What You Need to Know about Metro Taxing Districts

Metro taxing districts are a part of a property's tax bill and are becoming more and more common in Colorado. Rather than including the costs of infrastructure such as roads and recreation facilities into the price of a newly built home, developers create a separate taxing district so that these expenses can be paid back over time. This keeps the prices of the homes lower, requiring less of a downpayment and creating more opportunities for home ownership.

Property Tax Certificate

The downside of these districts is the potential for unanticipated hikes in future property taxes. One study showed that a typical metro tax district payment increased by about 10% in the first four years. In addition, if houses in the new development are not built and sold as fast as anticipated, the existing homes will foot the bill for more of their share of the expenses. A Denver Post article not long ago cited both successful districts and those being abused, creating a source of revenue for the developer. 

Helpful information for evaluating metro tax districts can be found at the Colorado Division of Local Affairs. One thing to look for is the number of homeowners on the board; the more homeowners, the more likely decisions regarding the neighborhood will be made in the interests of the homeowners. Also, checking on the amount of total debt that can be issued in the future can help potential buyers determine what the worst case scenario for the tax bill would be. Smaller districts with fewer homes should be able to determine with a fair amount of accuracy what the total infrastructure costs will be versus very large developments that build for many years.

Evaluating the metro tax district is an important but confusing part of the home buying process. If you need help, the Colorado Division of Local Affairs should be able to answer questions, as would the tax assessor in the county where the development is built. The existence of a metro tax district is not, in and of itself, something to be feared, but it is important to know what you're getting into.

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I would love to help you with your real estate journey. 

Please contact me at 303-917-7143 or robbin@elevatedrealestate.com

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How Will the Gallagher Amendment Repeal Affect Property Taxes?

I recently attended a webinar explaining the Gallagher Amendment, and how its repeal could potentially affect our property taxes. This hour-long video will also include some information on the federal governments proposed tax policies and 1031 Exchanges for investment properties.

Should you need more resources, don't hesitate to contact me!

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I would love to help you with your real estate journey. 

Please contact me at 303-917-7143 or robbin@elevatedrealestate.com

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Can I Claim the Mortgage Interest Deduction?

Details can be tricky. Double-check yourself with these tax rules affecting home owners.

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I would love to help you with your real estate journey. 

Please contact me at 303-917-7143 or robbin@elevatedrealestate.com

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Louisville Water Rebate for Seniors

Boulder Valley is a great place to live, and the nation knows it. Thanks to word of mouth and Top Ten type lists the population keeps growing, which is driving up house values. That can make affordability a problem for groups like first-time buyers and seniors.

The City of Louisville is aware of this, and is offering a $100 water rebate to seniors who have paid property taxes in 2020 or rent in 2019. Certain qualifications apply - check out the details and apply with the city by November 30, 2020!

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I would love to help you with your real estate journey. 

Please contact me at 303-917-7143 or robbin@elevatedrealestate.com

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Comparing the Candidates: Real Estate Issues

To say that there are strong feelings about this year's election would be an understatement. There's a lot to pay attention to, but let's take just one issue today and break it down. How do Trump and Biden approach housing issues?

Discrimination

• Trump repealed the Affirmatively Furthering Fair Housing Rule, which requires jurisdictions that receive federal housing funds to assess any patterns of discrimination and plan to diminish them. Advocates say that the rule gave HUD the teeth to enforce provisions of the Fair Housing Act of 1968. Trump pursues actions that generally loosen regulations for various industries, and has stated that the AFFHR represents further government encroachment.
• Biden, on the other hand, plans to use legislation to enforce fair housing policy, although he does want to prohibit certain local exclusionary zoning laws. He's interested in creating a Homeowner and Renter Bill of Rights to add more consumer protections in the lending process and housing access.

