Tax Implications When Selling a Home*

Home sellers used to be penalized when they sold a home, paying huge capital gains taxes on their next tax return. However,the United States government saw fit to change that taxation process with the Taxpayer Relief Act of 1997.  Now, many people qualify for no capital gains at all, depending on their income and tax situation. Take a look at some sample situations that can help you to avoid tax-related headaches and stay ahead of the financial curve. Single Owners – If you are a single homeowner, you are not required to pay capital gains unless the profit is higher than $250,000. You can figure out your profit by subtracting the sold price from the original price paid.  From that figure, you can also deduct any major household improvements made over the years, including an additional room or in-ground pool installation. For most homeowners, their profit is conservative, allowing them to pocket the money or put it toward a new property.  Married Homeowners – Because a home may be larger for a married couple, the government stipulates that up to $500,000 in profit is acceptable to avoid taxation. However, there is a significant tax rate when profits are above the $500,000 threshold.  In general, your tax rate is around 20 percent.  For example, your profit is $600,000. You need to pay a 20 percent tax on the $100,000 above the threshold. As a result,you owe $20,000 in taxes alone.  Time Constraints – You must pay capital gains only if you lived in the home for less than two years. For most homeowners, this time constraint is not applicable.  As long as you remain in a home as a primary residence, you can technically sell and buy a home every two years without paying capital gains.  For families trying to grow their family and wealth, this tax relief is a welcome sight. There is no limit to the amount of times you can buy or sell with no tax liability.  Special Circumstances – The government recognizes that there are extenuating circumstances that must be accounted for.  If you bought a house and were transferred to a different state by your employer within one year, for example, you are exempt from paying capital gains.  Other issues, including long-term government or private company duties, free you from paying taxes as well. Documented health problems, such as suffering from cancer, allow you to skip taxes if you must move before the two-year limit. If You Owe – It is best to contact a tax professional.  He can look over your personal situation to find out the tax cost.  In general, tax professionals take the sold price and reduce it with documented capital improvements and depreciation costs.  You can also deduct some of the closing costs to lower your tax liability.  However, high profits mean higher taxes overall.  Selling a home is much easier than it used to be. Go over your personal situation when considering selling prices. Receiving a conservative profit on your home is helpful when it comes to tax liability.

*I am a Realtor, not an accountant or attorney; this post is for informational purposes only and is not intended to replace your consulting with a tax professional.

How the Real Estate Business Works

I was recently working with a prospect who was looking for a lease property and that experience is what has prompted me to write this post.  I met this person and showed her some homes.  I had mentioned to her that the homes she was finding on other web sites came from our Multiple Listing Service and I would be able to show those properties.  She notified me about homes she found on one of the sites but when I looked them up, they were not listed.  I told her she would have to contact the owner or agent direct and I was kicking myself because I did not explain to her how our business works.

The Multiple Listing Service is not just a list of homes on the market.  When a property is listed for sale or lease, that listing agent is offering compensation to the cooperating agent.  If the commission is 6% the compensation to the cooperating agent is usually 3%.  If a property is not listed we cooperating agents are not entitled to a commission; therefore, we may be working for nothing, which, of course, agents cannot afford to do.

We have the capability of putting prospects on an auto-e-mail program that will notify them when new listings come on the market.  A person’s finding just the right property, I believe, is contingent upon working with an agent he trusts to keep him apprised of new or price-changed listings and to be there to show him the property.  That buyer’s agent will be working just for that buyer.  Look for an agent who is not only responsive, but also a good negotiator who is up on the latest legal requirements for real estate transactions cialis 20mg en ligne.  Ask the agent for recommendations from other satisfied buyers.  A listing agent who represents you as a buyer may have a conflict of interest, as he is also representing the seller.  Be sure to ask how he will handle the situation.  He will have to ask himself over and over, “Is this in the seller’s best interest; is this fair to the buyer?”

Good luck with your real estate purchase. and be sure to contact me if you need assistance.

90274 Zip Code Facts

The 90274 zip code includes the cities of Palos Verdes Estates, Rolling Hills Estates, Rolling Hills and the unincorporated area of Los Angeles County (Palos Verdes Peninsula).

There are 9437 households of which 87% are owner occupied;  71% are married; 35% have children.   The median home sales price is $1,225,000.  The median age of the inhabitants of this zip code is 31.88 years; 38% have a bachelor degree and 25% have graduate degrees.  83% are white collar workers, mostly in service industries and most commute by car thirty minutes to their places of work.

This information was obtained from the Realist tax portion of our Multiple Listing Service and though believed to be accurate, is not guaranteed.

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Household Problems You Can Solve

There are problems around the house that you should certainly call a professional to fix, such as a leaking roof, but here are some solutions to common problems that you can fix on your own:

Problem:  Countertop scuff

You will need a crayon, a spatula knife, and a microwave-safe bowl.  Pick the crayon whose color comes closest to matching your countertop.  Peel off the paper, place it in the bowl and place in the microwave.  Pour the hot, melted crayon onto the scuff mark and work it into the indentation with the spatula knife.  Scrape off the excess with the spatula knife.  The crayon mixture will harden and dry quickly, erasing the countertop flaw.

