Home Qualifying for Exclusion of Gain
Updated September 20, 2021
Does Your Home Sale Qualify for the Exclusion of Gain?
The tax code recognizes the importance of home ownership by allowing you to exclude gain when you sell your main home. To qualify for the maximum exclusion of gain ($250,000 or $500,000 if married filing jointly), you must meet the Eligibility Test.
The Eligibility Test determines whether you are eligible for the maximum exclusion of gain ($250,000 or $500,000 if married filing jointly).
Automatic Disqualification - Determine whether any of the automatic disqualifications apply. Your home sale isn’t eligible for the exclusion if ANY of the following are true.
• You acquired the property through a like-kind ex- change (1031 exchange), during the past 5 years.
• You are subject to expatriate tax. For more information about expatriate tax, see chapter 4 of Pub. 519, U.S. Tax Guide for Aliens.
Find Your Exclusion Limit
Status: Married filing jointly - Maximum exclusion $500,000
Both spouses meet the residence and look-back requirements and one or both spouses meet the ownership requirement.
Status: Single, married filing separately - Maximum exclusion $250,000
You meet the residence, ownership, and look-back requirements.
Status: Widowed - Maximum exclusion $500,000
1. You sell your home within 2 years of the death of your spouse.
2. You haven't remarried at the time of the sale.
3. Neither you nor your late spouse took the exclusion on another home sold less than 2 years before the date of the current home sale.
4. You meet the 2-year ownership and residence requirements (including your late spouse's times of ownership and residence if need be).ore details.
Certain events during your ownership, such as use of your home for business purposes or making improvements to it, can affect your gain or loss.
Source: IRS.gov/Help in frequently asked questions on Capital Gains, Losses, and Sale of Home to help you get answers to some of the most common tax question. Consult your tax advisor/CPA or more details.
Zillow Estimate: How Accurate Is It?
Updated August 2, 2021
Zillow is one of the most popular real estate databases online. Founded in 2006 by former Microsoft executives Rich Barton and Lloyd Frink, Seattle-based Zillow lists information about millions of homes for sale and rent across the United States and Canada. Users can search for a home in a particular area using different criteria including—but not limited to—prices, number of bedrooms and bathrooms, square footage, type of home, and other amenities.
One of Zillow’s key features is its Zestimates, a popular consumer tool for seeing how much homes are worth. These estimates are based on information from sources such as comparable sales and public data. Launched in 2011 with information about 90 million homes, Zestimates has expanded its reach, providing users with data about more than 100 million homes across the United States.
Whether you're looking to see how much your home’s value has changed, if your home’s appraised value is high enough to let you refinance, or curious about how much your coworker spent on his new house, Zestimates offers users a starting point in home valuation.
But there are several reasons these numbers may not be as accurate as you’d like them to be.
- Zillow's Zestimates allows users to see how much homes are worth.
- Figures are based on information from sources like comparable sales and public data.
- Zestimates are only as accurate as the data behind them, meaning they may be outdated or incorrect.
- There may be mistakes in property taxes paid or tax assessments, and Zestimates may not include any upgrades or improvements made by homeowners.
- Zillow also accounts for turnover rate, so an area where people keep their homes for longer periods of time may not be as accurate.
Inaccurate Basic Information
Zillow’s unique algorithms update its collection of property values multiple times a week, based on information from both public data and user-submitted data. According to Zillow, the nationwide median error rate for the Zestimate for on-market homes is 1.9%, while the Zestimate for off-market homes has a median error rate of 6.9%.3 But Zestimates are only as accurate as the data behind them, so if the number of bedrooms or bathrooms in a home, its square footage, or its lot size are inaccurate on Zillow, the Zestimate will be off.
The Bottom Line
Zillow isn’t trying to hide the imperfections of its Zestimates from consumers, and you can’t expect perfectly accurate estimates from competing sites, either. The point is for homeowners to use prices from Zestimates as a broad guideline, and contrast these figures against other sources. It should not, in any way, be considered an appraisal. A comparable market analysis from a local real estate agent and a professional appraisal of the home are the best ways to learn its value.
