Tag Archives: Real Estate Taxes

Should You Add Your Name to Mom or Dad’s Deed?

25 Jan

MetroBoston Publication Date January 24, 2013
By Attorney George Warshaw

Last week we briefly discussed the tax benefits and perils of gifting real estate. One thing that most people do not consider as a gift is when a child’s name is added to a parent’s deed.

Usually a child is added to a deed to make inheritance easier or to help manage the parent’s property.  Adding one’s name to a deed can have unintended tax consequences. It is often considered a gift under the tax code!

If it is considered a gift, then the person receiving the gift receives along with it the same tax basis that the parent had in the property.

If a house is worth $500,000 and a child is added to a parent’s deed as a joint tenant with rights of survivorship, the child usually receives a gift of a portion of the parent’s ownership interest – typically a half-interest.

Keep in mind this basic estate planning rule when transferring any interest in property: a person inherits property at its fair market value; a person receives a gift of property at the same tax basis (i.e. cost + improvements) as the giver has in the property.

Check with your tax accountant, adviser or lawyer before adding someone onto a deed. The foregoing may not apply to you. © 2013 George Warshaw.

George Warshaw is a well-known attorney and author. He represents buyers and sellers of homes and condos in Massachusetts, and prepares wills, trusts, and estate plans. George welcomes new clients and questions. Contact him at metro@warshawlaw.com.

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Is it Better to Give than Receive?

17 Jan

MetroBoston Publication Date January 17, 2013
By Attorney George Warshaw

When families get together over the holidays talk often turns to inheriting mom or dad’s house or estate.

Is it better to receive a gift of real estate today or inherit it later? Tax wise, a gift isn’t always the best choice.

When a person dies one’s real estate has to be valued. Let’s say the present market value of the house is $500,000, but mom or dad only paid $100,000 for it.

Give it to your children while you are alive and they are considered to have acquired it at the same price you (mom and dad) paid plus any improvements.

A person who receives a gift steps into the shoes of the giver. If your children acquire the property by gift at the same price or tax basis as mom and dad paid ($100,000) and sell it later for $500,000, they’ve made a profit of $400,000.

If your children inherit it later, on the other hand, the tax law treats it as if your children bought it at its fair market value. Inherit it at $500,000, sell it at $500,000 and they technically made no profit.

Always consult your tax advisor or attorney before gifting real estate. It’s a complicated subject. The above information may not apply you. © 2013 George Warshaw.

George Warshaw is a well-known attorney and author. He represents buyers and sellers of homes and condos in Massachusetts, and prepares wills, trusts, and estate plans. George welcomes new clients and questions. Contact him at metro@warshawlaw.com.

 

 

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Have Your Property Taxes Gone Up?

16 Jan

MetroBoston Publication Date January 10, 2013
By Attorney George Warshaw

There is no more unpleasant New Year’s surprise than to find a tax bill in your mailbox for your home or condo, especially if your taxes have gone up.

Massachusetts has a confusing way of taxing properties.

First of all, the tax year starts in July, not January (i.e. which the government calls a “fiscal year”). Fiscal year 2013 began last July 1, 2012.

Secondly, most cities and towns issue bills quarterly (Boston, Brookline) while some bill semi-annually (Cambridge, Cape Cod).

Changes in taxes, rates and valuations are announced in the middle of the tax year (January for quarterly taxpayers), not in the beginning (July). One must wait until January to find out what the taxes should have been last July.

If that isn’t confusing enough, here’s the tongue twister: any increase or decrease in the value of your property that appears in a January tax bill doesn’t relate to the year in which the bill is issued; it relates to the previous tax year!!!

The value the city puts on your property that appears in the tax bill issued in January 2013 is what the city believes your property was worth on January 1st 2012 – one year ago!

Now try to figure that out!

Are You Eligible for a Property Tax Abatement?

If your home or investment property is being over-assessed by the city you may be eligible for a tax abatement.

Every January, municipalities that have a quarterly payment plan (like Boston) announce new tax rates and new assessed values of homes and investment properties.

If your property was overvalued you can file for an abatement. The question that you must answer in your application is what your property was worth on January 1, 2012 (one year ago). Your real estate broker is often a great resource of information.

Abatement applications in cities and towns that bill quarterly must usually be submitted by February 1st (be sure to check your town). In order to be eligible for an abatement – and this is critical – all property taxes due by February 1st (including any past due) must be paid by that date.

Once an abatement application is submitted, the city or town must accept your valuation, make a compromise or reject it within a specific period of time. Many applications, especially in Boston, are rejected merely because the city runs out of manpower to process all the applications.

If an application is rejected, all is not lost. A property owner still has a right to appeal to the Appellate Tax Board and begin a legal proceeding. © 2013 George Warshaw.

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George Warshaw is a well-known attorney and author. He represents buyers and sellers of homes and condos in Massachusetts, and prepares wills, trusts, and estate plans. George welcomes new clients and questions. Contact him at george.warshaw@warshawlaw.com.

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