- Days left
real estate tax tipsThe real estate downturn that dominated 2009 leaves many on unfamiliar ground at tax time. Where better to look for advice than in suburban Los Angeles, where property values took a particularly vicious dive. There, Woodland Hills investment adviser Mark Kennedy shared his tips with WalletPop:

On Foreclosure: "Homeowners here are really getting screwed. If they do what's called a deed in lieu of foreclosure, their credit gets slammed, just like a foreclosure, and then, even if the bank forgives you, the IRS does not. Say you borrowed $500,000 and the house now is only worth $300,000. You would get a deficiency 1099 from the IRS for that difference. Doesn't make sense, but that's the rule."

"The idea was so people wouldn't walk away from their homes, but the government never thought we would be in this situation. You are taxed as if you had $200,000 in a capital gain sale, at 15%. In certain situations you can get relief on that, but you have to prove hardship and everything else. "

On Rental losses: "For rental real estate, let's say you make decent money, say $150,000 of adjusted gross income. If you have rental losses, you can't find a renter because there is so much available property out there now, you can't take a loss, but you can carry it forward to a year you do not have that AGI."

On Loss on an inherited home: "For non-spouse heirs, if you inherit a house from your parents, you don't have to pay any capital gains at all. Say the house is worth $500,000. The IRS views that $500,000 as the price you can sell it for right away and take no gain. If you sell two years later and the value goes down $200,000, you can take that loss. There's no limit on that, for rental property or primary residences."

On Refinancing costs: "You may be able to write off some costs, escrow and so on, depending on how you itemize your taxes. But mostly with a refinance you cannot write it off. However, if you take out a home equity line of credit, anything above your acquisition line of credit up to $100,000, you can deduct the interest on it. You can do anything you want with that, put it in the bank, buy a boat, as long as it is under a $100,000 indebtedness."

On Creative use of home equity: "With a lot of clients, we are using their home equity line of credit, converting from a regular IRA, which is taxable when you take it out, to a Roth IRA, which is not. You have to pay the income tax when you make the conversion. If you do that in 2010 you can stretch that tax over two years and that's the only year you're going to be able to do that. You don't owe it until 2012. That's a great break the IRS has been giving people. So we are taking unused home equity lines of credit, separating that from the home value, get the money out of there, then using that cheap money to pay the tax (and it's tax deductible) instead of paying it out of their own money, their life savings."

On Buying a home: "People can still get the federal $8,000 home buyers' tax credit for first-time home buyers (or as long as you haven't owned a house in two years). If you sell and go buy another home, that now has a tax credit of $6,500. This is good through April of this year and you have to close by June."



Increase your money and finance knowledge from home

Intro to different retirement accounts

What does it mean to have a 401(k)? IRA?

View Course »

Goal Setting

Want to succeed? Then you need goals!

View Course »

TurboTax Articles

Employer Sponsored Health Coverage Explained

The Affordable Care Act, also known as Obamacare, is simpler than some people may give it credit for. The basic rule to remember is that everyone must carry Minimum Essential Coverage (MEC) or pay a penalty. Employers with 50 full-time employees or more are obligated to sponsor plans for their workers to help them meet this requirement.

How to Report RSUs or Stock Grants on Your Tax Return

Restricted stock units (RSUs) and stock grants are often used by companies to reward their employees with an investment in the company rather than with cash. As the name implies, RSUs have rules as to when they can be sold. Stock grants often carry restrictions as well. How your stock grant is delivered to you, and whether or not it is vested, are the key factors when determining tax treatment.

What is a Schedule Q Form?

The Internal Revenue Service (IRS) has two very different forms that go by the name Schedule Q. One of them is for people who participate in certain real estate investments; this is known as a Form 1066 Schedule Q. The other Schedule Q deals with employer benefit plans. It?s not something an individual taxpayer would normally have to deal with, though a small business owner might need it.

Incentive Stock Options

Some employers use Incentive Stock Options (ISOs) as a way to attract and retain employees. While ISOs can offer a valuable opportunity to participate in your company's growth and profits, there are tax implications you should be aware of. We'll help you understand ISOs and fill you in on important timetables that affect your tax liability, so you can optimize the value of your ISOs.

Add a Comment

*0 / 3000 Character Maximum