Mortgage Debt Relief and Taxes

 The Mortgage Debt Relief Act is set to expire at the end of 2012. This is the law that may exclude from taxation qualifying debt forgiven at the conclusion of short sales. Although it is possible that this law will be renewed, no one knows for sure.

 For some time now, emails have circulated suggesting that the federal health care law will impose a 3.8% federal tax on the sale of all homes. The emails are terribly misleading – the tax referred to is neither a real estate transfer tax or a sales tax. Instead, it’s a 3.8% tax increase on capital gains (and other unearned income) for individuals with adjusted gross income over $200,000 (or $250,000 for married couples filing joint returns). In addition, the normal capital gains exclusions that we work with every day still apply – which in most cases means no tax on the sale of principal residence (assuming less than $500,000 gain under a joint return, $250,000 for an individual return). In the end, a small percentage of homesellers will be affected by this new tax. See my previous blog article.

For more information on the Mortgage Debt Relief Act

For more information on the capital gains tax

Property Taxes and Market Values

If you're like me, you just received your property tax statement for next year's taxes and were shocked by how low the assessed value is.

Based on our neighborhood property values, my assessed value is below what my home would sell for in the current real estate market and yours may be as well. (see chart below showing YTD Maple Grove increase in median sales prices)

The taxable market value is established each year by the Maple Grove assessor using appreciation/depreciation percentages, sales data and computer programs. Additionally, every five years the assessor visits your property to confirm condition and updates which he/she also factors into his/her valuation.

A few details to consider:
(1) Make sure you are looking at your taxable market value and not the net value after the homestead market value exclusion is subtracted (see previous blog article on this)
(2) You can appealing your taxes and taxable market value - an appeal is required by April 30. See the city website and a previous blog article for more details.

If you still have questions on your taxable or actual market value, drop me a line.