© 2012 Cengage Learning. Taxes and Assessments Chapter 14.


Taxes and AssessmentsChapter 14


In This Chapter

You will be introduced to ad valorem taxes and various types of property assessments.


Property Taxes Ad valorem taxes = according to value Source of income for local government Appropriation Tax district appraisers all taxable property Assessment by appraisal district Tax rate calculation

Dollars per hundred


Expressing Property Tax Rates


Other Taxing Matters Unpaid property taxes Assessment appeal Property tax exemption Property tax variations Special assessments Tax Limitation Measures


Special Assessments AN IMPROVEMENT DISTRICT TEXAS HOMESTEAD EXEMPTION BOND ISSUES APPORTIONMENT


Federal Income TaxBasis is the price originally paid for the home plus any fees paid for closing and improvements.


Capital Gains To calculate the gain you must take the sale

price and subtract the selling expenses; then subtract the basis to determine the gain.

Amount realized – selling price of home less sales expense.


Long Term Capital Gain Holding period longer than 1 year Tax rate


Calculation of Gain


Adjusted Sales Price

Selling price of old home

Less selling expenses

Less fix-up costs

Equals adjusted sales price

$250,000

-18,000

-7,000

$225,000


TAXES ON SALE OF A RESIDENCE A taxpayer can exclude $250,000 of gain from the sale

of the taxpayer’s principal residence. If the taxpayer is married, there is a $500,000 exclusion

for married individuals filing jointly, if: either spouse meets the ownership test, both spouses meet the use test and the taxpayer has resided

there for at least two of the past five years, a husband and wife file a joint return in the year of sale or

exchange, and neither spouse is ineligible for exclusion by virtue of sale or

exchange of the residence within the last two years.


Income Tax Exclusion

Sale of principal residence Occupied for 2 out of the last 5 years Married – exclude up to $500,000 gain Single – exclude up to $250,000 gain


Agent’s Liability for Tax Advice A real estate practitioner must be aware of

tax laws that affect the properties the practitioner is handling. A real estate agent has a responsibility to alert clients to potential tax consequences, liabilities, and advantages whether they ask for it or not. Lastly, an agent is responsible for the quality and accuracy of tax information given out by the agent.


Key Terms Adjusted sales price Ad valorem taxes Appraisal Review

Board Assessed value

Basis Gain Installment method Mill rate Tax lien

© 2012 Cengage Learning. Taxes and Assessments Chapter 14.

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Transcript of © 2012 Cengage Learning. Taxes and Assessments Chapter 14.