This site is an excellent tool for you to use in the Metro Charlotte Area for organizing & promoting your events.

Its free,  easy to use, & they help promote your  wine & cheese events, broker coffees, open houses, & broker luncheons.   Check back frequently to see where the next event in your area will be.   Check it out & let them know your thoughts:  www.brokerlunch.com

TAX BREAKS: Positive and Negative News

As many Americans learned recently, new tax breaks for real estate were enacted by legislation this summer providing relief from the current mortgage crisis. If you want to know which lenders have closed their doors and which lenders are listed on a watch list, google “mortgage implode” and click the website for the “Implode-O-Meter”.  Lawmakers approved tax cuts worth $12.4 million over 10 years; however, lawmakers also enacted tax increases to offset them.

Property Taxes

Individuals who do not itemize can deduct property taxes in 2008 in addition to taking the standard deduction.  The extra write-off is capped at $1,000 for married couples and $500 for singles.  Keep in mind this tax break lapses after 2008.  Discuss your situation with your CPA or financial planner.

First-Time Home Buyers Tax Credit

First-time home buyers receive a tax credit for up to $7,500 for buying a primary residence after April 8, 2008, and before July 1, 2009.  To qualify and be eligible, purchasers must not have owned a principal residence in the United States in the previous three years.  The credit phases out between $150,000 and $170,000 for adjusted gross income for married couples and $75,000 to $95,000 for single persons.  It is refundable to the extent that it exceeds regular tax liability, but it does NOT offset the alternative minimum tax.  Keep in mind that the tax credit is recaptured over 15 years, without any interest, starting two years after the year the credit is claimed.  For example, a first-time buyer who claims a $7,500 tax credit for a purchase in 2008 must pay an extra $500 of income tax in 2010 and later years.  If the homeowner sells the residence before the credit is fully repaid, the seller is taxed that year on the lesser of the gain from the sale (if sold to an unrelated party) or the unrecaptured balance of the credit.

Conversion of Second Home To Primary Residence

When an individual wishes to convert a second home to a primary residence, some of the gain will be ineligible for the home-sale exclusion if the house is converted to a personal use after 2008 and is later sold.  The portion of the profit that is taxed is based on the ratio of the time after 2008 when the home was used as a second residence or rented out the total time that the seller owned the house.  Individuals wanting to convert need to contact their CPA or financial planner for advice as soon as possible.

Conversion of 1031 Investment Property to Primary Residence

If you have an investment property under a 1031 Tax Free Exchange, and you would like to move into that property as your primary residence to take advantage of the home-sale exclusion, you must live in that property for  five years.   Remember, this applies to the conversion of 1031 investment property to a primary residence.  If you move your primary residence every two years (primary residence to primary residence), you qualify under the home-sale exclusion up to $250,000 tax free gain for single individuals (or married filing separated) or up to $500,000 tax free gain for married individuals filing jointly.  Individuals need to discuss this conversion with their CPA or financial planner to correctly interpret the tax law and determine if it’s in the best interest of the taxpayer.

Conclusion

As the mortgage meltdown continues and our financial markets continue to be in major turmoil, we need to stay informed and learn what our Congress and Senate are planning to do to turn our financial crisis around in the coming months. 

Bill Gallagher

Superior School of Real Estate

bgallagher@superiorschoolnc.com

www.superiorschoolnc.com