Extension of CA Eviction Protections
Updated June 29, 2021
California tenants will be protected from evictions for another three months, and those with low incomes will have all of their past-due rent paid by the state, under a bill signed Monday by Gov. Gavin Newsom in response to the COVID-19 pandemic.
The governor acted just hours after both houses of the Legislature approved the bill extending the eviction protections through Sept. 30.
"California will significantly increase cash assistance to low-income tenants and small landlords under the state’s $5.2 billion rent relief program, making it the largest and most comprehensive COVID rental protection and rent relief program of any state in the nation," said a statement by Newsom's office.
Landlords and tenants can apply immediately for the expanded rent relief.
In addition to prohibiting eviction of tenants who pay at least 25% of their rent for another three months, the new measure blocks landlords from getting a court order for eviction before giving tenants a chance to apply for rent relief through March 2022.
For more information, visit https://www.gov.ca.gov/2021
Wealth Builder with Suze Orman
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on June 17, 2021
Capital Gains Tax on Real Estate
Updated February 22, 2021
How Much Is Capital Gains Tax on Real Estate?
Capital gains tax is the income tax you pay on gains from selling capital assets—including real estate. So if you have sold or are selling a house, what does this mean for you?
If you sell your home for more than what you paid for it, that's good news. The downside, however, is that you probably have a capital gain. And you may have to pay taxes on your capital gain in the form of capital gains tax.
What is capital gains tax—and who pays it?
In a nutshell, capital gains tax is a tax levied on possessions and property—including your home—that you sell for a profit.
If you sell it in one year or less, you have a short-term capital gain.
If you sell the home after you hold it for longer than one year, you have a long-term capital gain. Unlike short-term gains, long-term gains are subject to preferential capital gains tax rates.
What about the primary residence tax exemption?
The IRS gives each person, no matter how much that person earns, a $250,000 tax-free exemption on capital gains from a primary residence. You can exclude this capital gain from your income permanently. You do have to meet specific requirements to claim this capital gains exemption:
- The home must be your primary residence.
- You must have owned it for at least two years.
- You must have lived in it for at least two of the past five years.
- You cannot have taken this exclusion in the past two years.
If you don't meet all of these requirements, you may be able to take a partial exclusion for capital gains tax if you meet certain exceptions (e.g., if your job forces you to move before you live in the home two years). For more information, consult a tax adviser.
Do home improvements reduce tax on capital gains?
You can also reduce the amount of capital gains subject to capital gains tax by the cost of home improvements you've made. You can add the amount of money you spent on any home improvements—such as replacing the roof, building a deck, replacing the flooring, or finishing a basement—to the initial price of your home to give you the adjusted cost basis. The higher your adjusted cost basis, the lower your capital gain when you sell the home.
How to avoid capital gains tax as a real estate investor
If the home you're selling is not your primary residence but rather an investment property you've flipped or rented out, avoiding capital gains tax is a bit more complicated. But it's still possible. The best way to avoid a capital gains tax if you're an investor is by swapping "like-kind" properties with a 1031 exchange. This allows you to sell your property and buy another one without recognizing any potential gain in the tax year of sale.
If you’re opting out of the rental property investment business and putting your money in another venture that does not qualify for the 1031 exchange, then you’ll owe the capital gains tax on the profit.
For more information on how real estate tax may affect your current situation, please consult a tax advisor or tax attorney.
