Ask the professionals: Tax season questions about real estate
Like other homes in the Redlands that offer great views, this house has retained its value more than homes in other values. Although it sold earlier in the year, the asking price was 98 percent of the assessed value, according to listing agent Harry Hotimsky with 1st Choice Real Estate.
Like other homes in the Redlands that offer great views, this house has retained its value more than homes in other values. Although it sold earlier in the year, the asking price was 98 percent of the assessed value, according to listing agent Harry Hotimsky with 1st Choice Real Estate.
Brent Goff, the deputy assessor for Mesa County, answered questions about the assessed value of property in Mesa County and explained why the assessed value may be higher than what the property could currently sell for in today’s market.
Brent Goff, the deputy assessor for Mesa County, answered questions about the assessed value of property in Mesa County and explained why the assessed value may be higher than what the property could currently sell for in today’s market.
Dorothy Stevenson urges homeowners who may be considering turning their primary residential home into a rental home to consider the tax implications of such a move.
Dorothy Stevenson urges homeowners who may be considering turning their primary residential home into a rental home to consider the tax implications of such a move.
This home, at 2745 Cheyenne Drive, has an assessed value of $270,080. It’s currently listed for sale with Harry Hotimsky of 1st Choice Real Estate for $200,000. The 2,313 square-foot house has four bedrooms and two baths and sits across the street from Eagle Rim Park.
This home, at 2745 Cheyenne Drive, has an assessed value of $270,080. It’s currently listed for sale with Harry Hotimsky of 1st Choice Real Estate for $200,000. The 2,313 square-foot house has four bedrooms and two baths and sits across the street from Eagle Rim Park.
This patio home in the north area, at 1805 Venetian is listed for $260,000, which is 75 percent of the assessed value of $346,600. Harry Hotimsky with 1st Choice Real Estate is the listing agent for the four-bedroom, two-bath home.
This patio home in the north area, at 1805 Venetian is listed for $260,000, which is 75 percent of the assessed value of $346,600. Harry Hotimsky with 1st Choice Real Estate is the listing agent for the four-bedroom, two-bath home.
This home at2320 Knolls Circle, is listed by Harry Hotimsky with 1st Choice Real Estate for $400,000, which is 82 percent of its total assessed value of $487,060. The three bedroom, three bathroom home has 2,195 square feet and is in the Knolls in the north area.
This home at2320 Knolls Circle, is listed by Harry Hotimsky with 1st Choice Real Estate for $400,000, which is 82 percent of its total assessed value of $487,060. The three bedroom, three bathroom home has 2,195 square feet and is in the Knolls in the north area.
Whether March brings dreams of spring training or spring flowers, it’s also a good time to review tax information.
When it comes to real estate, there are several tax issues to consider and several different ways various government entities squeeze pennies from property owners.
Property owners are experiencing the after-affects of the housing boom, which continued in the Grand Valley after the real estate bubble burst in other parts of the country. All properties were assessed for real estate tax valuations during a period that started Jan. 1, 2007 and lasted through June 30, 2008, when real estate values were peaking.
In Mesa County, real estate property tax bills that property owners are paying in 2011 continue to reflect that high assessment period, since taxes being paid this year are for calendar year 2010.
“We were in the top 10 accelerating real estate markets in 2007,” said Brent Goff, deputy assessor with Mesa County. “Everyone’s stuck in the same unpleasant boat. This is the first time in my 15 years that we’re visiting with a lot of people about their tax bill. Property is assessed at a higher value than they could sell it.”
Relief is in sight — property is assessed every two years, and the latest assessment period ended June 30, 2010. Property owners can expect to get their newest property valuations in May 2011, even if their taxes are paid through an escrow account as part of their total PITI (payment, insurance, taxes and insurance) mortgage payment.
Tax bills in 2012 should be lower than those from the previous two years. Homeowners whose taxes are paid through an escrow account as part of their mortgage payment should receive a notice early next year announcing that the real estate tax portion of the total will be lower.
The assessor’s office looks at comparable properties that sold in the 18-month collection period to determine the value of any particular piece of real estate. The smaller sales volume experienced in the last collection period has created challenges.
“It’s making our job more difficult,” Goff said. “We don’t have as much to compare it to. We have whole sections of town where we have less data to work with.”
If there haven’t been many sales during the data collection period, the assessor’s office can either go back five years to compare price data or it can look at comparable neighborhoods.
Residential property is taxed at a lower rate than vacant land, commercial property or investment property. Agricultural land is taxed based on the value of what is produced on the land.
When property owners receive their notice of tax valuation in early May, they should check to make sure the assessor’s office has the correct square footage and number of bedrooms and bathrooms. The valuation will include a value for the land and for the improvements.
Property owners who don’t agree with the assessment have the opportunity to appeal during the month of May.
Any supporting material, such as an appraisal, should be included as part of the appeal. If the property was listed for sale during the data collection period at or below the assessed value and it didn’t sell, that information should also be included in the appeal.
Real estate taxes are deductible from income if a taxpayer chooses to itemize his deductions. If taxpayers want to pay two year’s worth of real estate taxes in one year in order to get a larger deduction in a particular year, they are allowed to do so. Taxes must be paid before the end of the year, however, rather than waiting for the real estate tax bill sent out by Mesa County after the first of the year.
Homeowners are allowed to make up to $250,000 profit on the sale of their home (or $500,000 for married couples) without it being considered a capital gain. Homeowners must use the home as a personal residence for two years in order to reap that particular tax break.
“In today’s market, it’s not a real issue,” said Dorothy Stevenson with Tax Time about the capital gains provision. Most homeowners who are trying to sell today are hoping for marginal profit and don’t have to worry about that half-million dollar profit ceiling.
Because prices are low and inventory is high, some homeowners may be considering turning their personal home into a rental property rather than try to sell it in today’s tough market. That could have tax implications.
“You have to live in the house yourself for two out of the past five years,” Stevenson said. “The IRS goes by intent. If you intend to turn that house into a rental, it’s considered investment property.”
Rental property is passive property and considered a business when it’s sold, which means if the property owner makes money on the sale, that profit won’t be exempt from capital gains taxes.
Homeowners who are choosing to temporarily turn their primary residence into a rental home may want to continue actively listing the property for sale.
“If you can make a little money on it and rent it out, that may be good, but you’re always taking risks,” Stevenson said. “It falls back on your intent. If you were able to show that it was your personal residence for at least two out of five years, that’s also helpful.”
Those who are considering renting out their primary residence should talk to a tax professional and make sure they understand all the implications of the decision before doing anything. In the meantime, paying 2010 taxes in 2011 will continue to be painful, but the new assessment should give stressed homeowners some relief.
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