You've just moved into your new home. Now you need to decorate it and make it your own. You don't need a lot of fancy trinkets and expensive doodads. All you really need to make your house a home is a few mason jars. With National Mason Jar Day coming up on November 30th, let's look at some of the many fun things you can do with these durable, beautiful, and versatile jars.
November 23rd is National Espresso Day. What better way to celebrate than with a delicious latte? There are plenty of coffee shops in the area, but if you've just moved to a new place, it might be nice to try out your new kitchen and make one yourself. Here are some tips for making the perfect latte.
Real estate has always been a great way to build wealth. When you buy a property by putting a relatively small amount of money down and obtaining a mortgage, you're leveraging your investment; in other words, you're getting an asset worth significantly more than the money you've invested as a down payment.
If your home increases in value, you build equity based on the total price of the asset. Another significant benefit of real estate is the tax breaks. When you live in the home, the interest you pay on your mortgage is tax-deductible if you itemize your return. Thanks to the Taxpayer Relief Act of 1997, another tax break comes in reduced capital gains taxes. For example, when you sell your home, the first $250,000 gains are free from capital gains taxes ($500,000 for married couples). These tax advantages make owning a home a wise investment for many of us and allow us to build wealth relatively tax-free when investing in a residence.
If you're a commercial real estate investor, there is another rule you can also use to defer capital gains on your investment property to build wealth. It's called the 1031 Exchange Rule, and it has many moving parts. Real estate investors must understand the law before attempting to use it, and it can be complicated to follow. An exchange can only be made with like-kind properties. In addition, there are tax implications and time frames that must be strictly followed, or it may be problematic.
If you're considering using a 1031 Exchange or want to learn more, we're going to help you gain an understanding of this investment benefit in this post.
In simple terms, a 1031 exchange (also known as a like-kind exchange) is a swap of one investment property for another. Although most swaps are taxable as sales, if you meet the requirements of 1031, you'll pay no tax or a limited tax due at the time of the exchange.
In effect, you are changing the "form" of your investment in the eyes of the IRS without cashing out or recognizing a capital gain. This allows you to grow your investment tax-deferred. Because there are no limits as to how many times or how frequently you can use 1031, you can continue to roll your capital gains from one investment property to another, and another, and another.
Even though you may be profiting from each swap, you avoid paying any taxes until you finally cash out many years (or even decades) later. If it works as planned, you'll pay a single tax at the current long-term capital gains rate (currently 15 or 20% depending on your income).
Most exchanges must meet the criteria known as "like-kind." However, this phrase doesn't necessarily mean what the name implies. For example, you can exchange an apartment building for raw land or a ranch for a strip mall. The rules are surprisingly liberal. You can also exchange one business for another. However, there are "traps" of which you need to be aware.
The 1031 rules are for investment and business property, although they can apply for a former primary residence under certain conditions. It's also possible to use the 1031 Exchange for swapping a vacation home, but this loophole has been made much narrower in recent years.
As a real estate investor, there are several reasons that you may consider using a 1031 exchange. These include:
The main benefit of a 1031 exchange over simply selling one property and buying another is the tax deferral. By deferring capital gains taxes using a 1031 exchange, you're freeing more capital for investment in a replacement property.
Bear in mind that 1031 might require a higher minimum investment and a longer holding time. 1031exchange transactions can be complex and should be handled by professionals.
It's essential to understand the concept of depreciation to gain a proper understanding of the benefits of a 1031 exchange.
Depreciation is the percentage of the cost of an investment property written off every year, recognizing the effects of wear and tear. When you sell a property, capital gains taxes are calculated based on the property's net-adjusted basis, which combines the property's original purchase price plus capital improvements, minus depreciation.
If your property sells for more than its depreciated value, you may need to "recapture" the depreciation. That means the amount of depreciation is included as taxable income when you sell.
Since the size of depreciation increases with time, you might want to consider a 1031 exchange to avoid the significant increase in taxable income that recapture would cause. Depreciation recapture is a factor to account for when considering a 1031 exchange.
The classic exchange involves a simple swap of one property for another between two people. However, it's long odds to find someone with the exact property you want, who wants the exact property you have. As a result, the majority of exchanges are delayed, three-party exchanges.