Food Drive February 9-28, 2021
|Join the Coldwell Banker charity drive and provide nutritious food to those facing hunger.|
|Participants agree that by participating, you hereby grant Realogy Brokerage Group LLC the right to use your name and photo in promotional materials. Affiliated real estate agents are independent contractor sales associates, not employees. ©2021 Coldwell Banker. All Rights Reserved. Coldwell Banker and the Coldwell Banker logos are trademarks of Coldwell Banker Real Estate LLC. The Coldwell Banker® System is comprised of company owned offices which are owned by a subsidiary of Realogy Brokerage Group LLC and franchised offices which are independently owned and operated. The Coldwell Banker System fully supports the principles of the Fair Housing Act and the Equal Opportunity Act. 21AUY3_SFPEN_1/21 CalRE #01908304|
Understanding Proposition 19
On November 3, 2020, California voters approved Proposition 19, titled the Home Protection for Seniors, Severely Disabled, Families and Victims of Wildfire or Natural Disasters Act. Proposition 19 is a constitutional amendment that has several different provisions affecting different parties, including wildfire victims and severely disabled people, seniors looking to relocate within California, and children or grandchildren who will eventually inherit property.
Current law allows a primary home to be transferred – by sale, gift or inheritance - between parents and children, and between grandparents and grandchildren, without reassessment, and other types of properties, such as a vacation home, rental or commercial property, to be transferred with the first $1 million exempt from re-assessment. Under Proposition 19, these tax breaks will be limited with fewer tax savings opportunities.
Proposition 19 will allow homeowners who are over 55 years of age, disabled, or victims of a wildfire or natural disaster to sell their primary residence and transfer its assessed value to a replacement primary residence in any county in California up to three times.
The new law will:
- Replace Proposition 58(1986) and Proposition 193(1996) by eliminating parent-and-child transfer and grandparent-to-grandchild transfer exemptions unless it is the child’s or grandchild’s primary residence.
- Effective 2/16/2021
- Replace Proposition 60(1986) and Proposition 90 (1988) programs for home transfer by seniors and severely disabled persons.
- Effective 4/1/2021
For more information on how this proposition may affect your current situation, please consult the State Board of Equalization’s website and/or legal counsel.
November 10-29, 2020
|Join Coldwell Banker in celebrating the spirit of the season.|
|Participants agree that by participating, you hereby grant Realogy Brokerage Group LLC the right to use your name and photo in promotional materials. Affiliated real estate agents are independent contractor sales associates, not employees. ©2020 Coldwell Banker. All Rights Reserved. Coldwell Banker and the Coldwell Banker logos are trademarks of Coldwell Banker Real Estate LLC. The Coldwell Banker® System is comprised of company owned offices which are owned by a subsidiary of Realogy Brokerage Group LLC and franchised offices which are independently owned and operated. The Coldwell Banker System fully supports the principles of the Fair Housing Act and the Equal Opportunity Act. 206HWA_SFPEN_10/20 CalRE #01908304|
September 8-30, 2020
|Help support Coldwell Banker's Homes for Dogs Project.|
|Participants agree that by participating, you hereby grant Realogy Brokerage Group LLC the right to use your name and photo in promotional materials. Affiliated real estate agents are independent contractor sales associates, not employees. ©2020 Coldwell Banker. All Rights Reserved. Coldwell Banker and the Coldwell Banker logos are trademarks of Coldwell Banker Real Estate LLC. The Coldwell Banker® System is comprised of company owned offices which are owned by a subsidiary of Realogy Brokerage Group LLC and franchised offices which are independently owned and operated. The Coldwell Banker System fully supports the principles of the Fair Housing Act and the Equal Opportunity Act. 202XSK_SFPen_8/20 CalRE #01908304|
What is Credit Freeze and Credit Lock?
Updated July 9, 2020
What is a Credit Freeze?
A credit freeze prevents access to your credit report and can help protect you from identity theft. By law, you can request a credit freeze, also known as a security freeze, at no cost from all three major credit bureaus: Experian®, Equifax®, and TransUnion®. When you request a security freeze on your credit report from one of the bureaus via phone or email, you receive a personal identification number (PIN) or password for future "unfreezing." Credit freezes can also be requested for children under the age of 16. When you place a freeze, the bureaus must complete your request within 24 hours.
