Tax Advantages of Seller financing in today’s Market
With lenders becoming more and more cautious about whom they loan money to, seller financing is becoming more desirable to both buyers and sellers. The buyer obviously benefits by being able to purchase a home they otherwise may not qualify for. However, it is the seller that really has the opportunity to reap the majority of the benefits.
When a seller agrees to carry financing, in addition to the steady flow of installments, they also are in a position to defer some of the income on their taxes if the sales price is above the capital gains limit of $250,000. Instead of declaring the excess amount as income within one year, the seller can defer the amount over the course of the financing period.
The seller must determine how much of each year’s payments are taxable as capital gains, and how much are a nontaxable recovery of the seller’s cost basis. Every payment needs to be broken down into three elements:
-A partial return of the seller’s adjusted basis in the property sold, which is non-taxable
-A portion is the taxpayer’s realized gain on the sale which is considered capital gain
-And finally accrued interest, which is taxable as ordinary interest income.
Prior to offering owner financing, sellers should consult an attorney and their tax adviser about the risks involved.
Should you have any questions or need further information,
please don’t hesitate to contact me, (775) 220-1630
Or visit my blog at www.SellingNorthernNV.com
Joshua Talayka
Chase International
Office: 775 850 5900
Toll Free: 877 922 5900
Cell: 775 220 1630
Fax: 775 850 5901
985 Damonte Ranch Pkwy, Ste. 110
Reno, Nevada (NV) 89521
Source:
Realtor Magazine
Jonathan A Goodman
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