Burt M. Polson - Commercial Real Estate Broker

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Filtering by Tag: taxes

Real Estate Applications of the Tax Cut and Jobs Act

Mortgage Interest Deductions (For taxpayers who itemize)

  • The mortgage interest deduction for existing mortgages of up to $1 million (for principal residence and second homes, combined) taken out before December 15, 2017, will not be affected. Homeowners may also refinance mortgage debts existing on December 14, 2017, up to $1 million and still deduct the interest, so long as the new loan does not exceed the amount of the mortgage being refinanced.
  • For any new loans as of January 1, 2018, (for principal residence and second homes, combined) the deduction will be limited to interest on $750,000 of principal.
  • The interest on home equity loans will only be deductible if the proceeds are used to substantially improve the residence.
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The tax bill and other readers’ questions

I value your feedback on my articles as well as the questions. There are many topics to discuss today in real estate, but I would like to take a moment to answer a few of your questions. Please be sure to consult with a professional for any legal or tax-related questions.

Cassandra of St. Helena, CA asks

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No returns - exchanges only

The Internal Revenue Service (IRS) allows an investor to sell investment real estate and potentially pay no taxes. Using a well-known tax law called Section 1031 of the Internal Revenue Code (IRC) an investor could defer capital gains on certain real estate investments.

Without a 1031 exchange tax liability could be as high as a blended rate of up to 35 percent in California. An investor who decides to cash-out from a sale could end up paying a large tax bill.

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Real Estate, Opinions and the President

“My psychiatrist told me I was crazy and I said I want a second opinion. He said okay, you're ugly too.” Rodney Dangerfield isn’t exactly a philosopher I commonly quote, but this quote rings true when you look at the number of opinions circulating online.

 

Now that we know who will be in the big chair for the next four years I asked myself in what ways may this help my client or hurt. Scanning the many media channels for answers is not only mind-numbing, but full of conflicting information and a plethora of opinions.

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Becoming a Millionaire: 5 Compelling Ways Real Estate Can Make You Wealthy - Part 3

I am going to wrap-up my three part series on the 5 compelling ways real estate can make you wealthy by taking a final look at Pete’s case study. Unfortunately,Pete still has not found a tenant to lease his office building and is being patient while continuing to look at his options.

The last two ways real estate can make you wealthy are tied together: disposition strategies and tax strategies. These strategies can be complicated, so always have a tax professional, exchange professional and real estate broker on your team.

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Retirement, taxes and warm fuzzies - part 2

In my previous article, John and Martha’s desire in their retirement was to refocus their energies from managing their large home and investment real estate. They sold their family home pocketing $1.8 million from the sale. They purchased a condo for $600,000 and invested the balance in a combination of stock and bond ETFs.

The next step in their strategy is to lessen their level of management of their real estate investment portfolio.

Their portfolio provides them stable income of $280,000 per year. This is derived from an 8,000

sq. ft. strip center bringing in $150,000 per year income and a 10 unit apartment building, $130,000 per year. They wish to keep this level of income, pay less in taxes and eliminate the hands-on approach to their investments while maintaining stability.

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A Snapshot of Capital Gains Taxes

I found a simple chart of federal capital gains tax rates for easy reference at taxfoundation.org. One option for commercial property owners in the disposition of their commercial real estate investment could be to just pay the tax.  Rates are low compared to past history and possibly the new rates to come.  Don't forget about the 25% tax on depreciation recapture besides the new 3.8% Patient Protection and Affordable Care Act surtax.  For California residents add another 13.3%.

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Understanding property taxes

Property taxes have been around for thousands of years. Centuries ago in Boston, Massachusetts, Puritans enacted a property tax system to pay for the construction and operation of the church as well as the religious education of their children. Regardless of your religion you paid the tax and it went directly to the church. If you did not pay there was quick remedy being that the sheriff was the ex-officio tax assessor and collector.

