Archive for March, 2016

4 Misconceptions About Capital Gains And Your Brooklyn Home Sale

Wednesday, March 30th, 2016
Capital gains

It’s tax time. Don’t let the dreaded capital gains tax cause you dread. Learn more about it right here!

Your taxes are due. April 15th is just two weeks away. Are you ready? If you sold your Brooklyn home last year, there are a few things you should know about capital gains and your home sale.

High-fives to you! You made a positive financial move in 2015 and walked away with a profit on your Brooklyn home sale. Now it’s tax time and the dreaded capital gains tax threatens to burst your bubble of excitement. Maybe this will help.

What are capital gains?

According to nystax.net, capital gains are the profits that occur as a result of the difference between selling and purchasing price, on which sellers of a primary residence are taxed.

First, know this. The rules aren’t as rigid as they used to be, and there are plenty of exceptions and loopholes you should be aware of. Second, talk with your accountant in Brooklyn, and ask these important tax questions to help avoid any confusion on April 15.  See 10 Money-Saving Tax Questions Sellers Need to Ask.

Knowledge is power. Learning about capital gains on a positive home sale in Brooklyn will save you money. On that note, let’s break down 4 misconceptions you may have about capital gains and your Brooklyn home sale.

  1. All Brooklyn home sales are not treated equally

Flipper and homeowner sales are taxed differently. A homeowner who has uses their home as their primary residence for two out of the five years before it is sold will receive better tax treatment on their home sale profit. A flipper doesn’t usually use a home as a primary residence for two out of the five years before it is sold, so profit on the sale is taxed as capital gains. If you happen to flip houses regularly, your home purchases are inventory, not capital assets. The profit from these home sales are taxed as income. For most people, long-term capital gains tax is 15%, but if you happen to be in the top tax brackets, it is 20%. But, if the profits earned are considered taxable income, tax rates could range between 10% and 39.6% depending on the rest of your income. Homeowners can avoid the tax by rolling profits over into the next home they purchase. Those who flip houses can’t.

  1. What matters if you’re married or single

Thankfully, the once-in-a-lifetime tax exemption of $125,000, was done away with by the Taxpayer Relief Act, but limits still exist for claiming tax exemptions. If you’re married, you can claim a tax-free exemption up to $500,000 from the sale of each home. If you’re single, you can claim a tax-free exemption up to $250,000 from the sale of each home. Claiming this tax-free exemption can get a bit sticky for newly married couples though. Let’s say one person owned a house for two years before it sold, and his or her partner was added to the title for two months prior to the sale. That works. But, both the bride and groom must have lived in that home for two years before it was sold even if the one partner was only on the title for two months before they married. And, if either party sold a home within the last two years and claimed an exemption, the newlyweds will have to wait until that two-year window closes before claiming any profits from the home they now share.

  1. Is your home a primary residence, vacation home or a rental property?

What if you aren’t flipping homes? What if you have a second home or a rental property you’ve lived in for two years that you’d like to sell? For tax purposes, it won’t be treated as a primary residence. Before the 2008 shift in the tax code, second homes and rental properties received the same tax benefits even if the home became the primary residence for a time. Now a prorated amount is determined on the number of years the home or rental property was used as a second home or rented out after 2008.

Here’s a “story problem” to help me explain this scenario: If you used your vacation home for 15 years before 2010 when you began using it as your primary residence, 10% of the profit earned on the sale would be taxed. Here’s why: The 2 years following 2008 when your home was used as a vacation home equals 10% of the total 20 years you owned the home. As long as the rest of the profit from the sale of the home falls within the tax exemption limits, it won’t be taxed.

  1. The more my Brooklyn home sells for, the greater the capital gains tax will be

This isn’t true. For tax purposes, the capital gains tax you owe doesn’t depend on the price you sell your home for. It depends on the amount you profit from the sale. As long as you don’t profit more than the exemption amount allowed on the sale, your home could sell for $1 million and you would not owe any in taxes.

Selling your Brooklyn home can be complicated. There is a lot to know when it comes to taxes and capital gains in New York. For instance, you could be reaching your cap on tax exemptions but still qualify for a partial exemption and not know it. Be sure you talk with your tax accountant before you make a major financial real estate move. Ask important questions and avoid confusion. It’s your accountant’s job to know the details about capital gains taxes on the sale of your home and the tax exemptions available to you. Let them help you get the most from the sale of your Brooklyn home.

If you’re selling your Brooklyn home, contact Charles D’Alessandro, your Brooklyn real estate agent with Fillmore Real Estate at (718) 253-9600 ext. 206 or email charles@brooklynrealestatesales.com today. He can help you sell your home and get your questions about capital gains answered.

Home Inspections: Take ‘Em! Don’t Leave ‘Em!

Tuesday, March 15th, 2016
Home inspections

Home inspections are worth every dollar invested because they give the homebuyer peace of mind.

So, you’ve fallen in love with the home of your dreams in Brooklyn. The floor plan and colors on the walls, the flooring, kitchen cupboards and bathrooms … You wouldn’t change a thing. After all, what could possibly be wrong with this home? Everything is perfect!

