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Oregon Tax Issue for Out of State Sellers!

Oregon is going to see a few changes to the way Real Estate sales, contracts and proceeds are handled as we begin 2008. Out of state sellers will have a new rule that they and their agents will need to be very well educated on.

I have just started my own research to best protect my sellers and educate them so they are prepared for the new changes.

The Oregon Legislature approved a new bill - HB 2592 - this is a huge change. Upon the sale or lease of a property - there will or can be a 4% of the sales price or 10% of the gain deduction from the seller's proceeds. This deduction will be to pay Oregon Income Tax. It will be held in a trust account and sent to the State of Oregon Revenue Department.

My Questions have been;

Are there exceptions to this rule - and the answer is yes -

If the sales price is under $100,000
If the buyer obtains the property through foreclosure
If the seller is a resident of the State of Oregon
If the seller is a corporation, with a permanent place of business in Oregon
If you will not owe tax under ORS chapter 316, 317or 38 for the tax year because the conveyance is non-taxable with an exchange.

Obviously these changes can cause a lot of confusion if you are not prepared - knowing what to expect takes the frustration out of the sale of your home.

As always your comments and questions are appreciated.

________________________________________________________________________________________________________
Thesa Chambers • Broker • RE/MAX Sunset Realty
541-771-7064 Cell • 541-536-0117 Office • 888-868-2050 Toll Free
Mailing Address • PO Box 3510, La Pine, OR 97739

Posted by Central Oregon Real Estate | Thesa Chambers, Broker on 11/25/2007 07:04 PM

Comments (20)

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20 Comments on Oregon Tax Issue for Out of State Sellers!

Thesa... 4% ? ouch... now, question. How many of your sellers are out of state sellers? Could this be construed as discrimination? If the state knows the percentage of in state to out of state sellers? hhhhmmmm

11/25/2007 07:12 PM

by Jeff Belonger -- The FHA Expert.com -- FHA Loans -- FHA mortgages -- Mortgages (Infinity Home Mortgage Company, Inc)

Jeff - or 10% of the gain which ever is less - I am pretty certain that in my area more than 50% of the sellers are out of state sellers - but is it discrimination? If you make money in Oregon you pay the dreaded state income tax.... so - they are just collecting - what really makes me wonder is how sellers that close at the first of the year will feel about it versus those that close at the end of the year?

11/25/2007 07:19 PM

by Central Oregon Real Estate | Thesa Chambers, Broker (RE/MAX Sunset Realty La Pine)

Thesa... sure, 10% of the gain could be a lot also. And that's my point... they are trying to collect even if you are out of state..... couldn't that come back to bite them in the butt or haunt them? Meaning.... if many buy as 2nd homes or investment properties, will this hurt that type of market?

11/25/2007 07:21 PM

by Jeff Belonger -- The FHA Expert.com -- FHA Loans -- FHA mortgages -- Mortgages (Infinity Home Mortgage Company, Inc)

Thesa, those state legislatures sure keep us on our toes, don't they. It always take a while for all the implications to shake out, and then maybe another session to correct the inefficiencies in a bill... Oregon home sellers and buyers are fortunate to have you to keep them informed about things like this.

11/25/2007 07:37 PM

by Margaret Woda, Maryland REALTOR (RE/MAX VISION)

Of course it can be a lot - that is why it is so important to have an agent that has done their homework - most investors or second home owners use a 1031 when they buy and sell - these transactions are exempt - but there will be necessary paperwork for the exemption - and there are other situations that could seriously affect a sale - these taxes were paid previously or I should say should have been - and now they will be -

11/25/2007 07:37 PM

by Central Oregon Real Estate | Thesa Chambers, Broker (RE/MAX Sunset Realty La Pine)

Margaret - they sure do - we have some changes for the better on the books too.... and I will be posting about them in the near future... thanks for your loyality and support

11/25/2007 07:38 PM

by Central Oregon Real Estate | Thesa Chambers, Broker (RE/MAX Sunset Realty La Pine)

The government sure likes to keep us on our toes, don't they? I'm not in OR, but FL sure has plenty of changes to stay on top of.

