Tax Myths about Home ownership

roybean · 03-20-2007, 02:40 AM

I don't know how true this is, but since I am trying to learn as much as I can I am posting this link.

5 homeownership tax myths
http://realestate.msn.com/Buying/Art...87267&GT1=9226

neil5623 · 03-20-2007, 08:16 AM

#4 is somewhat misleading IMO. The last line in the box appears to say that you owe $150K in taxes on the sale. What it means is that you owe taxes on $150K. Big difference. What gets me is that these so-called money gurus will say "look at how much you are paying in taxes using this method vs. how much if this happened." I say look at the bottom line. Which way do you net more. Plus, there may be ways to offset losses that are not discussed. Besides, it's $ you would not have had anyway, but for somebody "buying the farm."

Enigma · 03-20-2007, 03:35 PM

Quote:

Originally Posted by neil5623

#4 is somewhat misleading IMO. The last line in the box appears to say that you owe $150K in taxes on the sale. What it means is that you owe taxes on $150K. Big difference. What gets me is that these so-called money gurus will say "look at how much you are paying in taxes using this method vs. how much if this happened." I say look at the bottom line. Which way do you net more. Plus, there may be ways to offset losses that are not discussed. Besides, it's $ you would not have had anyway, but for somebody "buying the farm."

I get this question all the time. Unless the child establishes the home as his/her primary residence, then the child will pay taxes on the $150,000.

http://www.extension.umn.edu/distrib...nt/DF6304.html
http://www.timbertax.org/estate/stepbasis.asp?id=estate

When all else fails, read the IRS Code:

http://www.irs.gov/publications/p530/ar02.html#d0e1868

Hedwig · 03-20-2007, 04:09 PM

It's a bad idea on many levels to co-own ANYTHING between generations. In almost every case you lose a stepped-up basis.

roybean · 03-26-2007, 02:25 AM

Real estate just seems to be so complicated...every time I think I am getting a handle on it...there is something else to be learned.

Hedwig · 03-26-2007, 02:39 AM

To quote you, read, read, and read some more.

Then ask questions.

Hedwig · 03-26-2007, 02:39 AM

Quote:

Originally Posted by Hedwig

To quote you, "read, read, and read some more."

Then ask questions.

roybean · 03-26-2007, 04:12 AM

Instead of getting pieces of info here and there, I need one general book to cover the basics...I think I was trying to get info from too many sources.

Enigma · 03-26-2007, 08:30 AM

Quote:

Originally Posted by roybean

Instead of getting pieces of info here and there, I need one general book to cover the basics...I think I was trying to get info from too many sources.

That would be a RATHER large book.

tabufx50 · 05-05-2007, 03:14 PM

it's always good to own a home and get the tax write-offs and also gain equity and enjoy a piece of the pie.

Jane

Hedwig · 05-05-2007, 06:46 PM

Quote:

Originally Posted by tabufx50

it's always good to own a home and get the tax write-offs and also gain equity and enjoy a piece of the pie.

Jane

Absolutely NOT always true. It depends on the circumstances. If you can't afford a home, and the upkeep, you're better off renting and investing the money. Maybe you can buy a house some day.

If you move frequently or are subject to relocation on short notice, home ownership might not be for you.

One of the root causes of the problems with the subprime loans and the decline of the housing market is the fact that many people were sold homes they really couldn't afford. They were told that they could afford it now because they could get a low intro rate or an interest-only loan. When the time comes that the higher rate or paying principle kicks in, they were supposed to be able to sell.

Right--anyone with a basic knowledge of economics knows that at that point the law of supply and demand will produce a surplus and drive prices down. This person would also realize that since the inflation rate has been low, salaries don't increase by large amounts and the ability to pay in the future won't be there.

And anyone with a rudimentary knowledge of human nature knows that people won't want to move to a smaller house.

These people would have been better off renting and investing their money. If they saw what was coming, maybe now they could buy at a lower price, have a decent down payment and some money for unexpected repairs.

Enigma · 05-05-2007, 11:47 PM

Quote:

Originally Posted by tabufx50

it's always good to own a home and get the tax write-offs and also gain equity and enjoy a piece of the pie.

Jane

Tax write offs are not perpetual. With homeownership comes maintenance costs, in some markets ever increasing property taxes.

With the market in a state of flux in a large part of the country, right now may not be the best time to purchase. With a potential for prices to head lower, one would end up losing equity.

It will require some study and some speculation to enter the market.

In my neck of the woods, there is a large condo project that is going up on the beach. The units went from $1.5 million to over $10 million for the four penthouses. The project is still a year from completion and the $1.5 million units are now worth $700,000. In less than 9 months the place lost half its value.

The place sold 100% on opening day, its not fully built yet and the developer is going after unit owners for additional cash to complete the units since the banks won't finance the overages. Its a real mess for the owners and business is booming for real estate attorney's.

Hedwig · 05-06-2007, 12:40 AM

I agree, it's an individual decision with many aspects to consider.