property tax - Linkenheimer LLP CPAs & Advisors

Be Aware of the Tax Consequences of Selling Business Property

If you’re selling property used in your trade or business, you should understand the tax implications. There are many complex rules that can potentially apply. To simplify this discussion, let’s assume that the property you want to sell is land or depreciable property used in your business, and has been held by you for more than a year.

Note: There are different rules for property held primarily for sale to customers in the ordinary course of business, intellectual property, low-income housing, property that involves farming or livestock, and other types of property.

Basic rules

Under tax law, your gains and losses from sales of business property are netted against each other. The tax treatment is as follows:

If the netting of gains and losses results in a net gain, then long-term capital gain treatment results, subject to “recapture” rules discussed below. Long-term capital gain treatment is generally more favorable than ordinary income treatment.
If the netting of gains and losses results in a net loss, that loss is fully deductible against ordinary income. (In other words, none of the rules that limit the deductibility of capital losses apply.)

The availability of long-term capital gain treatment for […]

By Linkenheimer LLP|2024-07-15T19:46:17+00:00July 15th, 2024|business, property tax|0 Comments

The Tax Mechanics Involved in the Sale of Trade or Business Property

What are the tax consequences of selling property used in your trade or business?

There are many rules that can potentially apply to the sale of business property. Thus, to simplify discussion, let’s assume that the property you want to sell is land or depreciable property used in your business, and has been held by you for more than a year. (There are different rules for property held primarily for sale to customers in the ordinary course of business; intellectual property; low-income housing; property that involves farming or livestock; and other types of property.)

General rules

Under the Internal Revenue Code, your gains and losses from sales of business property are netted against each other. The net gain or loss qualifies for tax treatment as follows:

1) If the netting of gains and losses results in a net gain, then long-term capital gain treatment results, subject to “recapture” rules discussed below. Long-term capital gain treatment is […]

By Linkenheimer LLP|2022-04-26T17:53:00+00:00April 26th, 2022|business, property tax|0 Comments

The Tax Rules of Renting Out a Vacation Property

Summer is just around the corner. If you’re fortunate enough to own a vacation home, you may wonder about the tax consequences of renting it out for part of the year.

The tax treatment depends on how many days it’s rented and your level of personal use. Personal use includes vacation use by your relatives (even if you charge them market rate rent) and use by nonrelatives if a market rate rent isn’t charged.

If you rent the property out for less than 15 days during the year, it’s not treated as “rental property” at all. In the right circumstances, this can produce significant tax benefits. Any rent you receive isn’t included in your income for tax purposes (no matter how substantial). On the other hand, you can only deduct property taxes and mortgage interest — no other operating costs and no depreciation. (Mortgage interest is deductible on your principal residence and one other home, subject to certain limits.)

If you rent the […]

By Linkenheimer LLP|2022-03-22T20:35:08+00:00March 22nd, 2022|property tax, real estate|0 Comments

California Tax Updates for 11/17

Update 1:

The rules for property tax appeals in California have changed. Effective June 21, 2021, four rules for tax appeals in CA changed, involving: petitions for redetermination; innocent spouse relief; rules for rescheduling or postponing appeals; and filing documents. These rules are classified as Rule 100 changes, which means they have no regulatory effect. The rule changes were made because the CA State Board of Equalization’s Board Proceedings Division has physically moved to a new location. The mailing address hasn’t changed. The appropriate email address for appeals-related communication is appealsscheduling@boe.ca.gov or fax to: (916) 324-3984. Here’s more: https://bit.ly/3kp5PHj

Update 2:

The passage of California Assembly Bill 150 in July 2021 brought many changes effective for taxable years beginning in 2021 (but before 2026). One is the Small Business Relief Act, which allows qualified pass-through entities (PTEs) to annually pay an elective tax of 9.3% of the pro rata […]

By Linkenheimer LLP|2021-11-17T16:56:24+00:00November 17th, 2021|business, property tax|0 Comments

Vacation Home: How Is Your Tax Bill Affected If You Rent It Out?

If you’re fortunate enough to own a vacation home, you may want to rent it out for part of the year. What are the tax consequences?

The tax treatment can be complex. It depends on how many days it’s rented and your level of personal use. Personal use includes vacation use by you, your relatives (even if you charge them market rent) and use by nonrelatives if a market rent isn’t charged.

Less than 15 days

If you rent the property out for less than 15 days during the year, it’s not treated as “rental property” at all. In the right circumstances, this can produce revenue and significant tax benefits. Any rent you receive isn’t included in your income for tax purposes. On the other hand, you can only deduct property taxes and mortgage interest — no other operating costs or depreciation. (Mortgage interest is deductible on your principal residence and one other home, subject to certain limits.)

By Linkenheimer LLP|2021-10-14T20:31:26+00:00October 14th, 2021|property tax, real estate|0 Comments