In a delayed exchange, you need a qualified intermediary or middleman. He or she will hold the cash after you sell your property and then uses it to purchase the replacement property for you. This is a three-party exchange that is classified and treated as a swap. Here are two essential timing rules you need to follow in a delayed exchange.
This rule relates to the designation of a replacement property. Once a sale occurs, the intermediary receives the cash. Within 45 days of the sale, you must designate the replacement property in writing to the intermediary, specifying the property you wish to acquire. The IRS rule states that you can select three properties as long as you eventually close on one of them.
The second timing rule you need to be aware of in a delayed exchange relates to closing the replacement property. You must close on the new property within 180 days of the sale of your original property.
One crucial fact to be aware of is that these periods run concurrently. That means the clock starts when you close on the sale of your original property. For example, if you designate a replacement property exactly 45 days after you close, you'll have just 135 days left to close on the replacement.
While there are plenty of benefits to 1031 exchanges, it's essential to understand potential pitfalls if the transaction isn't handled correctly. For example, you may have cash left over after your intermediary acquires the replacement property. If so, they will pay it to you at the end of the 180 days. This cash is known as "boot," will be taxed as the partial sales proceeds from the sale of your property, typically as a capital gain.
One way people can get into trouble with this type of transaction is by failing to consider loans. You must consider any mortgage loans or other debts on the replacement property. If you don't receive cash back, but your liability is reduced, that is treated as income to you – just like cash.
For example, if you were carrying a mortgage of $1 million on your old property, but the mortgage on the replacement property you receive in the exchange is only $900,000, you will have a $100,000 gain. This is classified as "boot," and it will be taxed.
While we've just touched on the highlights of 1031 exchanges, the fact is, 1031 is an intelligent tax-deferral strategy that real estate investors can use to build real wealth. The bottom line is that while using a 1031exchange strategy is a savvy business move, there are many complex moving parts that not only require you to understand the rules. It is important to enlist professional help, even if you're a seasoned real estate investor.
With the start of the holiday season so close at hand, you're probably already thinking about how you're going to get all your holiday shopping done. This year, our real estate agents have challenged themselves to do what they can to help the small businesses that make every community a better place to live. Want to join them in their support of local entrepreneurs? Here are seven ideas to get you started.
Once you've experienced the magic of shopping local around the holidays, this practice is sure to become a household tradition for your family. Do your part to support your local economy today, and if you have an imminent move on the horizon, don't fret. Contact us for help finding a home and getting settled into your new community.
Selling your home is both time-consuming and expensive, often more than a homeowner might expect. It's easy to get excited when you look at the latest Zestimate and seeing how much more your home is worth than when you bought it. However, if you're considering selling your home, you need to factor the cost to sell a house into your calculations.
It's important to factor in and be prepared for the hidden and sometimes overlooked cost to sell a house. Some expenses are negotiable, but sellers need to expect to pay the costs of selling their homes. Today we're living through one of the biggest seller's markets in our lifetimes, on average in a typical market, homeowners will spend seven months planning and preparing to sell their home, and three additional months with their home listed, pending, and closing.
What follows is a breakdown of what a homeowner can expect when determining the cost to sell a house.
Some expenses are common, and you can expect to pay them when selling a house. Some costs may be hidden or not commonly considered.
Depending on how competitive your local market is, it may make sense to pay for extra services to attract more potential buyers. Many of these are optional, but they can help alert you to potential problems and help make your home stand out from others in the market.
Selling your home can be challenging and exhilarating at the same time. In today's super hot seller's market, it can also be lucrative. If you are planning or considering selling your home, make sure you factor both the typical and potential cost of selling a house into your plan. A REALTOR® can help you to better understand the exact cost of selling your home.
If you're considering selling your home, contact the REALTORS® at Masiello Residential Real Estate. We can help you get the best price for your New England home, can assist you to find the perfect new home to meet your needs, and understand the true cost of selling your home.
If you're planning to buy or sell a home, then you should be prepared to receive loads of advice from family, friends, and neighbors. When it comes to real estate transactions, everyone has their own unique perspective. While advice can be helpful and well-intentioned, it's important to weigh the advice based on experience. The average person is involved in a real estate transaction once every 5 to 7 years while the average Masiello agent manages 11 transactions every year. These uneven experiences have given rise to numerous industry myths.