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Taxing Changes | Learn how new laws could affect commercial real estate decisions

In the wee hours of Jan. 1, 2013, Congress passed the American Taxpayer Relief Act of 2012 and the tax changes that resulted will drastically alter the way commercial real estate professionals plan for major transactions. Additionally, tax provisions written into the Patient Protection and Affordable Care Act, which went into effect Jan. 1, 2013, will affect some taxpayers’ real estate decisions. This synopsis focuses on the impact of ATRA and the Affordable Care Act on real estate-related tax issues.

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A 92 Year-old Solution For Real Estate Investors Facing Higher Taxes In 2013

Compliments of Bill Angove, Asset Preservation, Inc.

The familiar adage, “It’s not how much you make, but how much you keep” rings truer than ever for real estate investors in 2013. Not only have capital gain taxes increased significantly for high earners, but many investors below the top tax bracket face an additional 3.8% surtax on passive investment income like capital gains. Fortunately, IRC Section 1031, a provision which has been in the tax code since 1921, provides critically needed tax relief.

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Taxes on Short Sales and Foreclosures

An unfortunate reality in today's market is that many homeowners and investors are selling their property in a short sale or are being foreclosed upon.  What many people don't realize is that a foreclosure or short sale can result in significant tax consequences.  According to the IRS, "if you owe a debt to someone else and they cancel or forgive that debt, the canceled amount may be taxable." The good news is that the Federal government has provided some relief in the form of The Mortgage Forgiveness Debt Relief Act of 2007.  The highlights of this Act are as follow:

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How are supplemental property taxes calculated?

The Assessor appraises the property to determine the new base year value as of the date of the change of ownership or completion of new construction. The Assessor then calculates the difference between the new base year value and the existing roll value. The result is the new Supplemental Assessment. The Assessor will send you a "NOTICE OF SUPPLEMENTAL ASSESSMENT AND IMPENDING TAX BILL".

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Tax Exemption for Mortgage Debt Forgiveness

The good news! Homeowners will be getting some relief on their taxes this year and the years to come. The Mortgage Debt Forgiveness Law allows a homeowner to not have to claim the debt forgiven from a short sale or foreclosure as income.

The bad news! The State of California lost the exemption January 1, 2009. The Federal exemption continues to December 31, 2012.

paid

-Burt

California law, SB 1055, which went into effect Sept. 25, 2008, conforms California Revenue and Tax Code Section 17144.5 to the federal Mortgage Forgiveness Debt Relief Act of 2007 with the following exceptions:

(1) The maximum amount of acquisition indebtedness is $800,000 for couples filing jointly and $400,000 for individual filers;

(2) The maximum amount of debt relief income that can be forgiven is $250,000 for couples filing jointly and $125,000 for individual filers; and

(3) California’s debt relief statute applies to property sold on or after Jan. 1, 2007, and before Jan. 1, 2009.

Tax Implications of a Short Sale

There is a plethora of information available regarding foreclosures, short sales and deed-in-lieu of foreclosures.  Where does someone start?  My recommendation is to speak with a qualified tax accountant or CPA, of which I am not.  However, here is start of some good information regarding the tax implications of debt forgiveness from the disposition of your personal residence. 

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Investment Property Taxation

In a nutshell, here is what you could expect to pay in taxes on the sale of an investment property. Please keep in mind that taxes could be delayed if a seller elected an 1031 tax-deferred exchange. Also, I am not a tax advisor nor claim to be one so please be sure to consult your tax advisor or CPA as each taxpayer's circumstances could be different.

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Calculating Capital Gains Taxes in Investment Real Estate

I received the following information regarding the calculation of capital gains taxes from Asset Exchange Company.  I thought it was laid-out simply for most investors to understand.  Please keep in mind that the best way to avoid paying capital gains taxes is to conduct a 1031 exchange.  These types of exchanges have rigid rules governing timing, values, property type and other factors so be sure to pursue tax and legal advice as well as advice from your exchange accommodator.

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