To lift the freeze and allow potential lenders to access your credit report, you will need to use the PIN or password provided to you. If you don't have the PIN, you will be required to supply additional verification to process your request. You must contact all three separately to initiate a freeze. When you request a credit freeze lift via phone, your request must be lifted within one hour.
What is a Credit Lock?
The main similarity between a credit lock and a credit freeze is restricted access to your credit report. However, credit lock, a service offered by the three major credit bureaus, allows you to instantly lock and unlock your file so you can control who can access it.
The most beneficial factor of a credit lock is that you can coordinate with lenders, such as banks, auto dealers, and retail card lenders to grant access to your credit score to process applications. When the process is complete, you can immediately turn off access
Who Can Still See My Credit Report?
It's important to know that although access to your credit file is blocked for new loan and credit applications with both a credit lock and credit freeze, certain entities are still able to check your file, including:
- Creditors you have an established relationship with
- Landlords or rental agencies conducting background checks
- Utility and phone companies
- Debt collection agencies seeking payments
- Child support agencies looking to set child support amounts
- Lenders and credit companies who have prescreened credit offers for you
- Insurance underwriters who have your permission to act on your behalf
- Potential employers acting with your permission
- Government entities operating according to court orders or warrant
When Should I Lock My Credit?
If you know or suspect that your Social Security number or other information that uniquely identifies you (personally identifiable information) has been compromised in a data breach, you should consider locking or freezing your credit. You may prefer credit lock to a credit freeze if you plan to apply for loans or credit cards and want the ability to block and give access to your credit files in real-time.
SBA’s Economic Injury Disaster Loans
Updated June 15, 2020
SBA’s Economic Injury Disaster Loans and Advance Program Reopened to All Eligible Small Businesses and Non-Profits Impacted by COVID-19 Pandemic
To further meet the needs of U.S. small businesses and non-profits, the U.S. Small Business Administration reopened the Economic Injury Disaster Loan (EIDL) and EIDL Advance program portal to all eligible applicants experiencing economic impacts due to COVID-19 today.
“The SBA is strongly committed to working around the clock, providing dedicated emergency assistance to the small businesses and non-profits that are facing economic disruption due to the COVID-19 impact. With the reopening of the EIDL assistance and EIDL Advance application portal to all new applicants, additional small businesses and non-profits will be able to receive these long-term, low interest loans and emergency grants – reducing the economic impacts for their businesses, employees and communities they support,” said SBA Administrator Jovita Carranza. “Since EIDL assistance due to the pandemic first became available to small businesses located in every state and territory, SBA has worked to provide the greatest amount of emergency economic relief possible. To meet the unprecedented need, the SBA has made numerous improvements to the application and loan closing process, including deploying new technology and automated tools.”
SBA’s EIDL program offers long-term, low interest assistance for a small business or non-profit. These loans can provide vital economic support to help alleviate temporary loss of revenue. EIDL assistance can be used to cover payroll and inventory, pay debt or fund other expenses. Additionally, the EIDL Advance will provide up to $10,000 ($1,000 per employee) of emergency economic relief to businesses that are currently experiencing temporary difficulties, and these emergency grants do not have to be repaid.
Covid-19 in CA
Updated May 6, 2020
Find a Testing Site
Governor Newsom announced a new website to help Californians find a testing site near them.
- Stay home
- Avoid people outside your household
- Wash hands with soap and water for at least 20 seconds
- Cover your cough or sneeze with a tissue
- Clean and disinfect frequently touched objects and surfaces
- Maintain a safe social distance of 6 feet whenever outside of the house
- Wear a cloth face covering if you go outside
- Leave the house except for essential activities
- Shake hands
- Touch your face
- Go to doctor unless you call first
- Stockpile masks or gloves
Real Estate - Virtual Showings Only
Updated April 21, 2020
SAN FRANCISCO UPDATE ON REALTOR® GUIDANCE - VIRTUAL SHOWINGS ONLY
The Existing Order Continues To Prohibit Most In-Person Showings:
For any questions, it is strongly recommended you consult your broker/manager or legal counsel. The above is general information and may not be applicable to every specific property or situation.
