from refusing residency to persons with disabilities, or placing conditions on their residency, because those persons may require reasonable accommodations. In addition, in certain circumstances, the Act requires that housing providers allow residents to make reasonable structural modifications to units and public/common areas in a dwelling when those modifications may be necessary for a person with a disability to have full enjoyment of a dwelling.”
In Part Two of this continuing series of articles regarding disability accommodations, we will discuss who is responsible for complying with the Act.
By Gary Link, Attorney at Law
Gary Link, Attorney, is President of the Law Office of Gary L. Link, Inc. Since 1979, Mr. Link has represented landlords in over 35,000 eviction cases and litigated over 10,000 eviction trials. He is a member of the California Apartment Association, the Rental Housing Association, as well as a member of the local, state, and national bar associations. For questions relating to this article, call the law office at 916-447-8101. The information in this article is applicable as of 2007. Because laws may change please contact the law office to affirm continuing validity of the contents of this article.
For more information regarding RNB Property Management, Inc. please call
916-435-2424 or visit us online at www.RNB2day.com or
Property Management Rocklin
Tax Saving Strategies for Real Estate Investors
There are many tax saving strategies that attract investors to real estate investments. Paying capital gains on profits at 15% rather than up to 35% on ordinary profits is one such strategy. There are a variety of other ways to save your dollars. In each Landlord Today article, we will focus on one tax saving strategy you or your current tax preparer may not have thought about.
Make the Most of Depreciation.
As mentioned above, most know that depreciating their properties brings tax savings, but a lot of investors miss valuable depreciation deductions because they don’t know how to make the most of them. The following steps will help you get more annual depreciation to save tax dollars:
Step 1: Divide basis between “land” and “improvements.” Remember land provides no depreciation, so the goal is to assign as much as possible to depreciable improvements. The IRS suggests you use local property tax assessments. You can use any allocation (such as bank appraisal or your insurer’s estimate of replacement costs) so long as you show “reasonable basis.” Don’t forget that driveways and sidewalks crack, landscaping needs replacing, and pipes from the house to the street deteriorate over time. Consequently, you can depreciate land improvements over 15 years. If you miss those assets, you lose money!
Step 2: Split out components of the building to get shorter depreciation periods. Buildings depreciate over 27.5 years for residential property and 39 years for nonresidential property. But isn’t a building a collection of components? Of course it is. Buildings include structural components like walls, roofs, furnaces, and windows that are integral to the building. These depreciate over the traditional 27.5 and 39-year periods. But buildings also include personal property that depreciates over just 5 years. It makes sense that if you allocate part of your purchase to that personal property, you’ll boost your depreciation during the first few years you own your property. These are probably the years you need it most! Personal property examples include cabinets, countertops, dishwashers and carpeting.
By Richard Lagomarsino, EA
Richard is the president of FTMS Inc. Go to www.ftms.net for more helpful information.
For more information regarding RNB Property Management, Inc. please call
916-435-2424 or visit us online at www.RNB2day.com or
Property Management Rocklin
Make the Most of Depreciation.
As mentioned above, most know that depreciating their properties brings tax savings, but a lot of investors miss valuable depreciation deductions because they don’t know how to make the most of them. The following steps will help you get more annual depreciation to save tax dollars:
Step 1: Divide basis between “land” and “improvements.” Remember land provides no depreciation, so the goal is to assign as much as possible to depreciable improvements. The IRS suggests you use local property tax assessments. You can use any allocation (such as bank appraisal or your insurer’s estimate of replacement costs) so long as you show “reasonable basis.” Don’t forget that driveways and sidewalks crack, landscaping needs replacing, and pipes from the house to the street deteriorate over time. Consequently, you can depreciate land improvements over 15 years. If you miss those assets, you lose money!
Step 2: Split out components of the building to get shorter depreciation periods. Buildings depreciate over 27.5 years for residential property and 39 years for nonresidential property. But isn’t a building a collection of components? Of course it is. Buildings include structural components like walls, roofs, furnaces, and windows that are integral to the building. These depreciate over the traditional 27.5 and 39-year periods. But buildings also include personal property that depreciates over just 5 years. It makes sense that if you allocate part of your purchase to that personal property, you’ll boost your depreciation during the first few years you own your property. These are probably the years you need it most! Personal property examples include cabinets, countertops, dishwashers and carpeting.
