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ARE YOU ELIGIBLE FOR A REFUND ON YOUR PAID TRANSFER TAX

by Tom Stachler,ABR,CDPE - Group One Realty Team

Ready for your Transfer Tax Refund?

Usually, tax info in NOT good news, but hold on, I have some great information for you.  

As a Seller, Have you had a closing since 2011?  If so you maybe eligible for a refund of the state transfer tax you paid at closing.  The amount you would have paid would have been equal to roughly about $8 / per thousand of your sales price.  (Sale price / 1000 x 8.00)

The Michigan Supreme Court recently interpreted one of the exemptions to the State Real Estate Transfer Tax, greatly increasing the number of sales that qualify for the exemption. If the State Equalized Value (SEV) of the Home at the time you bought it is more than the SEV at the time you sell/sold it (it decreased in assessed value), and the sale was an “arm’s-length” or fair market transaction, the sale is exempt from the State Transfer Tax.  

Previously, you also had to show you sold the home for less than twice the SEV. You no longer have to meet that second requirement, meaning many are entitled to a refund of the State Transfer Tax.

Call or email me if you have any questions.  I have an attorney I can refer you too if you want to check to see if you are eligible and want to petition the state for a refund.  Their fee is quite reasonable and well work the extra money you will be left with after the refund.  

 

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Understanding Home Owner Tax Deductions and Michigan Homestead Tax Credit

by Tom Stachler,ABR,CDPE - Group One Realty Team

For decades, Home ownership in the United States has been partially subsidized by the tax savings associated with owning a home. Many homeowners qualify for certain tax deductions and tax credits that make home ownership more affordable.  In order to utilize certain deductions, a homeowner must itemize their tax deductions. But almost everyone is eligible to benefit from one or more of the tax benefits of home ownership. Here are a few to consider as of the date of this article:

tax benefits of owning a house
  1. Property Taxes Deduction: In many areas, property taxes can be one of the most significant costs of homeownership. Therefore, the ability to deduct residential property taxes from taxable income is an incredible savings. A property tax deduction is essentially a tax-deductible tax, so that the homeowner does not pay income tax on money that was used to pay property taxes. This particular deduction may only be used for the period of time the homeowner actually owns the home. Back taxes paid as part of the purchase arrangement may not be deducted. But anything going to the Seller on the settlement statement for property taxes the seller paid in advance can be deducted. Homeowners can only deduct the amount of property tax actually paid to their local municipality for the tax year. However, if the property taxes are held in escrow for paying taxes at a later time, the deduction cannot be taken until such time as the money is paid out of the escrow account to the taxing authority. Many local assessments for improvements or other city/county fees that one may find on their property tax bill are not deductible. Also, if any (typically partial) refund of the property tax occurs, the amount of the deduction is generally reduced by the amount of the refund.

  2. Mortgage Interest Deduction: For many homeowners, the mortgage interest tax deduction is the most valuable tax deduction, and can be used to deduct interest paid on a mortgage of up to one million ($1,000,000.00). When a homeowner receives their first Form 1098 from their lender, they should know that its potential value is vast and to consult with a tax professional as to how best to take advantage of this benefit. This deduction is especially useful for most new homeowners, as the initial mortgage payments for new homeowners are primarily comprised of interest for the first several years, making for a larger deduction (until more of the payment is comprised of principal when there is less interest paid and less interest to deduct). Prepaid mortgage interest paid at closing may also add to the amount of this deduction.

  3. Mortgage Insurance Premiums Deduction: Many home buyers whose initial down payment is less than 20% of the purchase price are required to pay private mortgage insurance or "PMI." This insurance can be a significant expense. Homeowners may generally deduct the premiums paid for such mortgage insurance for the current tax year on a primary residence and a non-rental second or vacation home. However, eligibility for this deduction is phased out based on income levels (check with your tax professional).

