Questions About Filing Your Texas Homestead Exemption?

Did you purchase a new home in Texas in 2017? Now is the time to file for your Homestead Exemption lowering the amount of school taxes you are required to pay.

Who qualifies?

Anyone who owned a home on January 1st and used it as a primary residence on that date is entitled to a $25,000 homestead exemption to lower school taxes this year… and it doesn’t matter if your home is a house, condominium or mobile home. A homestead can include up to 20 acres.

Is there a fee?

It is free to file through your county’s tax appraisal office.  There is NO CHARGE.   Ignore any solicitations you may get offering to file for you!  

Do I have to apply every year?

No. If you had a homestead exemption on your home the previous year, you won’t need to reapply unless your chief appraiser requires it. However, if you have not received an exemption on your present home or if you have moved to a new home, you will need to file for an exemption the current year.

What is the deadline?

You are to file the completed application with all required documentation between Jan. 1 and April 30 of the year for which you are requesting an exemption. If you qualify for the age 65 or older or disabled persons exemption, you must apply for the exemption before the first anniversary of the date you qualify for the exemption.

How do I file?

Fill out an application from your local appraisal district and send it in before April 30, 2018.  Contact information for the Homestead Exemption forms and instructions on filing are in the links below.

Denton County Appraisal District Home Page

Tarrant County Appraisal District Home Page

Dallas County Appraisal District Home Page

Collin County Appraisal District Home Page

Ellis County Appraisal District Home Page

Rockwall County Appraisal District Home Page

Kaufman County Appraisal District Home Page

Tax Benefits of Home Ownership

U.S. taxpayers have enjoyed specific tax benefits for home ownership since personal income tax was introduced by the 16th amendment in 1913. While these benefits may not be the primary reason that motivates a person to buy a home, they are still tangible and not available to tenants.

The exclusion of capital gains tax on the profit made from a home is unique from other investments and provides homeowners significant savings. Single taxpayers can exclude up to $250,000 gain and married taxpayers up to $500,000 gain. During the five-year period ending on the date of sale, a taxpayer must have: owned the home for at least two years; lived in the home as their main home for at least two years; and, ownership and use do not have to be continuous nor occur at the same time.

Gain on the sale of a principal residence in excess of the allowed exclusion are taxed at the lower long-term capital gain rate of the owner.

A homeowner may take the standard deduction or itemized deductions in any tax year based on which will create the largest deduction. Property taxes and qualified mortgage interest are allowable itemized deductions.

Qualified mortgage interest is acquisition debt plus home equity debt not to exceed the maximum amounts. Acquisition debt is the amount of debt incurred to buy, build or improve a first and second home up to $1,000,000. Home equity debt is limited to $100,000 over the current acquisition debt on the combination of a first and second home and may be used for any purpose.

For more information, see your tax advisor or see IRS Publications 523, Selling Your Home and 936, Home Mortgage Interest Deduction.

Home as a Gift or Inheritance - Does It Matter?

Gift or Inheritance - Does It Matter?

A person called into a radio talk program with a situation that was troubling to the caller and disturbing based on the potential tax liability that may have been avoided.

The caller’s elderly father had deeded his home to his daughter a few years earlier because in his mind, his daughter was going to get the home eventually and this would be one less thing to be taken care of after his death. The daughter didn’t really care because the father was going to continue to live in the home and take care of it so that it would be no expense to her.

Obviously, unknown to either the father or the daughter, transferring the title of a home from one person to another could have significant tax implications. In this case, when the father “gave” the home to his daughter, he also gave her the basis in the home which is basically what he paid for it. If she sells the home in the future, the gain will be the difference in the net sales price and her father’s basis which could be considerably higher than had she inherited it.

If the home was purchased for $75,000 and worth $250,000 at the time of transfer, there is a possible gain of $175,000. However, when a person inherits property, the basis is "stepped-up" to fair market value at the time of the decedent's death.  If the adult child had inherited the property, at the time of the parent's death, their new basis would be $250,000 or the fair market value at the time of death and the possible gain would be zero.

