 |  | SALES MEETING TOOL KIT: REAL ESTATE TAXES 101 | |
|  Real Estate Taxes 101, Introduction Component 1: Facilitator Talking Points Component 2: Real Estate Taxes 101 Meeting Agenda Component 3: Activity 1, Common Real Estate Tax Mistakes Quiz Component 4: Answer Sheet for Activity 1, Real Estate Tax Mistakes Component 5: Handout 1, What Can You Deduct When You Own a Home? Component 6: Activity 2, What Tax Deductions Mean to the Homeowner Component 7: Handout 2, What’s Your Real Gain? Component 8: Handout 3, A Basis Worksheet Component 9: Handout 4, Improvement vs. Repair Component 10: Activity 3, Name That Tax, or How Fast Can You Calculate Component 11: Answers for Activity 3, Name That Tax, or How Fast Can You Calculate Component 12: Other Resources | Component 4 Answer Sheet for Activity 1: Real Estate Tax Mistakes 1. A seller must buy another home within eighteen months years of the sale to avoid paying taxes on profits from the sale of a principal residence. False. Before the passage of tax reform in 1997, homeowners had to reinvest the gains from the sale of their principal residence within 18 months to delay tax liability. Today, homeowners don't have to reinvest in real estate to avoid tax on capital gains; they may use the proceeds in any way they choose. 2. A homeowner doesn’t have to live in a home at the time it is sold to qualify for the capital-gains exclusion. True. A homeowner must have lived in the home as a principal resident for two years out of the five years preceding the sale to qualify for the capital gains exemptions. But those two years do not have to be immediately prior to the sale. 3. A seller must be over 55 years of age to qualify for an exclusion of capital gains on the sale of a home. False. Before 1997, only homeowners aged 55 and older were eligible to exclude capital gains from their homes from taxation. The exclusion was a one-time exclusion of a gain up to $125,000. Today, a homeowner of any age may be eligible for an exclusion of capital gains once every two years. 4. An owner can deduct the mortgage interest for two residences at a time. True. Mortgage interest and real estate taxes paid on a principal residence and a second home that isn't rented more than a certain number of days a year can be deducted by taxpayers. However, only two homes may qualify for the deduction at any one time and the total amount of the two mortgages cannot exceed $1 million. 5. A homeowner may deduct all money spent on improving a home as expenses in the year the money was spent. False. Money spent on capital improvements to a residence may usually be added to the basis of the home, thereby lowering the realized capital gain when the home is sold. However, expenses may not be deducted against income unless the property is an investment property or the money was spent specifically to make the home ready for sale. Component 5: What Can You Deduct When You Own a Home? > |