  4. Points Deduction: If an owner paid discount points or "points" (or sometimes "loan discounts") to reduce the interest rate on borrowed funds as part of the purchase or refinance of a home, the cost of these points can be deductible in the year they were paid or over the life of the mortgage, depending on the type of loan and the unique qualities of the taxpayer.

  5. Energy Credits: Some homeowners can receive a tax credit (either federal, state or local) for a portion of the cost of materials used for energy efficient upgrades to their residence (including doors, windows, furnaces and air conditioners, roofing materials, insulation, solar panels, water heaters, geo thermal heat pumps, fuel cells, wind turbines, and other energy efficient upgrades).

  6. Home Office Deduction: Many home owners, who use a portion of their home for office purposes, may be able to claim a tax deduction for the pro-rata portion of costs related to the office space (e.g. repairs, mortgage, insurance, utilities, and depreciation). To utilize this deduction, the home office must be used exclusively and regularly as a place of business, a place to meet clients/patients for business purposes, a place of storage (e.g. for inventory or records used in the business), or a place where a majority of business work is done.

  7. Gain on Sale Exclusion: Individuals can exclude up to $250,000 of gain from a primary residence from taxable income, and married couples can exclude up to $500,000 of gain. To qualify, the seller(s) must have lived in the home as a primary residence for two of the prior five years before the sale.

  8. selling Costs Deduction: If the seller’s gain from the sale of a home does not qualify for the exclusion in #7 above, or the gain exceeds the maximum amount of the exclusion in #7, the costs associated with selling the home may also be available to reduce the tax burden of the seller. For example, the following costs may be deductible: title insurance, advertising and marketing expenses, broker fees, or repairs (if made within 90 days of the sale and with the intent to facilitate a sale).

  9. Home Improvement Loan Interest Deduction: Interest on loans for home improvements may be deductible, provided the loan was used for a "capital improvement," such as building a deck, installing a new water heater system, or building a garage or otherwise expanding the size of the home. Many s1maller items, such as wallpaper, paint, carpet, etc. are not considered "capital improvements."

  10. Construction Loan Interest Deduction: Interest on a loan used to construct a new principal residence or vacation home for personal use may be deductible for the first 24 months of the loan.

  11. Loan Forgiveness Exclusion: As of the date of this article, the Mortgage Debt Forgiveness Relief Act of 2007 was extended to allow debt that is forgiven by lenders in short sale situations to be excluded from taxable income, rather than being taxed as debt forgiveness income.

  12.  IRA Penalty Exemption: The ten (10) percent penalty for the early withdrawal of IRA funds can be avoided if the withdrawal of such funds is used toward the purchase of a home within 120 days of the withdrawal. This benefit is limited to a withdrawal of up to $10,000 in IRA funds for each spouse, and only if each spouse did not own a home within the two years prior to the new home purchase.

These tax benefits represent some of the biggest tax benefits of homeownership. Other tax benefits also exist. And the above analysis is an informational summary only and is not to be used, and is not intended to be used, as tax advice. When it comes to tax matters, a tax professional, Certified Public Accountant, or tax attorney should be consulted for the particular circumstances of each taxpayer, to ensure that no tax benefit opportunities are missed and to ensure compliance with law. 

HOMESTEAD TAX CREDITS - The state of Michigan has a homestead tax credit for owner occupied residences.  This amounts to approximately a 33% discount on your annual local and state property taxes.  There are deadlines for filing this paperwork however in order to get your tax savings.  There is also options to get more than one homestead credit though in most cases it is limited to just one per person/household.  CALL us to discuss your situation as they there are complex rules and regulations which vary by individual case.  

Interested in new listing updates?  Just click on the link above "Get Listing Updates" to receive new listings the day they come out automatically.  You can also contact us by using one of the options found after clicking on our home button above or call our office direct line at 734-996-0000 and ask for Tom Stachler.

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PURCHASE REAL ESTATE WITH YOUR IRA

by Tom Stachler,ABR,CDPE - Group One Realty Team
A self-directed IRA is used for real estate investing.

