DFW Real Estate Blog

Capital Gains Tax Law –For Real Estate Flippers Tax Law Makes the Difference

While housing prices have cooled in many markets, there are still some hotspots. Real estate investors are Gypsies when it comes to turning a quick sale: they will go where the home appreciation rates are still hot. In recent months they have abandoned Sacramento for parts of Arizona and New Mexico; as a result the sales rates in Sacramento have dropped considerably, along with the appreciation rate. What has not changed in any of the markets is the application of capital gains tax law.

Buying a house and then selling it after a short period may turn a profit for you, but how much of a profit depends on how the IRS views the transaction. Current law still applies a form of capital gains tax law to most home sales, with the rate depending on a couple of factors. If you owned it for less than a year, the profit will be taxed at your income tax level; for many of us thats about 35%. If you hold on to it for a year or more, the tax rate on sales profit will be at a lower capital gains rate, usually about 15%.

If and only if the home is regarded as your principal place of residence, up to $250,000 in profit - or $500,000 if you are married and filing jointly - will be exempt from the capital gains tax on home sale. In order for a home to qualify as a principal residence, you must have lived in it at least two years out of the last five.

Capital gains tax law also provides that you can defer taxes by exchanging the house youre flipping for another piece of real estate; known as a like-kind or Section 1031 exchange. The only restriction is that the property you are trading is an income producing asset and not personal property. Otherwise, you can trade a residence for a commercial property or a structure for a piece of land. The parameters are fairly broad as long as the house has been a business asset; thus the capital gains tax on home sales do not apply.

There is also a rule of moderation in this practice. If you engage in a lot of real estate acquisition and resale over a relatively short period, the IRS may look upon the sum of all that activity as a business, rather than an investment strategy. If they chose to do so, the capital gains tax law will not apply and the tax rate on your transactions will be based on the income tax index.

The leveling off in the housing market is going to take a lot of dabblers out of this business. Nevertheless, if you see continued opportunity in real estate trading it would be wise to consult your tax accountant as to the allowable level of activity and to ascertain the details for each of the rules that define this activity in capital gains tax law.

G. Mundy is a freelance writer specializing in bad credit mortgages and finances. For more information, please visit Mortgage Lenders Plus.com

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Real Estate Websites - Avoiding the Embarrassment of Broken Links

Your real estate website should be the epitome of professionalism.

Why? Because websites reflect their owners. So if a real estate website is sloppy and full of errors, readers will think the same of the agent behind the site. And who wants an error-prone agent helping them with something as important as buying or selling a home?

Take hyperlinks, for example. A website with broken links does not inspire confidence. It does not convey attention to detail, which is what people look for in a real estate agent.

The Reason for Broken Hyperlinks
Broken hyperlinks happen for several reasons: (A) The link points to a file that no longer exists. (B) The link points to a file that has moved. (C) The link is written incorrectly.

Regardless of why broken hyperlinks happen, you should make sure they dont find their way into your real estate website. When you do find them, correct them immediately.

Broken links say a lot about a website, and none of its good. They say…

* This is an amateur, unprofessional site.

* This site is not managed by anyone. (Known as the ‘ghost-town effect’)

* The owner of this site has no attention to detail.

* The owner of this site does not care about the site.

Checking for Broken Hyperlinks
Obviously, you dont want your visitors to think any of these things. So conduct a daily walk-through of your website — weekly at the least. Click on all the links (especially those that link to off-site information, as this information may have been moved without your knowledge). Make sure all images display properly.

A weekly review will only take you two or three minutes, depending on how large your website is. But no matter how long it takes, its essential.

How to Automate the Process
For a faster and more thorough approach, enter each of your web page URLs into the link checker at this site: www.validator.w3.org/checklink. It will perform an automated diagnostic check of the hyperlinks on every page.

Some of the errors the program returns will merely be recommendations. You can be the judge of that. But its a quick way to check links for basic functionality — especially on larger sites with a lot of links and pages.

* Copyright 2006, Brandon Cornett. You may republish this article in its entirety (and unaltered), provided you keep the hyperlinks active and include the byline and authors note.

About the Author
Brandon Cornett wrote the book on real estate websites and web marketing. The Agents Guide to Websites & Web Marketing includes more than 50 pages of tips and strategies, helpful illustrations, and a comprehensive review of real estate websites from all over the web. Learn more at: http://www.armingyourfarming.com/products/webguide.php

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