By Richard Lagomarsino, EA
Richard is the president of FTMS Inc. Go to www.ftms.net for more helpful information.
For more information regarding RNB Property Management, Inc. please call
916-435-2424 or visit us online at www.RNB2day.com or
Property Management Rocklin
Friday, July 13, 2007
When the Rent is Unpaid, Act Immediately!
The legal process of evicting a tenant in California for non-payment of rent is among the most streamlined of legal proceedings however, starting that process is often delayed by the hesitancy of the landlord in serving a "Three Day Notice to Pay Rent or Quit" upon the tenant.
When a tenant has not paid the rent when due, landlords are confronted with a difficult decision as to whether a "Three Day Notice to Pay Rent or Quit" should be served immediately or not. Although it is a troublesome decision to make, I recommend that the "Three Day Notice to Pay Rent or Quit" be served upon the tenant right away!
The failure to serve the notice immediately may result in a tenant claiming at the eviction trial that the landlord "waived" the right to receive rent on the first day of the month,
that the landlord and the tenant
verbally "worked a deal" for rent to be
paid later in the month, or that
the landlord should be "estopped" (prevented) from demanding that the rent was due on the first day of the month because the landlord has often accepted rent late. Judges may listen to these "phantom" defenses because they have heard many cases where the landlord waited for the problem to just "go away"
or that the landlord did
indeed work out some type
of verbal "deal" with the tenant.
Prompt service of the "Three Day Notice to Pay Rent or Quit" will hopefully eliminate the possibility of the tenant claiming a defense at a trial, set a precedent for the future that the landlord will be insisting upon prompt and timely payment of rent, and most importantly place the landlord in control of the rental payment duty of the tenant.
Gary Link, Attorney, is President of the Law Office of Gary L. Link, Inc. Since 1979, Mr. Link has represented landlords in over 35,000 eviction cases and litigated over 10,000 eviction trials. He is a member of the California Apartment Association, the Rental Housing Association, as well as a member of the local, state, and national bar associations. For questions relating to this article, call the law office at 916-447-8101. The information in this article is applicable as of 2007. Because laws may change please contact the law office to affirm continuing validity of the contents of this article.
For more information regarding RNB Property Management, Inc. please call
916-435-2424 or visit us online at www.RNB2day.com or
Property Management Rocklin
When a tenant has not paid the rent when due, landlords are confronted with a difficult decision as to whether a "Three Day Notice to Pay Rent or Quit" should be served immediately or not. Although it is a troublesome decision to make, I recommend that the "Three Day Notice to Pay Rent or Quit" be served upon the tenant right away!
The failure to serve the notice immediately may result in a tenant claiming at the eviction trial that the landlord "waived" the right to receive rent on the first day of the month,
that the landlord and the tenant
verbally "worked a deal" for rent to be
paid later in the month, or that
the landlord should be "estopped" (prevented) from demanding that the rent was due on the first day of the month because the landlord has often accepted rent late. Judges may listen to these "phantom" defenses because they have heard many cases where the landlord waited for the problem to just "go away"
or that the landlord did
indeed work out some type
of verbal "deal" with the tenant.
Prompt service of the "Three Day Notice to Pay Rent or Quit" will hopefully eliminate the possibility of the tenant claiming a defense at a trial, set a precedent for the future that the landlord will be insisting upon prompt and timely payment of rent, and most importantly place the landlord in control of the rental payment duty of the tenant.
Gary Link, Attorney, is President of the Law Office of Gary L. Link, Inc. Since 1979, Mr. Link has represented landlords in over 35,000 eviction cases and litigated over 10,000 eviction trials. He is a member of the California Apartment Association, the Rental Housing Association, as well as a member of the local, state, and national bar associations. For questions relating to this article, call the law office at 916-447-8101. The information in this article is applicable as of 2007. Because laws may change please contact the law office to affirm continuing validity of the contents of this article.
For more information regarding RNB Property Management, Inc. please call
916-435-2424 or visit us online at www.RNB2day.com or
Property Management Rocklin
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