A self-directed IRA is used for real estate investing.

If you have been frustrated over the performance of your IRA investments in stocks, bonds or mutual funds, investing your IRA funds in real estate may be a desirable alternative. 

 

IRAs can be used to purchase real estate of any type, such as a single-family Home, commercial building or even raw land. However, there are rules and limitations regarding how IRA-owned real estate can be purchased and used. Violating these rules can result in adverse tax consequences.

 

Self-Directed IRA

Although IRS rules permit IRA funds to be invested in real estate, IRS rules do not require an IRA trustee to offer real estate as an investment option. Most trustees who offer traditional IRA investments, such as depository banks, do not allow an IRA owner to invest in real estate because of the extra administrative burden of real estate management. As a result, if you want to invest your IRA funds in real estate, you will most likely have to convert your traditional IRA to a self-directed IRA—which is an IRA that requires you to decide what investments to make, such as real estate. In general, you can establish a self-directed IRA with a nondepository bank or trust company.

Prohibited Transactions

IRS rules require IRA-owned real estate to be for investment purposes only. This requirement places several prohibitions on how the real estate can be purchased and used. Key to understanding the prohibitions is the term “disqualified persons.” This term is used in the IRS rules regarding IRA-owned real estate to refer to the IRA owner and related persons--that is, the IRA owner and spouse, ancestors (mother, father, grandparents) and descendents (children, grandchildren and their spouses). The term disqualified person also includes the IRA-owner & investment advisers, including a trustee of the IRA funds, and any business in which a disqualified person has a 50 percent or greater interest. IRS rules prohibit the use of IRA funds to purchase real estate from a disqualified person. The rules also prohibit a disqualified person from using any real estate purchased with IRA funds, either as a home or business. These rules even preclude you from purchasing a vacation home that is only partly for personal use and otherwise rented to others.

Financing Issues: UDFI Tax

If you use all cash to purchase your IRA-investment real estate, the income produced by the property and the gain from a future sale of the property will remain in your IRA tax-deferred until you start taking distributions. However, if you acquire a mortgage as part of your purchase of the real estate, you will have to pay taxes on any income or gain attributable to the financed part of the transaction, called Unrelated Debt Financed Income, or UDFI. With regard to a mortgage, you must also keep in mind that you cannot guarantee repayment of the mortgage, as this would violate the disqualified person rule. This may require you to use another property as additional security for the lender or pay a higher interest rate and other costs.

Tax Consequences

If you violate the IRS rules regarding prohibited transactions, the IRS will consider the IRA funds used in the transaction as a distribution of your IRA. You will be taxed on the funds from the first year in which the transaction occurred, with penalties and interest included. Depending on your age, you may also incur an additional penalty for taking an early distribution.

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Check out the "ALL MLS LISTINGS"  link above to search for income and owner occupied real estate options.  

 

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how to purchase real estate using your ira account.  buy income property using an ira. information on how to use your ira to purchase real estate. ann arbor real estate for sale using your ira account. tom stachler with real estate one can help you make the right investment and real estate purchase decisions. real estate one ann arbor michigan saline dexter ypsilanti realty to purchase

Michigan Property Tax Homestead Exemption Information

by Tom Stachler,ABR,CDPE - Group One Realty Team

New Changes in the State of Michigan Homestead Exemption Filing Dates

Good News.  The Michigan Association of Realtors was instrumental in helping get this signed yesterday. The former deadline date of May 1st for your homestead exemption and discount on property taxes for Michigan property has been changed.  

See the information below regarding your Michigan Property tax homestead exemption and tax discount.

Legislation Signed by the Governor
5/2/2012

Today, Governor Snyder signed legislation providing homebuyers a fair process when it comes to their property taxes.

Senate Bill 349, sponsored by Senator Dave Hildenbrand (R-Lowell) creates two Principal Residence Exemption (PRE) filing dates; one on June 1st, and the other on November 1st. Additionally, this legislation allows bank-owned properties to retain their PRE so that buyers can qualify at the lower rate of taxation. This is particularly important since foreclosures have flooded the market in recent years.

