Oct 31

Home Appreciation and Capital Gains

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The last seven years has seen tremendous appreciation in home prices. This brings up the issue of home capital gains tax issues for people when they sell.

Home Appreciation and Capital Gains

Owning home is considered part of the American Dream. Unless you are extremely unlucky, homeownership leads to tremendous wealth building. You simply sit in your home, make the monthly payment and reap the benefits of appreciation and increased equity. A bit of the luster, however, can be lost when it comes time to sell.

Capital gains taxes are the problem. The federal government encourages homeownership, but also wants a chunk of a change when you sell. The capital gains tax is a percentage of the profit you have realized from the home, to wit, the difference between the price you purchased it at and the price it is sold. You can deduct mortgage costs, improvements and so on, but there is still the tax.

Fortunately, there are some large safe harbor exemptions to the home capital gains tax. If you are single, you can exclude the first $250,000 in profit from being taxed. If you are married and filing jointly, you can merge your individual exemptions and protect the first $500,000 from being taxed. In most parts of the country, these exemptions will completely protect you from home capital gains tax. Even if they dont, the tax savings should be substantial.

To claim the exemptions, you must meet a few requirements. Obviously, you have to actually own the home. You must also have lived in the home two out of the previous five years. It must have been two years since you tried to claim the exemption on any other home. Put another way, you cannot claim the exemptions for investment property or second homes. Still, these healthy exemptions are a windfall for most homeowners.

Americans are notorious for being horrific savers when it comes to financial planning. Homeownership provides a relatively straightforward savings method and the government promotes it as such by providing these large home capital gains tax exemptions. If you can pull it off, buying a home is one of the smartest moves you will ever make.

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Aug 20

Title:

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Title:
Change in Capital Gains

Word Count:
527

Summary:
If you own a property which you are planning to sell, be sure to consult a tax advisor or get informed about tax law before doing so. Many real estate agents also know the subtleties of property selling and taxation. Several small points can make the difference between having to pay capital gains tax or not.

Keywords:
real estate investing, selling property, selling real estate, capital gains

Article Body:
If you own a property which you are planning to sell, be sure to consult a tax advisor or get informed about tax law before doing so. Many real estate agents also know the subtleties of property selling and taxation. Several small points can make the difference between having to pay capital gains tax or not.

Capital gains is something that not many of us worry about because we only have the one home which is often only sold in order to buy another property. Usually the next property will cost more money and will be a like-kind property so the question of capital gains tax never arises.

However, until now, there has been a little known tax clause which had taxed the most unsuspecting of people with capital gains. These people are newly widowed women, who suddenly find that they will now be taxed as a single woman. On top of losing a spouse, they also had to worry about losing a large chunk of their assets in the form of money from the sale of their family home.

When a home is sold, it has usually been the property of joint owners (most commonly husband and wife) and each owner is allowed to claim $250,000. This means that, for tax purposes, the average couple can exclude up to $500,000 of gain – provided that they have used the house as a principal residence for a cumulative two of the previous five years.

In most cases, being able to ‘write off’ a $500,000 profit margin means most of us are not concerned with capital gains tax.

But what happens when a spouse suddenly dies? The capital gains or the profit allowed on the sale of the house is now only one person’s allowance of $250,000. If you and your husband were married in the 1940s and lived all your life in the same house, then death of one of the spouses would incur heavy taxes on the sale of the property.

The IRS has just stepped in to change this situation, but with all the mortgage rate controversy, it has slipped by almost unnoticed.

Until now, the only way to qualify for the full $500,000 capital gains allowance was to sell your home in the same year in which your spouse died. In other words, it would be the last year that you could file a tax return as a married person, so it would be the last year that any taxation could be applied to the married -deceased- spouse.

Apart from the shock of losing a spouse and thinking about selling your home all in the same time period – what happens if your spouse dies in November? You have one month to get your act together!

Theoretically, most husbands or wives inherit their spouse’s share of the property at what is called a ’stepped-up’ tax basis, but now that the IRS has introduced new legislation for the spousal death situation, everyone can breathe more easily.

The new change in the law, introduced at the end of 2007, now gives surviving spouses a full two years to claim the “double” allowance of $500,00 on capital gains, even though, by law, they are now single.

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Nov 21

Will Your Business Benefit From Venture Capital?

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Not all businesses can attract venture capital. Venture capital is provided by a firm of professional investors that are generally seeking high growth business opportunities to invest in. They provide funds to help you grow your business but in return they often want shares in the business.

If you have a brilliant idea that has huge growth potential and are struggling to raise money through the normal channels then this route might be ideal for you. Be prepared to give away a large chunk of your business and remember that most venture capitalists will also want a say in how your business is run!

This method of raising funds is also a great way to get some fresh minds looking at your business idea. Venture capital investment companies have been investing in great ideas for many years and know how to turn great concepts into reality.

Do not approach a venture capital company if all you are seeking is money to clear your existing debts. They will not be interested! They are also not interested in providing funds so that you can buy your dream car or luxury house.

They are in the business of providing funds so that they can make money for themselves with the funds they provide you to assist your growth. Got the idea?

A well researched and carefully crafted business plan will definitely help you. How are you going to use their money? They will want to see it being used for growth, sales, marketing and creating value for them. They will not be happy if you use their funds to make a beautiful office! Remove any expenses that are not critical for growth and show them how you can generate profits and a return from their investment.

When a venture capitalist firm looks at your idea, they are also examining you. Millions of people have great ideas and to be honest, the majority of these people do not have a clue how to execute a plan.

If they like your idea, then they will want to get to know you in detail. What are your work ethics like? Why should they back you over the hundreds of other people that are competing with you for their money? Remember that they are most likely to be seeking a brilliant person with a great idea that can deliver them a “home run.”

It also costs a lot of time and money presenting your idea to venture capitalists! They do not give anybody any money at the first meeting. In fact they might even meet you a dozen times only to completely reject your idea at the end! Be prepared for this and possibly try out your business plan with a more than one firm at the same time.

The costs will not be that much greater to present your case to two different companies at the same time! Remember that you are also dealing with personalities and one wrong word and they will kick you out before you can count to ten. I never said that it was going to be easy, did I?

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