11/25/2007 07:41 PM

by Lisa Hill (Daytona Beach Real Estate) (Adams Cameron and Company)

Lisa - I love the first of the year - because I can educate my buyers and sellers and keep them ahead of the rest of the market - it always feels good to have a client know what they will see and expect -

11/25/2007 07:49 PM

by Central Oregon Real Estate | Thesa Chambers, Broker (RE/MAX Sunset Realty La Pine)

Thesa, the government sure likes to make us know our stuff. Always having to learn some new rule they're implemented!

11/25/2007 07:59 PM

by Linda Scanlan (A Fan of AR)

Thesa, That is pretty high. I am glad someone is educating the out of state sellers.

11/25/2007 08:02 PM

by Camarillo CA Real Estate Agent/ Mana Tulberg (Beach View Real Estate)

Linda - it is amazing what changes from year to year

Mana - no sales tax in Oregon means generally a higher income tax - can't have it all

11/25/2007 08:10 PM

by Central Oregon Real Estate | Thesa Chambers, Broker (RE/MAX Sunset Realty La Pine)

Hi Thesa,

Looks like it's been contagious. We've had 3 1/3% of the sales price for quite a few years now, our last govenor, not the Terminator. Last year it was revised somewhat effective 1/07, the seller could choose the original method, 3 1/3 of s/p or a max rate of 9.3 based on the seller's estimated gain.

And yes, there are some exemptions, yet many do have it withheld.

11/25/2007 09:16 PM

by Orange Co. Real Estate~Lynda Eisenmann, Broker-Owner, CRS,CRB,GRI,SRES, Brea, CA (Preferred Home Brokers)

Thesa,

Oh, I just noticed you included "leases" yikes!

11/25/2007 09:17 PM

by Orange Co. Real Estate~Lynda Eisenmann, Broker-Owner, CRS,CRB,GRI,SRES, Brea, CA (Preferred Home Brokers)

Thesa, this sounds really complicated, it is great your clients have someone like you that is keeping on top of it.

11/25/2007 09:31 PM

by Marchel Peterson Spring TX Real Estate E-Pro ABR (Results Realty)

Lynda - thank you for letting all of us know we are not the only ones - I am not sure how the lease part works that is taken from the bill - but - not sure how they are working that since it is withheld by escrow & title -

Marchel - the nice thing is I do not have to do the calculations - it is al up to escrow and title -

11/25/2007 10:54 PM

by Central Oregon Real Estate | Thesa Chambers, Broker (RE/MAX Sunset Realty La Pine)

Thesa- this is very good information to know - I am bookmarking this blog for future reference.

11/26/2007 12:11 PM

by No Longer Active Albany & Brownsville OR Real Estate (No Longer Active)

Thanks for the update. As an Oregon Broker.. this is good information.

11/28/2007 12:49 PM

by Fred Jaeger ~ Central Oregon - Real Estate Connection (RE/Max Sunset Realty Sunriver-La Pine)

Thesa - Good info. It's amazing what happens when a party gets complete control of the govt.

While there are good reasons to say that this income should be taxed, which it would be if they were Oregon residents, it will be interesting to see what happens as less out of state buyers invest here.

Of course, one of the reasons that property values have increased so much is due to CA investors out bidding locals for properties and then holding them for a short time and flipping them. This appears to be a Govt. imposed penalty.

An unfortunate aspect is that many out of state sellers will now ask you to sell for that much more. They will also take their 1031 exchange out of state.

12/04/2007 01:00 AM

by Larry Morris, CMPS, Newberg Oregon (NW Lending Solutions)

Thesa ~ I had no idea on the details of this particular piece of legislation. This will likely provide a few challenges, but I am certain that you will get through them just fine. Thank for the solid information! :)

12/04/2007 08:36 AM

by Sarah Eubanks ~ Preferred Oregon Loan Consultant & Notary Public (Hill Valley Financial Services)

I am an out of state owner and trying to sell a condo. since the market crash, i will

not take a profit, but a loss instead. does that mean i still pay the 4% if i take a loss??

04/28/2008 11:00 PM

by sky

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