Affordability

• The AFFHR repeal also broadens the definition of affordable housing and allows jurisdictions more leeway to decide what actions they need to take, if any. HUD Secretary Ben Carson says it will reduce the barriers to compliance for cities and developers. Critics say the subjectivity will scale down efforts to provide affordable housing. Trump's 2017 tax cuts also included incentives for developers to build in "opportunity zones." 
• Like Trump, Biden takes a supply-and-demand approach to housing affordability. He has stated that he would invest $640 billion over the next 10 years to both provide direct financial assistance to consumers and increase support of other initiatives that address efficiency and accessibility.

Taxes

• Trump's tax plan also limited the amount of state and local property taxes that people could deduct on their federal tax returns. The effects of this action were predominately felt in higher priced housing areas such as New York and San Francisco where mortgages regularly exceed the new cap.
• Biden has said, if elected, her will roll back Trump's tax cuts. He has also mentioned enacting a $15,000 tax credit for first-time homebuyers.

Renting

• The administration mandated a 4-month moratorium on evictions for federally assisted properties during the COVID crisis. His most recent order did not extend the moratorium but encouraged landlords to try to find ways to work with tenants to allow them to stay.
• Biden would encourage localities to create "eviction diversion programs" including mediation and payment plans. He would also like to provide tenants facing eviction with legal assistance. He is calling for rental relief for those suffering from the coronavirus.

Homelessness

• Trump has been very vocal in his criticism of the California governor and mayors in their handling of the homelessness crisis in that state. The coronavirus relief packages included nearly $3 billion in homeless assistance funding. 
• Biden is taking a "housing first" strategy to address homelessness, calling for housing funding, vouchers and special programs for certain groups like veterans and the disabled.

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I would love to help you with your real estate journey. 

Please contact me at 303-917-7143 or robbin@elevatedrealestate.com

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The Tax Cuts and Jobs Act Effect on Real Estate

Questions about the new tax plan have been swirling for months. As of this writing, the bill has not been signed by the President but there seems to be no reason why it won't be shortly. If you're a homeowner, or have been thinking about becoming one, here are a few points that might be of interest to you:

• The new bill limits the deduction for the total of state and local property taxes and income or sales taxes to $10,000 for either individual or married couples filing jointly. It also precludes the deduction of 2018 state and local income taxes prepaid in 2017.
• Up until now, homeowners were allowed to deduct the interest paid on their mortgage loans up to $1,000,000. Going forward, the new limit will be $750,000. This probably won't affect the majority of homeowners, though, since existing loans will be grandfathered in at the old levels. Additionally, the median sales price nationally is about one-third of the new limit so only those that purchase in more expensive zip codes will notice a difference. 
• The standard deduction is being doubled to $12,000 for individual filers and $24,000 for joint filers. This is likely to reduce the amount of people who itemize, which could also reduce the impact of the lower mortgage interest deduction limit.
• In the past, the IRS has allowed a deduction for uncompensated casualty and theft losses related to your home or vehicle. Now the deduction can be taken only if the loss is related to a presidentially-declared disaster.
• A deduction was also allowed for moving expenses, should the relocation be job related. That deduction has been eliminated for everyone except for members of the military.
• For developers, the Low-Income Housing Tax Credit has been retained, which allows qualified agencies to issue tax credits for the development of affordable housing around the country. However, a lower corporate rate will devalue the credits in the future and likely contribute to a decrease in low-income housing being developed. 
• The Historic Tax Credit, which provides for the rehabilitation and preservation of aging structures has been retained but modified. Gone is the 10% credit for buildings older than 1936; now the building must be a certified historic structure to receive a 20% credit.
• The final bill increases the amount of eligible qualified property that commercial real estate owners can immediately expense from $500,000 to $1,000,000. While land and buildings do not qualify, improvements to non-residential property do, such as HVAC systems, roofs and security systems. 
• The final bill retains the current law on the capital gains exclusion, Mortgage Credit Certificates, and carried interest compensation and 1031 Exchanges for investors. Homeowners may still deduct interest on their home equity loans as long as the funds are used to substantially improve their property.

