What You Missed February 2013 General Meeting
by Robert Davis
If You Wait Until the Last Minute You May Pay Too Much in Taxes!
Presented by: Jerry Davies, BSRE, CPA
February 5, 2013
Jerry Davies is a very competent CPA specializing in tax benefits for real estate investors in the Tampa Bay area. He talked about the new tax laws and how they will affect us. For example, the IRS is being more stringent about issuing form 1099 at property closings. Another thing he said was they are making the AMT (Alternative Minimum Tax) a permanent thing. As your income exceeds $50,000 for a single person or $78,000 for a joint filing, you start losing some of your available tax deductions.
He talked about other tax items, too. For example, you can gift up to $14,000.00 each to any number of different individuals without anyone having to pay gift tax. The gift is not taxable to the recipient(s) but the donor does not get to deduct it from their income. Also, the first five million dollars of an estate is transferred to the heirs tax free. One caveat, any monetary gifts already received are deducted from the five million that passes tax free. Over five million dollars, the estate tax rate jumps to 40%.
Many of the education benefits have been extended. The government has also allowed tax relief for mortgage loan modifications. Jerry said the government should have and did do this. However, when you get a reduction in principal via a short sale, the amount forgiven can be deducted from the basis in your remaining assets. There are also tax incentives for doing research for businesses, as well as tax credits for hiring veterans.
The IRS still allows us to sell our residence and keep $250,000 profit per individual tax free. You must have lived in the residence for two years. Thus you could buy a house, live in it and rehab it, stay there for two years, and then sell it tax free up to $250,000 per individual in profits.
For high-income people the capital gains rate is now 20%. The government considers $400,000 income for a single individual or $450,000 income for a couple to be considered high income.
Finally, he said the interest rates on loans are about as low as they are going to get. The government seems to want everyone to own a house. This may be the best time to buy and lock in the low interest rate for your mortgage. We should always try to use competent people for our business and Jerry surely qualifies in that area.