California Real Estate Tax Question

[MR E30 325is]

Jon, et al., from what I have learned, there two scenarios which favor the seller:

1. Owner occupied for more than two years: no capital gains tax / sales tax
   
2. Investment property in which it was the owner's primary residence for at least two of the last five years: no capital gains tax / sales tax

Any scenario outside of these two leaves one exposed to capital gains / sales tax.

Can anyone confirm?

That sounds correct. If you can't do a 1031 exchange (i.e. you don't plan on buying another property with the money made of off the sale of your asset) and you don't fall into either of the two categories you mentioned, its time to pay up.

[mrsleeve]

Sales taxes on realestate wow!!!!!!

[markseven]

That sounds correct. If you can't do a 1031 exchange (i.e. you don't plan on buying another property with the money made of off the sale of your asset) and you don't fall into either of the two categories you mentioned, its time to pay up.

Yup! BTW, IIRC, I met you at Bimmerfest the first year it was the Rose Bowl.

Here's what is on California Tax Form 593-C, lines 17 and 18:

17 Optional gain on sale withholding amount:
Individual 12.3%
Corporation 8.84%
Bank and Financial Corporation 10.84%
Non-California Partnership 12.3%
S Corporation 13.8%
Financial S Corporation 15.8%

18 Total sales price withholding amount:
3 1/3% (.0333%)

[MR E30 325is]

Yup! BTW, IIRC, I met you at Bimmerfest the first year it was the Rose Bowl.

Here's what is on California Tax Form 593-C, lines 17 and 18:

17 Optional gain on sale withholding amount:
Individual 12.3%
Corporation 8.84%
Bank and Financial Corporation 10.84%
Non-California Partnership 12.3%
S Corporation 13.8%
Financial S Corporation 15.8%

18 Total sales price withholding amount:
3 1/3% (.0333%)

No shit? Haha that was back in 09 right? I still had my silver E30 at that point.

Thanks for sharing this info. I do buy and hold REI in AZ, so I am not super familiar with CA laws/regulations.

I did just read a story about a flipper in CA that had a squatter living in his property. It took him 5 years, yes, 5 whole years, to get him out of the property. After reading that I am going to give CA a wide berth and invest elsewhere!

[markseven]

No shit? Haha that was back in 09 right? I still had my silver E30 at that point.

IIRC you had just bought the M50-swapped coupe, from San Diego.

Thanks for sharing this info. I do buy and hold REI in AZ, so I am not super familiar with CA laws/regulations.

I did just read a story about a flipper in CA that had a squatter living in his property. It took him 5 years, yes, 5 whole years, to get him out of the property. After reading that I am going to give CA a wide berth and invest elsewhere!

I loved a lot of things about OC, but the economic climate was too crazy for me. While the heat is nuts in TX and amenities are few, for the most part it is the land of milk and honey. We should have come here years ago.

We own a rental property in Lake Havasu City; 60% equity in four years. It is out performing the CA house like nobody's business. I think you are targeting the right market.

[Farbin Kaiber]

I loved a lot of things about OC, but the economic climate was too crazy for me. While the heat is nuts in TX and amenities are few, for the most part it is the land of milk and honey. We should have come here years ago.

That whole leaving southern California thing is a great experience. Everyone should do it once.

[MR E30 325is]

IIRC you had just bought the M50-swapped coupe, from San Diego.

I loved a lot of things about OC, but the economic climate was too crazy for me. While the heat is nuts in TX and amenities are few, for the most part it is the land of milk and honey. We should have come here years ago.

We own a rental property in Lake Havasu City; 60% equity in four years. It is out performing the CA house like nobody's business. I think you are targeting the right market.

Ah, yeah, I remember now, got confused between two venues.

And good shit!

[markseven]

That whole leaving southern California thing is a great experience. Everyone should do it once.

That right there is funny and true.

Ah, yeah, I remember now, got confused between two venues.

:)

[Haystack]

Can't seem to find the article, but on the front page of one of our local papers today.. Some folks bought acreage out near Dinsmore. (Way out in the hills of Humboldt County).

Bought it 2 years ago for 600k. Got a permit to grow on it. Something like 300+ acres with water rights?


Sold for 8 million.

[markseven]

Wow, talk about being at the right place at the right time with that purchase.


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[FLYNAVY]

I was just talking about this tonight with a friend/coworker who owns a rental home in CA. His monthly rent payment from tenets is $100 less than his mortgage payment, yet he just got informed by the state that they intend to gouge him for 7% of rental "income" on top of the property taxes he already pays. Fuck that state

[markseven]

I was just talking about this tonight with a friend/coworker who owns a rental home in CA. His monthly rent payment from tenets is $100 less than his mortgage payment, yet he just got informed by the state that they intend to gouge him for 7% of rental "income" on top of the property taxes he already pays.

This is exactly our situation. We get $100 less in rent than our impounded mortgage payment, pay the property management company $99 / month, $64 / month for a home warranty policy, and $45 / month for a gardener. Factor in repairs and such, and the 7% rental income tax, it may not be worth it in the long run...

[mrsleeve]

So let me get this straight they want 7% off the top of a net loss??? Not 7% of any profits????? On top of what I would think is a much larger property tax bill since there is a lack of a homestead exemption since its not your primary residence...... WOW THATS FUCKED UP.

Unless its in an area thats about to explode in terms of desirability and value, I would be ridding my self of that liability in a heart beat

[reelizmpro]

This is exactly our situation. We get $100 less in rent than our impounded mortgage payment, pay the property management company $99 / month, $64 / month for a home warranty policy, and $45 / month for a gardener. Factor in repairs and such, and the 7% rental income tax, it may not be worth it in the long run...

So raise the rent?

[MR E30 325is]

So raise the rent?

More difficult than it sounds. Depends on lots of variables, but pricing yourself above market value for rent is the quickest way to increase your vacancy rate, which is extremely detrimental to overall cashflow.

Not to mention, depending on the lease, you can't simply raise the rent. Especially in CA (very tenant friendly state) dropping bombs on your tenants like higher rent, in the middle of their lease, is not going to fly.