I've seen a lot of difference scenarios run and tax liability calculated so far and I have to say that I'm having a hard time keeping the effects of the various changes in my head all at once. This might be a good year to talk to a financial professional to determine how buying a home or investment property will affect your specific situation. If you need a good resource, let me know - between myself and the cooperating agents in my office I've got a great team of experts that can advise you.

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I would love to help you with your real estate journey. 

Please contact me at 303-917-7143 or robbin@stauferteam.com

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Can a 1031 Exchange Help You?

For a lot of people, their home is their most valuable asset.  The long-term appreciation and equity in the property is likely to be their biggest investment, so the IRS allows sellers to exclude $250,000 in gains from the sale of their primary residence from taxes; $500,000 for a couple filing jointly.

For investors who use their properties to generate revenue, this exclusion is not available.  However, the IRS provides another avenue to defer the tax liability for a time by reinvesting the sale proceeds into another like-kind property, called a Section 1031 Exchange.  Business entities can also use this vehicle to protect assets.

The simplest exchange is a simultaneous swap of one property for another.  If the exchange does not happen at the same time, a qualified third party will hold the funds from the sale of the first property until they can be used toward the purchase of another.  Several rules govern this process.

First, the seller must identify, in writing, one to three replacement properties within 45 days of the closing of the sale.  All three properties may be purchased in exchange, or they can be treated as back-up options should one of them become unavailable after identification.  The purchase of the replacement property must be completed within 180 days of the initial sale.

There are other rules related to the value of the replacement homes identified and the percentage of the value that is actually acquired in the final sale.  In addition, if there is still additional money left after the purchase of the replacement property, that gain, or "boot," could be subject to taxation.  It is highly advisable to hire an exchange service to account for all funds and handle this sometimes complex transaction.  These experienced professionals can also help you make long-terms plans regarding the best way to handle or even reduce the deferred tax liability.  If you would like a referral, don't hesitate to contact me.

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I would love to help you with your real estate journey. 

Please contact me at 303-917-7143 or robbin@stauferteam.com

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Just the Facts, Ma'am

Did you hear about cashiers stealing money from people by initiating cash back requests on their cards?
Did you know your stomach will explode if you eat pop rocks and coke together?
Have you heard Obamacare is going to to cost you thousands of dollars in sales tax when you sell your home?

None of the above statements is true.

Well, okay, the last one is partially true, but there has been a lot of exaggeration and inaccurate information circulating out there.  Let's take a look at the details. 

Code Section 1411 of the Patient Protection Affordable Care Act (PPACA) will impose a 3.8% Medicare tax (not a sales tax or a transfer tax) on "unearned" investment income, starting in 2013, including capital gains, dividends, interest and rents minus expenses.  The tax will also apply to some real estate transactions under certain circumstances:

• The tax will be imposed on individuals with adjusted gross income (AGI) over $200,000, or couples filing jointly over $250,000 (about 3% of all American households).
• The tax will be imposed on profits realized over the capital gains thresholds - $250,000 for an individual or $500,000 for a couple.
• The tax applies to the lesser of two amounts: the profit over the capital gains exclusion, or the amount by which the income (increased by the net profit) now exceeds the threshold allowed.

Example:  A married couple has an AGI of $325,000. They purchased a home many years ago for $350,000 and sell it for $900,000, making a profit of $550,000. After excluding $500,000 from their gain of the sale, they are left with $50,000 investment income.  Their AGI is $75,000 over the married threshold amount of $250,000.  The lesser amount of $50,000 would be subject to taxation – at 3.8 percent they would owe $1,900.

 The revenues generated from the tax will be allocated to the Medicare Trust Fund, which is currently on shaky ground.  The thresholds are not indexed for inflation, so as time goes on more people will be impacted, which is a concern for those of us who make a living helping people buy and sell homes.  Regardless, this tax and the debate around it highlights again the importance of doing your homework and talking to experts in the field.  If you find you need clarification on real estate issues, or need help debunking the current urban legend, give me a call.

image:  samantha celera, anja_johnson

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I would love to help you with your real estate journey. 

Please contact me at 303-917-7143 or robbin@stauferteam.com

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