In most cases, there are less tax consequences with inheritance than with a gift. There are other factors that may come into play but being aware that there is a difference between a gift and inheritance is certainly an important warning flag that would indicate that expert tax advice should be sought before any steps are taken.

Sale of Home by Surviving Spouse - may qualify to exclude up to $500,000 of gain

Sale of Home by Surviving Spouse -

Special consideration is made by IRS for the sale of a jointly-owned principal residence after the death of a spouse. Surviving spouse may qualify to exclude up to $500,000 of gain instead of the $250,000 exclusion for single people if certain requirements are met.

• The sale needs to take place no more than two years after the date of death of the spouse.
• Surviving spouse must not have remarried as of the sale date.
• The home must have been used as a principal residence for two of the last five years prior to the death. 
• The home must have been owned for two of the last five years prior to the death.
• Survivor can count any time when spouse owned the home as time they owned it and any time the home was the spouse’s residence as time when it was their residence.
• Neither spouse may have excluded gain from the sale of another principal residence during the last two years prior to the death.

If you have been widowed in the last two years and have substantial gain in your principal residence, it would be worth investigating the possibilities. Time is a critical factor in qualification. Contact your tax professional for advice about your specific situation. Contact me to find out what your home is worth in today’s market. See IRS Publication 523 – surviving spouse.

Choose a Lower Tax Rate

Choose a Lower Tax Rate

During campaign season, it is not unusual to hear a candidate criticized because they make a lot of money but pay little in income tax. While it might not seem fair, taxpayers are allowed to arrange their affairs so that they minimize the amount of tax paid.

Salary, wages and commissions, along with interest and dividends are taxed at ordinary income rates which can range from 10% to 39.6%. However, capital gains rates, for property held more than 12 months, are much lower ranging from 0% to 20%. Taxpayers in the 25-35% brackets pay LTCG rates of 15%.

The profit on rental property enjoys the lower long-term capital gains rates as compared to the profit on “flipped” property which is taxed at ordinary income rates.

Investments in rental homes generate income, provide depreciation for tax shelter, have equity build-up due to the amortizing loan, leveraged growth due to the borrowed funds and appreciation. The profits could be considerably higher than alternative investments and the profits taxed at lower rates.

The advantage is available to people who understand the tax laws and choose to arrange their activities so they pay a minimal amount of tax. The advantage is available to all taxpayers, not just the rich. In fact, implementing these types of strategies could lead to an increase in wealth.

I can help you find that Investment Property 

Building a lifestyle together! 

Bret

Wilson

Keller Williams

Flower Mound TX

(214) 315-9465

bret.wilson@kw.com

You may never stop paying for some improvements

You may never stop paying for some improvements - 

You've saved the money and are ready to pay cash to build a new pool for your home.  However, that's just the beginning of your soon to be increased expenses which will include maintenance, higher utilities and higher taxes.

Homeowners obviously benefit by a larger equity when their home increases in value due to appreciation.   A not-so-obvious effect that will also more than likely take place is that their property taxes will increase.  In most cases, a property's assessed value is generally tied to market value to calculate the property taxes based on the tax rate for that year.

Similarly, a homeowner can affect the value of their home by making capital improvements.  Some small items may never be recognized by the taxing authority but items that require a permit, certainly are brought to their attention.  Items such as a fence, roof, remodeling, windows, new rooms or swimming pools can easily increase the assessed value of a property.

Most states have an established time frame in which to challenge the current tax assessment for that year.  The process is relatively simple and doesn't require professional representation.  It generally involves showing that there is an error which has overstated the value or that current comparable sales indicate a lower value.

If you'd like more information or need the comparable sales data, please let us know.  We would be happy to help you investigate the possibility of lowering your property taxes.