Real estate principles_powerpoint_for_chapter_15
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Transcript of Real estate principles_powerpoint_for_chapter_15
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Chapter 15: Taxes and Assessments
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appraisal & assessmentad valorem taxes = according
to valuesource of income for local
government tax district appraises all
taxable propertytax rate calculation
PROPERTY TAXES
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Expressing Property Tax Rates
Mill Rate Dollars perHundred Thousand
Schooldistrict
40 mills $4.00 $40.00
City 30 3.00 30.00
County 10 1.00 10.00
Total 80 mills $8.00 $80.00
Dollars per
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• 85 mills = .085• 215 mills = 2.15• 5 mills = .005
Move decimal: • Tax appraised value• Assessed value• Millage rate
(e.g., 80 mills; see previous slide)
Result: Tax Bill
Calculations using Mills
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Unpaid property taxes
Assessment appealProperty tax
exemptionProperty tax
variationsSpecial assessments
OTHER TAXING MATTERS
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Basis is the price originally paid for the home plus any fees paid for closing and
improvements.
FEDERAL INCOME TAX
© 2010 by South-Western, Cengage Learning
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To calculate the gain you must take the sale price and subtract the selling expenses; then subtract the basis to determine the gain.
CAPITAL GAINS
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Purchase price $90,000; closing costs are $500 Basis $ 90,500Add landscaping and fencing for $3,500 Basis $ 94,000Add bedroom and bathroom for $15,000 Basis $109,000
Sell home for $125,000; sales commissions Amount realized $117,000 and closing costs are $8,000
Amount realized $117,000Less basis -$109,000
Equals gain $ 8,000
Calculation of Gain
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Sale of principal residenceUsed for 2 of the last 5 yearsMarried – exclude up to $500,000
gainSingle – exclude up to $250,000
gain
INCOME TAX EXCLUSION
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15% to 20% If property held longer than 1 year
CAPITAL GAINS TAX RATE
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Selling price of old homeLess selling expensesLess fix-up costsEquals adjusted sales price
$250,000
-18,000
-7,000
$225,000
Adjusted Sales Price
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INSTALLMENT METHOD
Sale of real estate in which the proceeds of the sale are deferred beyond the year of sale
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Tax Deductions
• State & local real estate taxes• Interest with limits• Other deductions
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Impact on Real EstateAgent’s Liability for Tax Advice
Conveyance Taxes
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TAX RULES FOR REAL ESTATE ARE CONTINUALLY CHANGING
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Ad valorem taxes Adjusted basis Assessed value Assessment appeal
board Basis
Documentary tax Installment method Mill rate Tax certificate Tax lien
Key Terms
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