Santa Clarita Real Estate, New Capital Gains Tax Laws Everyone Needs To Read!

By
Real Estate Agent with Keller Williams VIP Properties

For those of you who have multiple properties here in Santa Clarita or anywhere in the United States you really need to take the time to read this information. You may get an unexpected Capital Gains Tax Bill in the mail. Please take time to be a wise real estate investor especially with the all the policy changes occurring on Capital Hill. Now more than ever education is key.

A popular tax-saving loophole regarding capital gains taxes on some primary residences has been impacted by the recently signed 2008 Housing and Economic Recovery act. The law places new restrictions on wealthy homeowners who own two or more homes and plan to "house hop" to avoid paying capital gains taxes. Under previous law, those who sell a house for profit after living in it as their primary residence for two of the past five years would not have to pay capital gains taxes on $250,000 of the gain for a single person or $500,000 for a married couple filing jointly. Some taxpayers have avoided the capital gains tax by selling their primary residence, claiming the full tax exclusion, then moving to a second or third home that they have owned for some time, making it their primary residence which they then sell and pay little or no capital gains tax. The new law states that the gain may not be excluded for periods of "nonqualified use," basically the period of time when the house was not used as the taxpayer's primary residence. While the change to the law will affect only a small minority of U.S. homeowners, it will cause some tax headaches for a few. 

Partial exclusions will still be available in some cases, and there are some special rules for members of the uniformed services and some federal employees. Here are the basics to remember: reasons or "unforeseen circumstances" such as the death of a spouse by the homeowner, spouse or former spouse as a principal residence. and plans to hold it as an investment. On January 1, 2012, they begin using it as their principal residence. They live there two years and sell it on January 1, 2014 for $1.1 million for a profit of $500,000.Under the old law, the couple would have excluded the entire $500,000 gain from their taxable income. Under the new law, they can only exclude $200,000 - two-fifths - since the other $300,000 would be considered nonqualified because of the three years in which the home was not their principle residence. 

My husband and I take the time to seek education and information to help our clients in the ever changing market. You need to hire professionals who can guide you in these challenging real estate times, we are that team! 

For more further information, consult your tax professional, who may be able to identify any exceptions or other important points for individual situations.

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Jennifer Ricco

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