Tax Musings of a Burbank CPA: Will You Owe Income Tax When You Sell Your Residence?

So you are planning on selling your residence and you are going to make money on the sale.  Are you going to have to pay income tax on the gain?  Well, the quick answer is maybe (you are thinking, thanks a lot! right now.) After calculating the gain on the sale of the residence (you can check on my previous blog post on how to do this – check my July 5 blog), you have to answer some questions.   Did you own and live in your residence for at least 2 out of the last 5 years?  If so you probably can exclude up to $250,000 in gain (up to $500,000 if you are married).  You may or may not be required to report the sale on your tax return if you can exclude the gain (I always recommend including the sale if the form 1099S that the escrow company sends you is more than the applicable exclusion amount; it can save a letter later on.) Generally you may only exclude your residence gain only once every 2 years (there are some exceptions.)  Also if you own more than one home, you can only exclude the sale of the [...]

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Tax Musings of a Burbank CPA: Book Report on “You Can Deduct That?” – How Small Business Owners Can Generate Tax Savings

A while back I reviewed Eva Rosenberg’s book: “Deduct Everything” about how to save on taxes.  Now I recently bought and finished “You Can Deduct That?” a book written by fifteen Certified Tax Coaches about how small business owners can increase deductions and save taxes.  A friend and associate of mine, Amit Chandrel, who is a CPA as well as a CTC, wrote chapter 15.  In fact, many of the CTCs writing chapters in the book are CPAs, Enrolled Agents, Chartered Financial Consultants, and one is a Certified Financial Planner. Anyway, after reading the book I was impressed with the wide range of information available to help get more tax deductions and generate maximum cash flow for businesses, including: 1. Using the Affordable Care Act to create opportunities 2. Tax planning and income shifting  3. Hidden business deductions 4. Estate planning opportunities 5. Retirement planning  6. Real estate wealth generating strategies 7. Protecting yourself from an IRS audit 8. Ways to keep your hard earned money ..and much more including a comparison of business entities.   I would recommend this book to people who have a business and don’t feel they are getting enough cash flow through tax savings and [...]

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Tax Musings of a Burbank CPA: How to Calculate Your Gain or Loss On Real Estate Sale

If you have real estate you are planning to sell, calculating any income taxes due on the sale becomes a priority. Whether you are selling a residence, a rental or an investment property (different taxes rules apply to each), calculating the gain or loss on the real estate is the first step to figuring out the taxes. The gain or loss is calculated by subtracting your tax basis and selling expenses from the gross sales price of the property.   You calculate your tax basis by taking the original purchase price of the real estate plus any additional costs that were paid through the escrow (except real estate taxes, insurance and prepaid interest), then add any capital improvements made to the property (like adding a roof, pool, modernizing a kitchen, anything that improves the value of the property; regular maintenance doesn’t count) and any fixing up expenses made to the property to sell it.  If you have a rental, you have to deduct depreciation expense taken each year you rented the property.  This will give you your tax basis in the property. Now look at your escrow – commissions, transfer taxes, escrow fees and any other expenses you are not [...]

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