Unit 1 Tax Advantages

Question 1

Deductions allowed on 1st and 2nd residences.

Answer 1

1. Property taxes
2. Mortgage interest
3. Points paid on loans used to improve or acquire

Points, origination fees, interest, property taxes

Must itemize to take deduction on taxes

Question 2

POIT

Answer 2

1. Points
2. Origination fees
3. Interest
4. Taxes (property)

Question 3

Capital Gains

Answer 3

Profit earned in the sale of an asset.

Question 4

Short Term Gain

Answer 4

Property held 12 months or less is taxed at ordinary income tax rate.

*Recommend buyers/sellers seek tax advice

Question 5

Long-term gain

Answer 5

Propery held more than 12 months is taxed at a different rate than ordinary income.

*Recommend buyers/sellers seek tax advice

Question 6

Taxation of gain on sale of principal residence.

Answer 6

Gain from sale of a principle residence is excluded from tax.
a.) $250,000 max if single taxpayer
b.) $500,000 max if married and filing jointly

Must own and occupy 2 of the 5 years preceding sale. Doe snot have to be sequential.

Question 7

For investors

Answer 7

Tax advantages help to offset lack of liquidity.