I recently heard someone say they were leaving California because they were afraid of being forced to build an ADU (Accessory Dwelling Unit). Which, I think it's safe to say, we all watch too
Real Estate And Taxes
Dated: March 13 2023
When we talk about taxes and home ownership, we always want to direct you to a tax professional who knows our state and federal tax laws better than we do. This is just meant to be an overview. Also, you may have heard that this year, depending on where you live in California, you may have extra time to file your income tax returns. But if you are getting a refund, you may not want to wait.
We usually think about income tax this time of year, but owning a home has other tax implications. Real estate taxes generally fall into two main categories, property tax and capital gains tax. No one likes to pay taxes under any circumstances, but concerns about these two forms of tax can also have a dampening effect on the real estate market by limiting some sellers’ interest in selling, occasionally leaving homes vacant rather than changing hands.
Property tax laws in California are significantly influenced by Proposition 13, which was designed to keep property taxes from increasing too rapidly by limiting the increase in the assessed value of your home. Prior to certain new propositions, this affected some homeowners' decision to sell. Now, homeowners that reach a certain age have more tools available to them to sell and buy replacement properties and transfer their lower property tax base to a new home. This has also served to loosen up the housing market by allowing older homeowners to sell/buy and move, making room for new buyers.
Capital gains tax is another reason for some homeowners to not want to sell their home. If a property has been owned for a long time there can be great capital gains and even with standard deductions, a significant tax burden as much as 25% and higher depending on an individual’s situation. Currently a deduction of $250k per owner may save a home seller from this expense. There are rumblings in Congress to increase that deduction after being at $250k for a long time.
Lastly, you may be able to deduct some of your mortgage interest and property tax on your income tax returns. There are limits however, and not everyone can take these deductions.
If you have questions about home ownership deductions or other ways that the purchase or sale of a home affects your tax liability, we encourage you to contact a local tax professional. If you need an introduction to a tax professional, please contact us.
Email: email@example.comHutchens Hamalian Properties Group is one of Dudum Real Estate's top Lamorinda teams. The Lafayette-based partnership focuses on real estate services in central Contra C....