Wednesday, January 31, 2007

Californian's Get a Break in 2007

Among new laws taking effect for investment property sales after January 1, 2007 , this one gives a break to most real estate investment property sellers.

Here's an excerp from a San Francisco newpaper article:

-- Lower withholding on property sales: If you sell any type of real estate other than your primary residence for more than $100,000 in California, the escrow company is usually required to withhold part of the proceeds for state taxes.

The old withholding rate was 3.33 percent of the sales price.

"Many times that resulted in over-withholding," says Denise Azimi, a spokeswoman for the California Franchise Tax Board. Sellers had to wait until they filed their return to recoup the excess tax.

Now you have a choice: You can request withholding at the old rate or an amount equal to your estimated capital gain, taxed at your marginal state-tax rate, which for most individuals is 9.3 percent.

If you sold a $1 million property with a $100,000 capital gain, under the old law your withholding would have been $33,333. Under the new option, it would be $9,300, assuming a 9.3 percent tax rate.

The new law applies to property sold starting this year.


This is especially important to sellers with a high selling price and fairly small gain. I've had client's tell me nightmare stories about having to take out home equity loans to cover the franchise tax!

We here in California will gladly take any new tax breaks we can get!

Paula Straub

Questionnaire to find out if you qualify to save thousands in Capital Gains Tax

Monday, January 29, 2007

Time to Sell Florida Investment Property?

Hi All,

I've been getting a ton of calls from Florida property owners lately. There is a very good reason for this.

Three things have happened in the Florida real estate market in recent years.

First, property values have increased dramatically. That's good news, of course.

Second, property is being reassessed for the higher values and property taxes are increasing rapidly. Not so good...

Third, due to the recent hurricanes, homeowner's insurance is either being canceled or has become so cost prohibitive that many people can no longer afford it. Again, not good for owners.

My parents live in Florida on a fixed income. They own their home outright, so have the option of not having home owner's insurance. Their carrier is pulling out of the Florida market completely. The 'replacement' carrier is almost tripling the premiums and increasing the deductible. They have decided to take their chances and go without.

For those with mortgages, this is not an option. Most lenders require you carry insurance.

So, now many retirees are finding they can no longer afford to remain in Florida. They are selling their homes and moving to places like the Carolina's and Georgia. Those with second homes are also selling.

Their residences have often appreciated and the sellers will face capital gains issues.

Also, many people own rental properties in Florida. What used to generate a decent income for them, now barely turn a profit. With the tax and insurance increases, the rent profit is diminished considerably. Rents cannot be raised enough to offset the expenses.

Here also there will be a capital gains tax problem on sale.

There are ways to minimize this burden. If you are selling Florida property or know someone in this situation, fill out a questionnaire or call me at 760-917-0858. I can help.

Paula Straub

ps. Check out the new Beginner's Guide to Saving Capital Gains Tax