CD3: Real Estate and Taxes (What Every Agent Should Know)
~Content Detail~

Introduction

• Understand the relevance of tax issues to the real estate industry
• Appreciate the effect of recent tax legislation
• Understand the purpose, structure, and features of this course

Home Mortgage Interest Deduction

• Identify the two main requirements for mortgage interest deductions
• Describe the limits on home equity loans when determining tax deductions
• Summarize the differences between acquisition debt and home equity debt
• List the three requirements needed for deducting interest on a qualified residence
• Summarize the general requirements that must be met for home mortgage points to be deductible
• Define the following terms: qualified residence, acquisition indebtedness, home equity indebtedness, interest, points, and secured debt

Taxation of Profit

• Explain the gain or loss formula
• Identify items that may be included in the selling price
• List items that may (or may not) be used as selling expenses
• Explain adjusted basis and why correct determination is valuable in determining gain (or loss)
• Summarize the differences between repairs and capital improvements and how this test applies differently for rental properties and personal residences
• Define the following terms: depreciation, selling price, selling expenses, adjusted basis, option, and capital expenditure

Exclusion of Gain Rule

• Define principal residence
• Explain when the gain realized on the sale or exchange of a principal residence is tax free
• Identify the tax planning ideas that have been replaced (i.e., 24-month rollover and over-55 one-time exclusion)
• Summarize the §121 requirements to exclude up to $250,000 or $500,000 MFJ (married filing jointly) from gross income
• Explain what happens when one spouse qualifies and the other does not
• Define the following terms: MFJ (married filing jointly), principal residence, and §121 qualification

Applying the Passive Loss Rules

• Explain RREAs (rental real estate activities)
• Summarize requirements for material participation in rental activities
• Describe the three common tests to define material participation for real estate investors
• List at least three types of taxpayers who will benefit from the 50 percent participation and 750-hour requirements

Office-in-Home Rules

• Summarize the three criteria to establish an office-in-home deduction
• Define principal place of business
• Describe which transportation costs may be converted to business mileage
• Cite examples of direct and indirect expenses that are used to calculate the office-in-home deduction
• Calculate the office-in-home deduction
• Describe how the office-in-home deduction creates a taxable gain when the home is sold

close