Module 9 Flashcards
What is the primary source of local government revenue?
Property taxes
What do property taxes fund?
Schools, roads, and hospitals
How are property taxes calculated?
As a flat percentage tax based on assessed property value
Who determines the assessed value of a property?
The County Assessor
What is an abatement?
A reduction in the assessed value of a property (and its taxes) after renovation or new construction
What abatement does the city of Cincinnati offer?
An automatic 10-year property tax abatement after a renovation or new construction
What is the time period for longer abatements?
15 years
What needs to be done to qualify for longer abatements?
The property needs to meet Leadership in Energy and Environmental Design and Visitability Standards
When an investor gets income from Trade or Business when they do not actively participate they are getting _
Passive income
When do passive investors use their investments as a tax shelter?
To offset active income from elsewhere
What type of investor earns income from stocks and bonds of real estate capital assets?
A portfolio investor
What is a type of real estate investment included in a portfolio?
A REIT
What types of leases are included in an investor’s portfolio?
Long-term and triple-net
How are the tax rates determined for portfolio investors?
Based on the types of income
What are the things that a real estate investor can be taxed on?
Sale of the property (Disposition), property taxes, and ordinary income
What are types of tax deductions in real estate?
Mortgage interest, discount points paid on the loan, depreciation allowance
With mortgage interest deductions you can deduct _ but cannot deduct _
Interest on loans, principal paid
What are the types of origination fees?
Origination points and discount points
What are origination points?
Fees paid to compensate the lender that are not deductible
What is an example of origination points?
Commissions
What are discount points?
Pre-paid interest that you can deduct over the loan term
What is the price appreciation taxed at during a disposition tax?
10-20%
What can cause delays to disposition taxes?
Capital gains exclusive, 1031 exchange
What is a major requirement to get the capital gains exclusion for residential properties?
Must have lived in the property for 2 of the previous 5 years
What is the basic idea behind a 1031 exchange?
To temporarily avoid capital gains taxes by reinvesting previous capital gains
What does an opportunity zone do for an investor?
Permits investors to have a portion of previous capital gains taxes reduced for investing in an opportunity zone
What does an opportunity zone investment do?
Free itself from capital gains
Who designates the opportunity zones?
The states
What is affordable housing defined as?
Paying less than 30% of your net income in rent
What does the Low Income Housing Tax Credit do?
Subsidize the acquisition, construction, and rehabilitation of affordable rental housing
