Concepts & Responsibilities of Homeownership Flashcards
What are the 7 types of Homeownership?
1.) Single-Family Home
2.) Condominium
3.) Cooperative
4.) Townhouse
5.) Planned Unit Development
6.) Multi-Family Homes
7.) Timeshare
Standalone house where the owner owns the house and land:
Single-Family Home
Includes ownership of the unit itself and a share of the interest in the common elements, but not the land that the property sits on:
Condominium
Rather than owning the unit itself, owners have shares of stock in the entity that owns the property:
Cooperative
Owners own the dwelling & the land it sits on, but might also share common elements like condominium owners do. The major difference between this & a condominium is the conveyance of the land with the residence by the deed:
Townhouse
Regular fees used to pay for things like the upkeep of common community areas, road repairs, and structural maintenance:
Assessments
Monthly mortgage payments for repayment of the loan typically include PITI:
P: principal
I: interest
T: taxes
I: insurance
Taxes on the profit a person makes by selling an asset, such as a house:
Capital gains taxes
A benefit enjoyed by homeowners who sell their principal residence:
Capital gains exemptions
Married homeowners may exclude up to the 1st $500,000 of profit on the sale of a primary residence & single homeowners may exclude up to the 1st $250,000
~ Universal exclusions provided by the Taxpayer Relief Act of 1997
~ Reusable every 2 years after the sale
How can a taxpayer become eligible for the capital gains exclusion?
1 of 2 Ways
- Taxpayer must have owned & occupied the home as a principal residence for at least 2 of the 5 years preceding the sale
- Years may be aggregate - not necessarily continuous
How can taxpayer become eligible for capital gains exclusion?
2 of 2 Ways
Homes sold for profit of < $250,00 or $500,000 for joint files don’t require the owners to file an info return reporting the sale of their principal residence
This right is automatic and protects homeowners from claims by creditors being made against their homes, preventing any eviction by these creditors:
Homestead Rights
What are the exemptions to the homestead rights?
~ Mortgage lenders b/c the homestead itself is used as collateral
~ Tax liens
Interest paid in monthly payments is always paid in:
Arrears
Means it is paid after it’s received/issued.
Paid in arrears
What do owners in co-op buildings actually own?
Shares of stock in the co-op corporation
Major difference between a condominium & a townhouse is that…
townhouse owners generally own the land below their unit
How can the difference between a condo & a townhome be verified?
By the legal description in the deed
Usually include the unit & the land:
Townhouses
Usually include the unit only:
Condos
A subdivision or development that includes single-family dwellings along with some common elements such as parks, pools, community recreational centers, and/or golf courses:
Planned Unit Development (PUD)
What do PUD owners actually own?
Their lot & a share in the common elements
Dwellings that are built in a factory (in accordance with federal building codes) and then delivered to the site once complete
Manufactured homes
Buildings with more than four units:
Commercial real estate
What type of property has multiple owners and is typically located in a recreational environment?
Timeshare
How is timeshare ownership different from other kinds of ownership?
Owners only get the right of possession for a certain period of time.
Provides ownership of the unit itself:
Condominium Ownership
The homeowners own individual units and have joint ownership of the common areas:
The form of ownership is stock:
Cooperative Ownership
Mobile homes, doublewides, and trailers:
Manufactured Homes
Dwellings built in a factory and then delivered to the site once complete
Manufactured Homes
Residents receive a proprietary lease for one of the units:
Cooperative Ownership
The homeowners own individual units and have joint ownership of the common areas:
Condominium Ownership
The building and the land are owned just as in a single family dwelling; however, there are separate residences in the building:
Multi-family Homes
Describe the IRA withdrawal tax benefit for 1st time homebuyers
1st time homeowners may be able to w/draw up to $10,000 penalty free from their tax deferred individual retirement account to go towards down payment
The profit received from selling a capital asset
Capital Gains
What is a benefit enjoyed by homeowners who sell their primary residence
Tax exemptions on capital gains
The loss incurred from selling a capital asset is referred to as…
Capital Loss
Include all of taxpayer’s tangible property - real estate, investment properties, & equipment
Assets
The IRS imposes taxes on all forms of _______
Capital Gains
How do you calculate capital gain in real estate?
Sales Price - (purchase price + cost of improvements) + Total Depreciation - Expenses = Gain
Why is depreciation omitted when calculating capital gains on the sale of a primary residence?
B/c homeowners get a tax break on the sale of a primary residence
The length of time a property is held is referred to as:
the holding period
The amount of time between the day a property is bought & the day it is sold:
The holding period
Holding period is shorter than 1 year
Short-term holding period
Determines whether a capital gain is taxed as a short-term or long-term gain
The holding period
Who is eligible for capital gains tax exemptions?
Homeowners selling their primary residences
Created certain exclusions from capital gains taxes for homeowners:
The Taxpayer Relief Act of 1997
Lets an investor sell a property, reinvest the proceeds in a brand new property, and defer all capital gain taxes:
1031 Exchange
~ Calculated according to the assessed value of real estate:
~ They are collected from each property owner to create revenue to run the local governmental agencies and provide benefits to residents of the community:
Ad valorem taxes
The value placed on a property by a governmental unit for use in levying annual real estate taxes:
Assessed value
Removes a percentage or an absolute dollar amount from the assessed taxable value of the property.
Exemption
This homestead tax exemption will reduce the amount of ad valorem taxes paid on the homestead:
Homestead tax exemption
How many homesteads can an owner claim under the homestead tax exemption?
1
Texas law requires school districts to offer a ___________ tax exemption on residence homestead.
$100,000
Counties are required to offer a _________ exemption if the county collects ______ __ ______ ______ ______ or ______ _______ _______.
~ $3,000
~ farm-to-market road taxes or flood control taxes
If a homeowner files a homestead exemption for reduced ad valorem taxes, the state of Texas requires the school district to supply an exemption value of:
$100,000
For homeowners aged 65 or older, the tax authority will establish a based on the previous two years of taxes.
“tax ceiling” based on the previous 2 years of taxes
Texas law requires school districts to offer a ___________ ___________for people who are over the age of 65 or those who have a disability.
$10,000 exemption
Ordinary expenses that a person pays in a taxable year that may be subtracted from their taxable income, thus reducing the tax liability on that income:
Deductions
Most insurance policies cover loss or damage from flooding.
FALSE
What can a seller typically expect to get when they cancel their insurance after selling their house?
A refund