Below are a few FAQ's regarding the new law:

1) Does the legislation take effect this year?
A) Yes. The new law moves current May 1st PRE filing deadline to June 1st of this year.

2) How does it work?
A) If a homebuyer purchases a Principal Residence and closes on or before June 1st, they can take advantage of a significant tax break by filing for a Principal Residence Exemption.

3) When is the additional filing date? A) November 1st. This allows for tax relief in those communities that still collect a portion, if not all of their non-homestead mills, on the December tax bill.

4) If my client buys after June 1st this year, what can they expect?
A) If a homebuyer purchases a Home after the June 1st filing deadline, and their local tax authority collects all non-homestead mills on the spring tax bill, their property taxes may not reflect the exemption until the next tax bill. If however that local tax authority collects a portion of the non-homestead mills on the winter tax billing cycle, the homebuyer can file for a PRE before the November 1st and exempt themselves from any non-homestead mills collected on the December bill.

5) What about the foreclosure provisions?
A) Banks have the option of maintaining the home's Principal Residence status by filing a Conditional Rescission. By maintaining this exemption status, it's the expectation that borrowers will be able to qualify for financing on these foreclosed properties at the PRE rate and begin paying the lower rate of taxation as soon as they move into the home. To make up for the lost school revenue, banks will be assessed a newly defined tax that will keep the 18 mills (which they presently pay on any foreclosed property) when a property can no longer qualify as a principle residence. It is important for those REALTORS® working with bank clients to let lenders know about the change and communicate the benefit of filing a Conditional Rescission.

Source: Michigan Association of REALTORS®

Michigan Property Tax Homestead Exemption Information

Tax Credit Extension Approved

by Tom Stachler from Group One Realty Team - Real Est

Congress Passes Tax Credit Closing Extension

Congress passed an extension of the closing deadline for the Homebuyer Tax Credit, the Homebuyer Assistance and Improvement Act (H.R. 5623). 

This extension applies only to transactions that have ratified contracts in place as of April 30, 2010, that have not yet closed. The legislation is designed to create a seamless extension; the new closing deadline for eligible transactions is now September 30, 2010. There will be no gap between June 30 and the date the President signs the bill into law. 

Contact our office for further details and as always you can get new listing update reports at www.shelterquest1.com

Appealing your Property Tax Assessment

by Tom Stachler from Group One Realty Team - Real Est

Well its that time of year again when we get our notice's from the local tax assessor.  The notice will contain your new tax assessment and what we can expect to pay for property taxes.  Remember you can appeal this decision if you do not agree.  Generally there will be instructions with your assessment that tell you how to sign up for to appeal initially to the local Tax Board of Review. 

I am please to announce that this past year I was notified that I would be getting back two checks for different properties that I had appealed to the State Tax Tribunal.  It should be noted that initially I did not receive any adjustments on the local level.  Initially, your case is reviewed by individuals appointed by local government that is very concerned about declining tax revenue due to declining tax values (Tax Board of Review).  No mystery here why they smile and tell you they will take your matter into consideration and then send you a denial letter once you are out of their door and confrontation range.  I have a few suggestions if you think your taxable value is higher than 50% of your market value and you want to lower your tax bill.

