Aug. 8, 2006 - 5 Property Tax Questions You Need to Ask

5 Property Tax Questions You Need to Ask

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? Generally taxes jump most significantly when a property is reassessed.

3. Will the sale of the property trigger a tax increase? Often 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 you might not qualify for? For example, many tax districts offer reductions to those 65 or over.

Reprinted from REALTOR® Magazine Online by permission of the NATIONAL ASSOCIATION OF REALTORS®
Copyright 2005. All rights reserved.

Aug. 8, 2006 - Understanding Capital Gains in Real Estate

Understanding Capital Gains in Real Estate

When you sell a stock, you owe taxes on your gain—the difference between what you paid for the stock and what you sold it for. The same is true with selling a home (or a second home), but there are some special considerations.

How to Calculate Gain
In real estate, capital gains are based not on what you paid for the home, but on its adjusted cost basis. To calculate this:

1. Take the purchase price of the home: This is the sale price, not the amount of money you actually contributed at closing.

2. Add adjustments:
* Cost of the purchase—including transfer fees, attorney fees, inspections, but not points you paid on your mortgage.
* Cost of sale—including inspections, attorney’s fee, real estate commission, and money you spent to fix up your home just prior to sale.
* Cost of improvements—including room additions, deck, etc. Note here that improvements do not include repairing or replacing something already there, such as putting on a new roof or buying a new furnace.

3. The total of this is the adjusted cost basis of your home.

4. Subtract this adjusted cost basis from the amount you sell your home for. This is your capital gain.

A Special Real Estate Exemption for Capital Gains
Since 1997, up to $250,000 in capital gains ($500,000 for a married couple) on the sale of a home is exempt from taxation if you meet the following criteria:

* You have lived in the home as your principal residence for two out of the last five years.
* You have not sold or exchanged another home during the two years preceding the sale.

Also note that as of 2003, you also may qualify for this exemption if you meet what the IRS calls “unforeseen circumstances,” such as job loss, divorce, or family medical emergency.

Reprinted from REALTOR® Magazine Online by permission of the NATIONAL ASSOCIATION OF REALTORS®
Copyright 2005. All rights reserved.

Aug. 8, 2006 - A Welcome Break for Homeowners

A Welcome Break for Homeowners

As early as age 55, you may be eligible for a special deal on your property taxes. Here's a state-by-state directory on where to find more information.

MOST STATES GIVE RESIDENTS OVER A CERTAIN AGE-- sometimes as young as 55 -- a break on their property taxes. In some states, you'll need a relatively low income to qualify, but in others your income doesn't matter. All 50 states offer some type of property tax relief program, such as freezes that will lock in the assessed value of your property once you reach a particular age. In addition, counties and municipalities often have their own property tax relief plans. For details, check with your state at the phone numbers or Web sites listed here. They can also refer you to any local sources.

ALABAMA - Find answers to questions pertaining to all aspects of property tax at www.ador.state.al.us/advalorem/index.html The purpose of this site is to provide general information to the public on the property tax laws in Alabama. Call the Department of Revenue at 334-242-1170.

ALASKA – Visit www.tax.state.ak.us or call the Department of Revenue at 907-269-6620 (Anchorage) or 907-465-2320 (Juneau).

ARIZONA – Visit www.revenue.state.az.us/property/property.htm or call Taxpayer Information and Assistance at 800-352-4090.

ARKANSAS – Visit www.state.ar.us/dfa. To claim a property tax refund or to obtain eligibility information, call the Department's Property Tax Refund Unit at 501-682-7265.

CALIFORNIA – Visit http://www.ftb.ca.gov/individuals/hra or call the Franchise Tax Board at 800-852-5711.

COLORADO – Visit www.revenue.state.co.us or call the Department of Revenue at 303-238-SERV (7378).

CONNECTICUT - State law provides a property tax credit program for Connecticut owners in residence of real property, who are elderly (65 and over) and whose annual incomes do not exceed certain limits. Visit www.opm.state.ct.us/igp/grants/circuitb.htm or call the Intergovernmental Policy Division at 860-481-6322.

DELAWARE – Visit www.state.de.us/revenue or call the Division of Revenue at 302-577-8200.

FLORIDA – Visit http://www.myflorida.com/dor/property or call 800-352-3671.

GEORGIA – Visit http://www2.state.ga.us/departments/dor/ptd/adm/taxguide/index.html or call the Department of Revenue’s Property Tax Division at 404-968-0707.

HAWAII – Visit http://www.state.hi.us/tax or call Taxpayer Services at 808-587-4242 (Oahu).

IDAHO – Visit http://www2.state.id.us/tax/propertytax/pt_homeowners.htm or call the State Tax Commission at 800-972-7660 or 334-7660 (Boise).

ILLINOIS - Visit http://www.revenue.state.il.us/Individuals or call the Department of Revenue at 800-732-8866.

INDIANA – Visit http://www.in.gov/dor/ or call the Department of Revenue at 317-232-2240.

IOWA – For an introduction to Iowa property tax, visit www.state.ia.us/tax/educate/78573.html. For more information, call the Property Tax Division at 515-281-4040.

KANSAS – Visit http://www.ksrevenue.org/faqs-taxhomestead.htm or call the toll free Kansas Taxline at 877-526-773.

KENTUCKY – Visit http://revenue.ky.gov/property_info.htm or call the Kentucky Revenue Cabinet at 502-564-4581.

LOUISIANA – Visit http://www.rev.state.la.us/sections/individual/default.asp or call 225-219-2448 for general information.

MAINE – Visit http://www.state.me.us/revenue/propertytax/homepage.html or call the Property Tax Division at 207-287-2011.

MARYLAND – Visit http://www.dat.state.md.us/sdatweb/htc.html for information on homeowners’ property tax credit program or call the Maryland State Department of Assessments and Taxation at 888-246-5941.

MASSACHUSETTS – For tax information specific to seniors, visit http://www.mass.gov/portal/index.jsp?pageID=intention&c=homehealth&v=seniors&i=seniorstaxinfo or call 800-392-6089.

MICHIGAN – Visit http://www.michigan.gov/treasury/0,1607,7-121-1748_1876---,00.html or call the Department of Treasury at 517-373-3200.

MINNESOTA – Visit http://www.taxes.state.mn.us/taxes/property/index.shtml or call 651-296-3781.

MISSISSIPPI - For property tax information, visit http://www.state.ms.us/frameset.jsp?URL=http%3A%2F%2Fwww.mstc.state.ms.us%2F or call the Mississippi State Tax Commission at 601-923-7000.

MISSOURI – Visit www.dor.state.mo.us/tax or call the Department of Revenue at 573-751-3505.

MONTANA - For property tax incentives information visit http://discoveringmontana.com/revenue/css/2forindividuals/03taxincentives/proptaxincentives.asp or call the Department of Revenue at 406-444-6900.