What Happens to Past Due Property Tax When I Short Sell my Home?
Video Summary
What happens to past due property tax when I short sell the home? Well that’s a fairly easy one. It’s when you short sell your home the property taxes are paid out of closing money and it reduces the amount that your lender receives or agrees to take in satisfaction of their lien and hopefully releases you from any liability on the loan. So those taxes are paid just like any other closing, when you close on your property and sell it to someone else. The back due taxes are paid, since they’re a lien against the real property rather than your personal obligation. So they are all taken care of and it is only up to you to negotiate with your lender that they’ll take the net proceeds less the payment of the real property taxes in satisfaction of the mortgage.
So if you have any questions, well give me a call at 727-847-2288.
- Published in Real Estate, Videos
What Are the Benefits of a Health Care Savings Account?
Video Summary
What are the benefits of a health care savings account? Well this question is probably better asked to your human resources person where you are employed. It’s an alternative to providing health insurance or can be a blended arrangement whereby your employer puts a certain amount of money into your account every month. Therefore, you can use that money for any health care needs you want.
After a certain amount, which is usually a fairly high deductible, then your health insurance would kick in as far as that’s concerned. But you can use this for dental or prescription drugs, anything you’d like as far as your discretionary.
It’s particularly beneficial to people who are very healthy and don’t go to see the doctor very often, other than an occasional physical and don’t get sick, because the money builds up in that account. And so you can use it for cosmetic surgery or dental work or whatever you would like. It’s not particularly beneficial to people who have prescription drugs that are particularly expensive; usually the money that’s deposited isn’t sufficient to cover the amount that the employee has to pay.
So it’s something that your employer does for you or to you in conjunction with providing health insurance for you. So you probably don’t need to call and talk to me about this but that’s my take on a health care savings account. You probably need to talk to the human resources department where you are employed and ask them to give you more information about it. And it’s an alternative to your medical insurance or deductible.
So good luck with that! You can always call me about your legal needs. It’s 727-847-2288.
- Published in Estate Planning, Videos
Ask Thomas Mitchell: How Does an IRA Distribution Affect My Taxes?
Video Summary
Good afternoon. I’m Tom Mitchell, a partner at the law firm of Waller and Mitchell in New Port Richey, Florida; I wanted to talk to you this afternoon for a minute or two about IRAs. Everybody knows what they are, but very few people know exactly how they work.
Basically, there are two types of IRAs. There is the traditional IRA and the Roth IRA, and there are differences between them. In the traditional IRA, you get to make contributions in to the plan. The money that you put in there accrues interest or dividends and its tax free while it’s in there but when you take the money out, then it’s taxed to you as ordinary income.
On the other hand, with the Roth IRA, when you put the money in, there is no current deduction on your income tax return. The money still grows tax-free while it’s in the account but you get to take it out tax exempt at the end of the time when you retire.
So the next question is who can have an IRA? Basically, anybody who is 70 1/2 and with earned income can establish and contribute to an IRA. When you establish and contribute to an IRA, the account is held by a person called a custodian and they will send you statements every year exactly what the balance of your account is. They also report that to the Internal Revenue Service.
So the next question is then when can I start taking money out? And the first answer is you can take money out at 59 1/2 and that’s awesome. You don’t have to take it out then but you can. And the maximum time that you can delay to take out any money out of your account is 70 1/2. And each year the custodian that I spoke of earlier calculates the balance in your account, divides it by your statistical life expectancy and then they send you a check for that amount.
If you take money out before you’re 59 ½, there’s a penalty. If you take money out after 70 1/2 that’s not sufficient to cover your required annual distribution, there’s also a penalty.
So if you have any questions about your IRA account, be sure to give me a call. This is Tom Mitchell with Waller and Mitchell. My number is (727) 847-2288.
Ask Thomas Mitchell: How Do Capital Gains Affect Me?
Video Summary
I’m Tom Mitchell. I’m a law partner at Waller and Mitchell in New Port Richey, Florida and I want to speak to you this afternoon for a minute or two about capital gains taxation. The capital gains tax is a tax that is levied on the sale of appreciated assets, based on the profit that you make when you sell.
There are two types of capital gains: short term and long term. Short-term are for assets held less than a year. Those get taxed as ordinary income. Long-term capital gains are those held more than a year and they get taxed at a special rate somewhere between 10 percent and 15 percent, depending on your other income.
So exactly what can be a capital asset that is subject to the tax? Pretty much anything, other than something you hold in inventory in your business or as stock and trade, so even cars and personal effects in your house are technically capital assets that could be subject to the tax. Of course, nobody keeps any records on those kinds of things, so very seldom do we see that, unless you have a very expensive painting or something with documentation. But the most common things that we talk about are stocks, bonds, mutual funds and real estate.
Now, real estate includes your personal residence. However, there’s a specific exemption in the law for personal residences, for a married couple of gain of less than $500,000.00 and for a single-person gain of less than $250,000.00, but that’s the single exemption that’s specific to the Internal Revenue Code.
So what happens in a capital gain transaction? How do they compute the tax? Well, they take the purchase price that you paid for the property to start with and they call that “basis” in the tax trade and they add to the basis any structural improvements that you may have made to the property, then when you sell it they subtract that from the selling price to come up with the gain. Then they apply a 15 percent tax rate to the gain to get you the tax.
So let’s take an example. You buy a vacation home up in North Carolina and you pay $100,000.00 for it. The next year you put a deck on the back of the property. The deck’s worth $10,000.00, so you have got $110,000.00 invested in the property. In 2002, more than one year later, you sell the property for $210,000.00, so your gain is the $210,000.00 minus the $110,000.00, or $100,000.00 and the tax due on that transaction at the 15 percent rate is $15,000.00.
So, if you have any questions about capital gains tax or any other tax issues, give me a call. This is Tom Mitchell at Waller and Mitchell, my telephone number (727) 847-2288.
Does Transferring a Property Relieve Me of Financial Obligation on the Mortgage?
Video Summary
Does transferring your property relieve you of the financial obligations of a promissory note and mortgage? The answer is no. When you sign a note and mortgage, you sign the note that says, “I promise to pay you, the bank, or a lender, the money, plus interest,” and it outlines the payments. Then you also sign another document, a mortgage, which is a lien against the property so that if the payments are not made on the promissory note, then the lender is in a position to foreclose and take the property away from the owner. So by transferring the property to a third party or to an entity, the bank still has a lien against the property since the lien was recorded before the conveyance and you still have the responsibility under the promissory note.
This is particularly frustrating when you have what they call a “white knight” who says, “Oh, I’ll help you with your foreclosure action. Just deed me the property and I’ll see about trying to make the payments or get the payments paid.” Well, what that does is you lose control of the property but you still have the liability under the promissory note and it still affects your credit.
So transferring property or some people would say deeding your property to a third party, does not relieve you of any debt on the property and you can still be sued and be held responsible for the promissory note if the lender so elects.
So if you have any more questions about transferring the property, trying to avoid liability under your note and mortgage, give me a call at (727) 847-2288. Thank you.
- Published in Real Estate, Videos