You will need to start by requesting a meeting with your tax board of review. This is a panel that will meet for several weeks straight following the mailing of your assessment and you need to request a time slot right away while they are convened.  Being a broker I can put together a market report showing comps or sold price data on similar properties.  I did this in the past but was unsuccessful on my appeals.   I would recommend that you spend $2-300. dollars for a formal appraisal.  The appraisal should be dated December 31st of the previous year which is the value date that your assessor is trying to establish.  Often, several of us in the community will go together and negociate a discounted price with a local appraiser for doing several appraisals at once for this purpose.  This makes the process much easier both at the local and state levels.  You now have an unbiased, third party market value opinion to present initially to the Tax board of Review and if needed, the State Tax Tribunal appeal.  I recommend this approach highly.  To start, you will make several copies (4) to supply to the local board and assessor at your first meeting which generally only last 15 minutes or less.  From my own past experience, this yields limited or no satisfaction at the local level, but you could get lucky.  You will receive an opinion from the Board of Review within a few weeks after your informal meeting along with instructions on how to appeal to the State Tax Tribunal.  Unhappy with the results?.... then don't stop and send a copy of your appraisal to the State if you disagree and then be prepared to wait up to two years for a notice from them, though you should receive a confirmation of receipt and case number within 60 days.  You can check you status online to by going to the State Web site as well.  If this is concerning your Home or principle residence, the appeal to the State is Free.  If its for investment property, then there is a $75. charge.  I have found far more receptive ears at the State level, so don't be shy about taking this final step.  

Of course there are more formal approaches involving hiring a tax attorney, but generally most people do not wish to speculate spending money on their fee's.  This is something you will need to weight vs. the potential return. 

Please call me if you have any questions or would like for me to send you some comps just to see if you should start with the appraisal route.  Remember, I got back thousands on each of my appeals to the state so think positive.  

Please scroll down and review other older posts herein for info on this and similar topics while your in this category.  

Good luck!

Would you like Two Principal Residence Exemptions?

by Group One Realty Team - Real Estate One

Principal Residence Exemption

Sellers who have taken advantage of the opportunity to retain two principal residence exemptions must file Form 4640 by December 31.

Legislation (signed in 2008) enables that the seller can retain an additional exemption for up to three years on property previously exempt as the owner's principal residence if the following criteria are met:

  • the property is not occupied
  • the property is for sale
  • the property is not leased or available for Lease
  • the property is not used for any business or commercial purpose.

For your convenience, a copy of Form 4640 is available at link to the form on the Michigan Government website.

Sellers Might be Exempt on State Transfer Tax

by Group One Realty Team - Real Estate One

With lower property values due to our struggling economy, many homeowners have been able to take advantage of an exemption contained in the Michigan Transfer Tax Act.  If a seller meets the criteria, they would be exempt from paying the state transfer tax.  Following are the criteria:

  1. The property must have been occupied as a principle residence – classified as homestead property.
  2. The property’s SEV for the calendar year in which the transfer is made must be less than or equal to the property’s SEV for the calendar year in which the seller acquired the property.
  3. The property cannot be transferred for consideration exceeding its “true cash value” for the year of the transfer.


For example:
If the SEV of the homestead principle residence when acquired in 2005 is $100,000 and the current SEV on the property is $90,000, then the first two criteria have been met.  To establish the “true cash value” of the property, you must double the current SEV at the time of transfer.  In this scenario, the true cash value would be $180,000.  If the property sold for $170,000, then the 3rd criteria has been met of Exemption “u” as designated by the Michigan Transfer Tax Act.

If you believe you may be eligible, you have up to 4 years from the transfer date to file for the exemption.  It is also important to note that there are no similar exemptions in the County Real Estate Transfer Tax Act.

To see if you as a seller are eligible, please contact our office for a copy of the “Transfer Tax Exemption Worksheet.”   

As always, thank you for your consideration and referrals.

NEW FIRST TIME HOME BUYER TAX CREDIT

by Group One Realty Team - Real Estate One

 ECONOMIC RECOVERY ACT OF 2008

 

FEATURE

 

H.R. 3221

Housing and Economic Recovery Act of 2008

 

 

Amount of Credit

 

Ten percent of cost of Home, not to exceed

$7500  Click Here for more info

 

 

Eligible Property

 

Any single-family residence (including condos, co-ops) that will be used as a principal residence.

 

 

Refundable

 

Yes.  Reduces income tax liability for the year of purchase.  Claimed on tax return for that tax year.

 

 

Income Limit

 

Yes.   Full amount of credit available for individuals with adjusted gross income of no more than $75,000 ($150,000 on a joint return).  Phases out above those caps ($95,000 and $170,000, respectively).