Finding the perfect home in Brooklyn is a wonderful thing, but don’t allow the love you feel for the home of your dreams cause you to cast a blind eye to problems that may be lurking. A home is one of the largest purchases you will ever make, and a home inspection is a cost-effective way to determine its true condition.

If you’re tempted to waive the home inspection, resist. Here’s why:

  • Home inspections are important to avoid purchasing a home in need of major repairs. It is a home inspector’s job to let you know if something isn’t right. If any safety issues are uncovered, an inspection will help you prioritize the repairs needed. Thoughts: Have you thought about how much time, energy and investment will be required once you’ve purchased the home?
  • You need the facts about a home’s true condition to decide whether or not you should move forward with the purchase. A certified professional home inspector will investigate the home’s electrical wiring, plumbing, roofing, insulation and structural features. Think of a thorough home inspection as taking out an insurance policy against potential operating costs.
  • A good home inspection helps you, the buyer, know exactly what you’re purchasing. Problems with a home that could be costly to fix can be used as a tool in purchasing negotiations with the seller. You could negotiate with the seller to have them pay for repairs before closing, purchase the home as is or back out of the purchase.
  • A home inspection gives peace of mind to you as the buyer and put your mind at ease that the home is in good shape.
  • For buyers, choosing to waive the option to have a professional inspection can cause major repercussions in the future. Sellers like offers in which the inspection is waived because it means they are selling the home ‘as is.’ It means they are not responsible for anything that you cannot see immediately.
  • An inspection allows you as the buyer the right to make requests for additional repairs that aren’t agreed to at the time of signing the initial purchase contract.
  • A home inspection will increase your buyer confidence. A 2012 survey from the American Society of Home Inspectors found that 84% were more likely to purchase a property after a home inspection reported the home in good condition.
  • Waiving a home inspection contingency is never worth the risk. It provides an extra measure of security and helps you plan for the future in your new home.

Types of home inspections

Before you purchase the home of your dreams, it is best to hire a certified home inspector for all-encompassing examinations of these types:

  • General or residential inspection – structure, exterior, roof, electrical, plumbing, HVAC, interior, insulation and ventilation. As the buyer, you will receive a report suggesting improvements or repairs needed to bring the home up to current standards.
  • termite/wood destroying organism inspection – structural damage caused by wood boring insects. This inspection is done for an additional cost, or a WDO/WDI inspector could be recommended to the buyer.
  • radon inspection – radioactive gaseous element. Radon is formed by the breakdown of radium. It occurs naturally and is hazardous to health.  Radon gas from natural sources can accumulate in homes, especially in confined areas such as attics and basements. Testing for high levels is important. Ways to alleviate radon could be costly to fix. Radon testing can be done at an additional cost. Ask your inspector for recommendations if he does not perform radon testing.
  • Well water testing, oil tank testing and septic tank testing. Again, these tests and/or inspections may be done for additional fees. Find out if the general home inspector you hire is qualified to perform these tests.

The cost of a home inspection may vary depending upon the size, region and age of the home and may take anywhere from 2-5 hours. An inspector may recommend repairs, but it is not his responsibility to correct or repair any problems found in the home.

Home inspections usually take place at the time of the sale of the home, and it is recommended that you attend your home inspection.

Are home inspections really worth the investment? Absolutely! Money may be tight at the time of closing but what if you were moving in and found out that the air conditioning unit doesn’t cool the home? What if you find out that the electrical system is substandard after you move in? What if you discover the chimney needs work? Don’t forego the peace of mind home inspections give.

But what if you are the seller of someone’s dream home? Is it important for you to get your home inspected and appraised before putting it on the market? Yes, because there are many benefits to you as the seller in doing so.

Pre-home inspections and appraisals benefit sellers in the following ways:

  • They give you a strong selling point. People don’t like surprises. Buyers value the peace of mind of knowing there are no issues they will have to deal with once they are finally moved in.
  • They make way for higher offers by making you an honest seller to the buyer. It reassures the buyer that you are selling exactly what you say you are, and they have the appraiser’s signature to back it up. This trust can lead to higher offers.
  • And MORE offers! When you have had the home inspected, repaired and appraised, more people become interested in your home. Buyers appreciate knowing that you have taken extra steps to ensure that your home is “all that and a bag o’ chips”.  This trust can also lead to more offers.
  • Offering a home which has been pre-inspected, repaired and professionally appraised at the closing of your home tells the buyer you are someone they can trust which makes the closing process smoother.

Many buyers believe that sellers cover up problems with their home, talking or playing up on the home’s best qualities and features. Getting a pre-home inspection and appraisal before you list your home takes away potential buyers’ doubts that your house may not be all that you say it is. It’s just good practice, highly beneficial and powerful for you.

Call me, Charles D’Alessandro, your Brooklyn real estate agent with Fillmore Real Estate at (718) 253-9600 ext. 206 or email charles@brooklynrealestatesales.com today. With over 30 years of experience in Brooklyn, I can help you find the perfect home and the best home inspector for the peace of mind you deserve.