Tax Hikes for 2014? The new year has a lot of ups and downs for folks as they figure out what the next year looks like for them and their family. But if you’ve been looking at newspaper headlines across the country you’ll find a lot of scary looking tax hikes on the horizon; “Brentwood property tax to increase for 2014, Township raises taxes for first time in 10 years, Norristown council reviews tax hikes and 2014 budget.”
If you’ve been waiting for the right year to complete a home purchase, or even how to setup your will for your loved ones than 2014 might just be the year. Attorney Mark Lee Levine is the founding member of Levine Segev LLC, a law firm that specializes in real estate, business, estate planning and immigration services took the time to answer a few question about real estate tax and how folks can navigate 2014 without a hitch.
What are some of the common tax mistakes, and write-offs new homeowners miss?
Certainly there can be many mistakes in this area. This is merely a sampling of many I have seen over 40+ years as a real estate broker, attorney, tax professor, etc.
1. Owners/taxpayers fail to keep an accounting of monies spent on the house. Such detail may help to avoid future tax liability. For example, finishing the basement, adding a fence, etc. are capital items and they increase the basis (cost) for the taxpayer. Thus, if a taxpayer paid 300,000 for a house and sold it for 500,000, the 200,000 is gain. (See below as to whether it is taxed.) But had the owners put 30,000 in the home for the items noted above, the gain would only be 170,000.)
2. Taxpayers need to show they can meet exclusion of gain rules from the sale of the principal residence. This is under Code Section 121. If met, the couple selling the home can exclude up to 500,000 of gain. That is, it is not taxed for federal income tax.
3. An office in the home may provide additional deductions that are often overlooked.
How do you see real estate tax laws changing over the next five years, and how should homeowners prepare for those changes?
The tax laws have changed dramatically for 2013 and 2014, among other years. Thus, the amount of capital gains tax rates, regular tax rates, deductions for personal items (interest on the home, taxes on the home, etc.), and exemptions, to name a few, have all changed for 2013 as compared to 2012. Rates have increased and this is indeed tax hikes.
What unexpected challenges do people face when they create an estate will & trust?
The most important is to be sure the documents accomplish what you want. This normally means to be sure that the people the decedent wanted to take the property actually receive it. Of course, planning for trusts for minors, those with disabilities, etc. must also be high up in the priority list. Death taxes for most estates is NOT the big issue today, because of exemptions that project most estates from death taxes.
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Austin Faux works for HomeVestors Franchise Network. When I’m not out selling homes you can find me at home helping my wife relax and taking the kids to the park. You can also find me on my podcast, “I Am A Super Nerd.”