Problem:  Loose cabinet hinge

You will need wooden matches, wood glue and a hammer.  Remove the cabinet hinge screw.  Dab wood glue on a match and stick it into the screw holes.  Tap it in with the hammer.  Break off the match part that is sticking out.  Let the glue dry for about four hours.  Twist the screw back into place.  The match piece will create a new solid base for the screw.

Problem:  Squeaky floor

You will need talcum powder.  Sprinkle the powder over the squeaky section and sweep it into the cracks.

Problem:  Stained bathtub

You will need cream of tartar, baking soda, lemon juice and a soft cloth.  Combine equal amounts of cream of tartar and baking soda with enough lemon juice to make a paste.  Rub the mixture into the stain with your fingers or a soft cloth.  Let it sit for a half hour, then rinse well with water.

Problem:  Drywall hole

You will need wire screen, a pencil, a joint knife, masking tape, sandpaper and drywall compound.  Cut the wire screen two inches larger than the hole.  Tie one end of the string to the pencil and thread the other end through the middle of the screen; bend the screen, and insert it and the pencil into the hole.  Pull the string until the screen is flat against the hole ( the pencil will help push the screen flat against the drywall) and hold it taut while you apply the drywall compound.  Tape the string to the wall to hold the screen in place as the compound dries.  Cut the string when dry.   Sand and smooth the compound with the joint knife.

Problem:  Torn window screen

You will need clear nail polish.  Slather the nail polish over the hole in the screen, both inside and outside.  Let it dry and no more bugs will sneak in.  (This is my favorite!)

Housekeeping Tips

Over the years of my career in real estate, I have learned some interesting housekeeping tips that you may not know about:

1.  Shower door cleaning: When I was in the process of getting my own home ready to market, I was trying to remove soap scum from my shower doors and failing at the task.  I gave up and called a tradesman to replace the doors.  The contractor told me how to clean them and I must share this information because it really works.  Spread shampoo (one without any conditioner in it) on the glass surface; rinse it off; and behold, it works like a charm!

2.  Cleaning sinks, tubs and toilets: There is a miracle product called “Bar Keepers Friend” that can be purchased at Home Depot, Lowes and other such stores.  All I can say is you will be amazed at how this product works.

3.  Maintaining hardwood floors: Usually, just dust mopping is adequate, but when the floors really need more help, I recommend using Murphy’s Oil Soap,  diluted as directed on the bottle.  Damp mop, but do not soak the floors.  Do not let the solution sit, but dry the floor immediately.  I get a towel and “skate” over the floor with it.

4.  Taking care of badly scuffed hardwood floors: One home I was helping an owner get ready for the market had hardwood flooring.  In one of the hallways the floor was really scuffed up.  The owner said he would probably have to re-do the floor, and expensive undertaking.  A quick, very inexpensive fix is to use Old English Scratch Cover, that comes in different shades.  I asked my client’s cleaning lady to try it; the floors looked like new; the home sold within a week.

 

 

 

 

 

Countdown to Home Buying

The market is improving; inventory is low.  Check this countdown list to make sure you are ready to purchase:

1.  Get Pre-approved.  You are pre-approved when your credit has been checked and confirmed and your income, assets and employment history have been verified.  Be careful; some so-called pre-approvals are not worth the paper they are written on.  I have received “pre-approval” letters from lenders and submitted them with offers to purchase only to find out later that the buyer was not able to obtain a loan.  Sometimes it is advantageous to work with loan officers at the bank with which you do business, as they have a vested interest in your continuing to do business with them.

2.  Temper your expectations.  Listing inventory in the Palos Verdes area and the entire South Bay is only 50% of what it was last year.  This means that if you want to stick to any sort of budget, you are not likely going to get everything you want or you will have to be patient.  Have a clear understanding of your needs, wants and wishes, so you will take action when the right home becomes available.

3.  Be ready to compete.  Unless you are willing to purchase a home an outlying area or in need of a lot of repairs, prepare yourself to make multiple offers and compete with other buyers in the market.

4.  Be prepared to act quickly.  When you find the home of your dreams, you need to be ready to rush to get it.  If you do not act quickly and start making preparations right away, you may find yourself left out in the cold when it comes time for your offer to be accepted.

5.  Watch your behavior at open houses.  Everything you do and say when in front of the listing agent (seller’s agent) or his representative will inevitably be shared with the seller and may come back to haunt you when your make an offer the purchase the home.  Both being too excited about the home or nit-picking the condition of the home can put you at a disadvantage at the negotiating table.

6.  Call your real estate agent.  Actually, this step should be first.  Contact me at 310-995-3754 or Katie@katiemuck.com as soon as you would like to begin the process!