Real Estate Taxes Flashcards
What are ad valorem taxes and who is involved?
Taxes based on value
The tax assessor/appraiser establishes the requirements, and the tax commissioner/collector determines and collects
**Assessed value/property tax calculation
MV * assessment rate = assessed value before exemptions
Assessed value - exemptions = new assessed value
New assessed value * millage rate = yearly property tax
(millage rate = county budget/county land value)
A mill = 1/10 of 1% = .001
Alabama classification of properties and tax percentage
Class 1 = utility companies, 30%
Class 2 = other commercial/industrial, 20%
Class 3 = residential, historic, farmland, timberland, 10%
Class 4 = personal property, 15%
Property tax appeal timeline and process
Can make an appeal to the Board of Equalization within 30 days of valuation change notice
1) review with tax assessor
2) meeting with Board of Equalization
3) legal proceeding with the state Circuit Court
What amount is taxed under income tax?
Current tax rate – income paid as salary, after tax cash flow if sole proprietorship, dividend income paid from REITs
(real estate investment trusts)
What are the allowed tax deductions (incentives) on real estate investments?
Depreciation deduction- 39 commercial, 27.5 residential
Mortgage interest deduction
Tax credit- 1st time homebuyer
Homeowner’s capital gain exclusion
Difference in tax rates on capital gains
Taxes on resale of investments = CG
if STCG - at your tax rate
if LTCG - 15 to 20%
Calculation for adjusted basis
Original/initial basis
+ capital expenditures (asset that benefits over time)
- accumulated depreciation
*Used for calculating capital gains taxes
?? Capital gain tax statement
Net sales - adjusted basis = gain on sale
Accumulated depreciation * tax rate
Remaining gain * tax rate
= total capital gains tax
