Tax exclusion for real estate
Dear Michael: We want to sell our home and want to take advantage of the equity profit that we have gained over the years as this is not taxable. Our house has been rented out for since Dec. 1 of 2010. When must sell if we want to take advantage of the tax benefit?
Answer: To claim the exclusion, you must meet the ownership and use tests as defined by the IRS.
This means that during the 5-year period ending on the date of the sale, you must have: Owned the home as your primary residence for at least two years, lived in the home as your main home for at least two years of the last five years.
If you have a gain from the sale of your home, you may be able to exclude up to $250,000 if single or $500,000 on a joint return. In your case in order for you to take advantage of this tax benefit you must close escrow on or before Nov. 30 to be eligible for the exemption.
Dear Michael: We are buying a new home. The seller asked if he can store his belongings in the garage for a period of 2 weeks after the close of escrow. We don’t mind if she does but would like to know if there is any risk involved.
Answer: if you don’t need the garage and you trust that your seller will move her belongings out 2 weeks after the home is sold to you, then I don’t see any problems with allowing it.
Make sure that the terms are outlined in writing and that the move out date is also indicated. You may also charge a refundable deposit if you are worried that he seller will not have his belongings out of the garage on time.
Dear Michael: If I become the owner of a home property by a quick deed, am I responsible for any delinquent taxes?
Answer: That would most likely depend on where the property is located but the most common answer to that question is yes.
Property taxes, mortgages, liens, and some other encumbrances are tied directly to the property, not the person that owns it. For instance, the IRS has the right to place a tax lien on your property if you are delinquent on your taxes.
That lien is then attached to the property. If you quit claim your home to your sibling, then the lien follows the property and your sibling will have to pay that tax lien off when he/she sell the property.
Some good advice is to never obtain a property without first doing some research on it. At the very least, check the taxing authority, water, sewer, and any other entity that may have the right to lien the property.
This will give you a general idea if there of the properties status. However, there may also be judgments and other liens attached to the property that you can’t find on your own and they will become a problem for you.
They may not be your judgments but they will become your problem when you attempt to sell the property or get a mortgage on it. It is highly advisable that you have a title company do a complete title search on the property before you have it deeded to you.
Michael Kayem is a Realtor with Re/max estate Properties serving Culver City and the Westside since 2001. You can contact Michael with your questions at 310-390-3337 or email them to him at: homes@agentmichael.com
