Q: Did the IRS’ new proposed regulations shut down a state & local tax workaround? Bill, Red Bank, NJ A: Before the new tax law was passed, you could generally claim a deduction for taxes paid to state and local governments, but now the deduction for state and local taxes is limited to $10,000. Some states with higher local taxes like NJ have proposed potential workarounds to the new federal limit on the deduction for state and local taxes that include providing a credit to taxpayers for charitable contributions to a state-created charity in lieu of payment of state income tax-the taxpayer would then claim a federal charitable tax deduction for the payment. The IRS’s newly proposed regulations would shut […]
continue reading Q: Gerald, I’m selling a building we’ve owned for many years and are thinking about doing a 1031 exchange to avoid taxes. Any advice you can give? Jason, Clearwater, FL. A: Jason, 1031 exchanges allow you to defer capital gains not avoid taxes. Here are 3 keys to a successful 1031 exchange: 1. Your sale and subsequent purchase of ‘like kind’ property must be “qualified transactions” for you to be able to defer capital gains through a 1031 exchange, which means the property you sell must’ve been held for investment intent, so rehabs or fix and flips typically don’t qualify. 2. The property you sell and the one you buy in a 1031 exchange must be held by the same […]
continue reading Q: Gerald, we are going away this month, can we write off our vacation as a real estate expense? Susan, Tinton Falls, NJ A: I am not a CPA, but I didn’t consult a friend of mine who is a CPA about your question and he said that you have to demonstrate that the purpose of your trip was real estate related in order for the trip to be tax deductible. This means you’d need to schedule real estate related appointments and meetings before you leave in order for your trip to be deductible. So, for example, if you attend a real estate seminar while on your trip that you’d like to deduct as a real estate expense, you’d need […]
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Use IRS Code 121 to defer real estate capital gains on your primary residence.
continue reading Use IRS Code 1031 to defer paying taxes on real estate capital gains of investment property.
continue reading Q: Gerald, I want to leave our home to my kids, should I give it to them before or after I die? Dan, Peekskill, NY A: Dan, I’m sure you may have personal reasons for giving your home to your kids now as opposed to after you pass, so I’ll leave that up to you. If you expect to have a large estate when you die, gifting assets now and reducing the size of your estate may help you avoid estate tax. If you give your property to your kids now, their cost basis in your home will be the property value now. If you bequeath your property to your kids when you pass, their cost basis in the property will […]
continue reading Q: Gerald, my cousin is selling a property he’s owned for a while that’s gone up in value, but he’s worried about paying taxes on the gain. Is there any way to avoid paying big taxes on the profit? Ted, Bozeman, MT A: That’s a great question, Ted. There are two IRS codes that may allow your cousin to exclude or defer taxes on the gain from selling his property. IRS code 121 allows you to exclude up to $250,000 as an individual ($500,000 if you file taxes jointly) of the gain from the sale of property that’s been used as a primary residence for at least two of the last five years before the sale. IRS code 1031 allows […]
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The 2015 American Community Survey data shows that New Jersey still leads the nation with the highest average annual real estate tax (RET) bill of $8,180.
continue reading Claim a deduction for state and local property taxes paid on your taxes.
continue readingQ: Gerald, I’m a real estate professional. Do you have any year end real estate tips for me? Lance, New Bedford, MA A: Hi Lance. Two ways to reduce your tax burden as a real estate professional for this current tax year is to pay more of your business-related expenses before the end of this year and defer income til January of next year. For example, you can send invoices late in December so collections won’t occur til January of next year–doing this will reduce your tax burden by reducing your taxable income. Thanks for your question, Lance-stay tuned for next week when I’ll reveal another end of year real estate tip. For more real estate tips and information visit […]
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