 

 

First-time Homebuyer Only

 

Yes.   Purchaser (and purchaser’s spouse) may not have owned a principal residence in 3 years previous to purchase. 

 

Recapture

 

Yes.  Portion (6.67 % of credit) to be repaid each year for 15 years.  If home sold before 15 years, then remainder of credit recaptured on sale.

 

 

Impact on District of Columbia Homebuyer Credit

 

DC credit not available if purchaser uses this credit.

 

 

Effective Date

 

Purchases on or after April 9, 2008

 

 

Termination

 

July 1, 2009

 

Interaction with Alternative Minimum Tax

Can be used against AMT, so credit will not throw individual into AMT.  


This credit is in effect now.  Get started looking at home.  Click here for direct MLS access for the Ann Arbor and surrounding areas.

Selling your home? You may not have to pay the transfer tax

by Group One Realty Team - Real Estate One
There is a little know law that exempts a seller from having to pay the normal transfer tax (approx $8.50 per 1K of sale price) at closing if your tax assessment is less at the time of sale than when you purchased the property.

MCL 207.526 (t) provides an exemption from State Transfer Tax for the following written instruments:
A written instrument conveying an interest in homestead property for which a homestead exemption is claimed under either the school code of 1976, Act No. 451 of the Public Acts of 1976, being sections 380.1 to 380.1852 of the Michigan Compiled Laws or the state education tax act, Act No. 331 of the Public Acts of 1993, being sections 211.901 to 211.906 of the Michigan Complied Laws, if the state equalized valuation of that homestead property is equal to or lesser than the state equalized valuation on the date of purchase or on the date of acquisition by the seller or transferor for the same interest in property. If after an exemption is claimed under this subsection, the sale or transfer of homestead property is found by the treasurer to be a value other than the true cash value, then a penalty equal to 20% of the tax shall be assessed in addition to the tax due under this act to the seller or transferor.

Attorney General Mike Cox issued an important opinion this week clarifying the proper application of an obscure exemption contained in the Michigan Transfer Tax Act. The opinion, arising out of a request from Representative Martin Griffin (D-Jackson), should afford certain Home sellers immediate financial relief as Michigan’s real estate market continues its road to recovery.

Exemption “t”, as designated in the Michigan Transfer Tax Act, sets forth that a seller may seek an exemption from paying the state transfer tax if the following criteria are met:

  1. The property must have been occupied as a principle residence, classified as homestead property;
  2. The property’s State Equalized Value (“SEV”) for the calendar year in which the transfer is made must be less than or equal to the property’s SEV for the calendar year in which the transferor acquired the property; and
  3. The property cannot be transferred for consideration exceeding its true cash value for the year of the transfer.

With property values and corresponding SEV declining due to the struggling economy, home owners and real estate agents first took notice of the exemption’s possible applicability under the state transfer tax. However, absent an official interpretation, there was little awareness of its proper application.

The opinion from the Attorney General uses examples to show how the application would apply. One example illustrating application provides:

If the SEV of the principle residence when acquired in 2006 is $74,000.00 and the SEV when transferred in 2008 is $72,000.00 then criteria one and two above are satisfied. You can establish the true cash value by doubling the SEV at the time of transfer. In this case the true cash value is $144,000. If the sale price in 2008 is $140,000.00 then the sale does not exceed its true cash value. All three criteria are satisfied and the exemption would apply.

The Attorney General’s opinion provides immediate relief to home sellers already faced with the reality of declining value on their single greatest asset. The opinion also provides a uniform reading of the exemption that is necessary to provide consistent application among the various Registers of Deeds across the state as they are already receiving filings for the exemption.

Sellers should be cautioned that a request for the exemption that fails to meet all three criteria could bring a penalty equal to 20% of the tax assessed in addition to the tax due. Additionally, no similar exemption exists in the County Real Estate Transfer Tax Act.

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