Displaying blog entries 11-20 of 101
The decision to purchase a home or investment property is a highly personal one, based on both tangible and intangible factors.
Beyond your personal situation, local market conditions, financing costs, future expectations must also be evaluated.
The following list of quetions can help you decide if you are ready to move forward with a property purchase. It will be my pleasure to assist you sort through these issues and prove essential local market perspectives.
PURCHASING CONSIDERATIONS
What are the total costs of home ownership? These may include:
Do you expect these housing related expenses to increase or decrease? (changes in interest rates may be a bigger factor than others)
What additional expenses are required to complete a purchase? (closing costs, moving expenses, etc)
How much will your home ownership costs decline after adjusting for interest expense deductions and property taxes (if applicable)?
Do you qualify for any special purchasing assistance programs?
What are your long term personal and financial goals with regard to housing and or investments?
Did you know that Hawaii does not have a sales tax? It's true! What most people think is a sales tax actually is a gross receipts tax, Hawaii's general excise tax. This is more than just a case of different names for the same thing; general excise and sales taxes are two completely different types of taxes.
A sales tax is a tax imposed on consumers who purchase goods at retail. Sellers are required to charge and collect sales taxes from consumers, usually a percentage of the retail sales price of an item, and pay the sales tax collected to the state or locality imposing the tax on behalf of the consumer. If a seller fails to collect the sales tax from the buyer, then that seller must pay the tax out of his or her own pocket. The bottom line, however, is that a sales tax is a tax which is imposed on customers, and which retailers are required to collect for the state or locality.
The general excise tax, on the other hand, is a tax levied on gross income (i.e., total business income before any business expenses are deducted) derived from business activity in Hawaii. It is different from sales taxes in two major ways.
First, the general excise tax is imposed on the business instead of on the customer. Rather than merely acting as tax collectors, businesses are themselves taxed on their income. The general excise tax, therefore, is considered to be an expense which businesses incur in the normal course of doing business in Hawaii, along with other expenses such as labor costs, utility bills, supplies, cost of inventory, and the like.
Second, the general excise tax is levied on gross income from almost all types of business activities. These include sales of tangible personal property at both wholesale and retail, services, contracting, commissions, interest, lease or rental activities, and more. The general excise tax rate varies depending on the business activity; it is 0.15% on insurance commissions, 0.5% on certain activities such as wholesaling, and 4% on most activities at the consumer level. The 0.5% and 4% rates are the same rates imposed by the Hawaii use tax. As discussed in Tax Facts No. 95-1,
the use tax is levied on the landed value of tangible personal property imported into Hawaii, and complements the general excise tax by requiring persons importing goods from outside Hawaii to pay the same rate of tax that an in-State seller would have paid in general excise tax had those goods been purchased in Hawaii.
Just had a delicious dinner at Big Wave Cafe in Kihei. The staff are very helpful and friendly and treat one like family (in a good way). I always enjoy my time with them. It would be a good idea to try it out some time.
In a 1031 exchange, the taxpayer must acquire all replacement property by the earlier of the date that is 180 days from the date the relinquished property closes, or the date the taxpayer’s federal income tax return is due, including extensions. This means that for exchanges where the relinquished property closes late in the year, the calendar-year taxpayer may need to get an extension of the tax filing deadline in order to benefit from the full 180-day exchange period.
For example, if the taxpayer is an individual who closes the sale of his relinquished property on December 1, 2011 and he does not get an extension, he will only have until April 17, 2012 to acquire all replacement properties. If he gets an extension, however, he will have until May 30, 2012 to acquire all replacement properties. For corporations on a calendar-year tax basis that close their sale late in the year and do not apply for an extension, they will only have until March 15, 2012 to complete their exchange. Even though the granting of the extension is “automatic” remember that you must still file with the IRS to claim it. (Form 4868 for individuals)
Once a tax return is filed, it cannot be amended to include the exchange or to obtain an extension of time to complete the exchange. If the exchange is incomplete, the sale will need to be reported as a taxable event.
compliments of Anthony Alosi
First American Exchange
A Newsletter For 1031 Tax-Deferred Exchanges
compliments of Anthony Alosi of First American.
On January 1, 2013, a new 3.8% federal tax on some, but not all, investment income will go into effect. The tax is sometimes called a “Medicare Tax” because the proceeds of the tax are earmarked for the Medicare Trust Fund. This tax has the potential to increase taxes for owners who sell their primary residence and investors who sell investment property, so it is important for all owners of real estate and their advisors to have a basic understanding of how the tax will work.
The new tax is an additional 3.8% tax on “unearned income” which is generally defined as interest, dividends, rents and capital gains. The tax is only imposed to the extent the taxpayer’s adjusted gross income (AGI) is higher than $200,000 for an individual or $250,000 for a married couple.
For example, assume that in 2013 you sell investment real estate for $1.2 million and you have a gain (including depreciation recapture and appreciation) of $670,000. Your wages are $315,000 and your AGI (in this case, your wages plus the gain from the sale of the real estate asset) is $985,000.
The tax is computed on the lesser of:
Please note that for purposes of this article, this example is simplified and your situation may be more complicated.
A. Total gain from the sale of real estate: $670,000
B. AGI:
|
Wage income |
$315,000 |
|
Gain from investments |
$670,000 |
|
AGI |
$985,000 |
C. Excess of AGI over $200,000: $785,000
D. Taxable amount is lesser of (A) $670,000 or (C) $785,000.
E. Tax is $25,460, which is computed by multiplying $670,000 by 3.8%.
Please also note that:
The example used in this article was taken from a recent publication by the National Association of REALTORS® (in slightly modified form). The full publication including other examples can be found on NAR’s website at www.realtor.org/healthreform.
Investors and owners of real estate should consult with their advisors to determine whether this tax may affect them. This article does not cover every instance where the tax may be due and First American Exchange cannot give tax or legal advice.
If you are selling your property and would like to set up a tax-deferred exchange, please contact First American Exchange Company.
HARPTA is an acronym for the Hawaii Real Property Tax Law - it is not a tax. Harpta was enacted to provide a means for the state to collect capital gains taxes from absentee owners. Harpta is very similar to laws passed by several other states as well as to a federal law (FIRPTA) that applies to Non-US citizens that sell real estate in Hawaii.
Some absentee owners may be exempt from HARPTA. Speak to your finance person for full information on this withholding at time of sale.
If the collected amount is too high how do you obtain a refund? The owner files a form N-288C after closing. Escrow will normally assist Sellers with this.
HARPTA has the buyer responsible for paying the withholding if appropriate documentation is not provided by the seller. Therefore, escrow will automatically withhold 5% of the sales price unless the seller documents that no such withholding is required.
In places like South Florida, international buyers already account for a whopping 25% of the market. California, Texas and Arizona also attract many foreign buyers, as do Hawaii and New York..........................
Overwhelmingly international buyers pay cash................Indeed, the Senate bill would require buyers to pay cash for the home to qualify for the new "homeowner" VISA. They would also need to pay US taxes and spend at least 180 days a year in the county. they cannot work here or take out home equity loans against the properties. In return, they would get to live here for at least three years...................................
Interesting concept.
Call me at 808-283-3783for information or email me
1. Choose a Realtor Lulu Williams R(B)
2.Prepare your property for selling
3. List your property with Lulu
4. Showings
5. Negotiate offers
6. Open Escrow
C E L E B R A T E
Displaying blog entries 11-20 of 101