1031 Extensions Granted!
Important 1031 information regarding IRS extended deadlines
The IRS issued Notice 2020-23, extending a variety of deadlines, including 1031 deadlines. Although the Notice is confusing, because it is not written like the typical Disaster Relief Notices, this Notice extends any 45-day or 180-day deadline that occurs between April 1 and July 14, to July 15, 2020.
We are working with other real estate professionals to convince the IRS to change the start date from April 1st to January 20th so that the extensions apply to more taxpayers.
Please note that this is different from the usual disaster extension that provides for an extra 120 days.
Here are two examples to illustrate the current extension.
- Example 1: Exchange began April 1, 2020. 45th day is May 16, which would be extended to July 15, 2020. Taxpayer must still close on replacement property by Sept 28, which is the 180th day; because Sept 28 is after the last day of the disaster period (July 15).
- Example 2: Exchange began Dec 31, 2019, 45th day is Feb 14, 2020. ID period is not extended because it is before April 1. The 180th day is June 28, which would be extended to July 15, 2020.
As always, exchangers should speak with their tax advisors to determine if they are eligible for an extension.
This remains a fluid situation and we will provide any clarification or changes that the IRS issues, if any.
IRS Disaster Relief Updates
THE STIMULUS BILL
Updated April 13, 2020
THE STIMULUS BILL: WHAT YOU NEED TO KNOW
The recently passed $2 trillion Coronavirus Aid, Relief and Economic Security (CARES) Act is 800 pages long. If you’re like me, your head is swimming with all the details floating around and trying to figure out what all of this means to you and your family. Hopefully, this will shed some light.
Housing Provisions – The act allows for mortgage forbearance for borrowers of government-backed mortgages and owners of multifamily properties, and places a moratorium on eviction filings and fees/penalties for tenants for rent nonpayment for properties backed by HUD. There are also provisions for rental assistance for seniors, the disabled and low-income working families, and more. Visit the link below for more details.
How Much Would I Get – Single individuals would receive a one-time payment of $1,200 and married couples would receive $2,400. In addition, parents would receive $500 for each child under 17. Payments start phasing out for individuals making more than $75,000, and those making more than $99,000 would not qualify at all. According to the Treasury Secretary, most payments would be received via direct deposit sometime in mid-April.
For Those Who Have Lost a Job – In addition to state unemployment benefits, which vary by state, the
federal government would give jobless workers an additional $600 a week for up to four months. The act also includes a pandemic unemployment assistance program that provides jobless benefits to those partially unemployed, self-employed and others affected by the virus who don’t qualify for traditional benefits.
Help For Small Businesses – Under the stimulus package, the Small Business Association will oversee the Paycheck Protection Program, which will distribute $350 billion to small businesses that can be partially
forgiven if the companies meet certain requirements. The loans will be available to companies with 500 or fewer employees.
Student Loan Payments – The Department of Education would suspend payments on student loan borrowers without penalty through September 30.
For more information on the act, click here. I hope that you and your family stay well during these challenging times. If you need someone to talk to – whether it’s about real estate, the news or your favorite new binge watch – I am always here for you. We’re all in this together!
Real Estate is Essential
|Providing exceptional real estate service has always been my top priority, but right now, it's the health and safety of my clients, family, friends, and our community as a whole. At Coldwell Banker ®, we already have a very strong digital platform in place, so I am well-equipped to serve my clients virtually, even during these challenging times.
While our country, and in fact, the entire world faces this challenging situation, Coldwell Banker is prepared and ready to continue to help you reach your real estate goals. Please contact me today if you have any questions or would like to discuss selling or purchasing a property.
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