Real Talk Ken Edwards As tax season continues, it’s time to clarify SALT myths
I’m back after taking a hiatus to recharge my writing batteries. Thanks to all who contacted me with encouragement to continue writing.
Now that the Super Bowl is behind us many buyers will leave the couch and be looking through the real estate pages, touring open houses and reviewing their favorite real estate sources to find their next nest.
So far in Feb·ru·ar·y (or Feb·u·ar·y if you prefer) six properties changed hand,s including a 2.61 acre land parcel on Stanwich Road that sold for $1.2 million and a commercial building on Bruce Park Avenue next to European Autoworks. That’s only six transactions in as many business days.
My sale of the week selection is the vacant land sale on Stanwich Road since there’s not a lot of land left for development below the Merritt Parkway and it is flanked left and right by high-end newish homes, making this a great location for development. It’s a good sale that will add measurably to our grand list of taxable properties, in effect putting downward pressure on our mill rate. Love it.
My buy of the week selection is a five bedroom six and two half bath estate on Pecksland Road.
Buy of the week
A very special 7,603-square-foot five-bedroom estate on Pecksland Road just got snapped up for $3.2 million. That’s 59 percent of the $5.4 million it sold for in 2002 after its renovation and addition in 2001. This is a truly gorgeous mid-country home with wraparound porches, expansive terraces, a pool and open floor plan.
There were tenants in residence during the selling process, which may have affected the sale price. In any event, it sold for 58 percent of the assessor’s tax-appraised valuation and on 4.61 acres it would be impossible to build it for anything close to $3.2 million.
This home is definitely ready for its next grateful and happy family.
Sale of the week
My sale of the week selection is a 2.61 acre parcel of land near the intersection of Stanwich and Guinea Roads. Ready for new construction, this vacant land is sandwiched between two very high-end luxury homes, one which sold for almost $7 million 14 years ago. That gives a lot of leeway to the size and scale of what can be built.
The property has been marketed four times starting in 2013 for prices up to $2.5 million. It’s a flat and level lot with no wetlands, perfect for a high-end luxury home builder or someone with blueprints already completed and looking for a parcel to build it on.
SALT myth busters
Local Realtors strive to continue their education beyond the state-mandated courses needed to maintain their license. Last week John Christensen and Pat Vetera of Christensen, DeFruscio, Allen & Company LLC, a Greenwich-based accounting, auditing and tax consulting firm, presented impacts of the new 2018 tax law changes for Realtors and their clients. You need to hear some of the facts they covered using real-life examples that will probably surprise you.
You and I have been misled. We’ve been told through media outlets that due to the elimination of the state and local tax deduction, residents of high-taxed states (including ours) would pay more federal income tax this year. To underscore that point the media are now reporting that income tax refund checks would, on average, be about 8 percent less this year.
Myth No. 1: State and local income tax (SALT) deductions haven’t been eliminated; they’ve been capped at $10,000. For the majority of Americans, that’s not an issue since they’re under that amount anyway. Not so for many if not most of us whose state income tax plus local property tax exceeds that amount. But there is still a SALT deduction, albeit smaller for many people here.
Myth No. 2: It’s a dirty little secret, but as their examples showed, due to the Alternative Minimum Tax (AMT) those deductions were bypassed for many people since they lowered their taxable income below the cutoff. That is, SALT deductions for them weren’t taken into account at all!
Myth No. 3: your refund check from the IRS is your money that you’ve loaned the federal government exceeding your tax liability at no interest. Since withholding tables were adjusted (lowered for most wage-earners) to reflect lower tax rates it isn’t surprising that you have a smaller refund. In essence, you’ve gotten portions of your refund all year long.
Why is this important in real estate? This is big, so pay attention. Potential buyers considering a purchase of property in high-taxed states like ours may argue or negotiate based on the “elimination of the SALT deduction.” The fact that taxpayers with AMT never got it in the first place may surprise them. It’s your chance to educate them and sell your property. I even have handouts for you to use.
If you want a copy of the four tax projection worksheets for married tax payers filing jointly with adjusted gross incomes of $290K, $370K, $149K, and $1,588K send me a note and I’ll email them to you. By the way, all four returns payed lower federal income taxes in 2018 than in 2017.
This Week’s Success Quote
“Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.” — Ronald Reagan, POTUS # 40
Ken Edwards is the principal Broker for Edwards & Associates Real Estate and has lived in town since 1974. All opinions expressed are entirely his own and not those of this publisher. Comments and questions may be sent to K_W_Edwards@ Yahoo.com or call (203) 918-4444.