Newsbriefs

Tax Time Provides Upside in Real Estate

It may be hard to fathom, but the tax deadline is just around the corner, and it provides many rewards of investing in last year’s red-hot real estate market. But it also brings the possibility of an audit if things aren't handled correctly, according to tax analysts.

Most sellers can cash in on one of the biggest perks in the tax code. Couples can sell their primary residence for a $500,000 profit without paying a cent of income tax. Single taxpayers can pocket $250,000.

To qualify, the house must be your principal residence for two of the past five years -- and even then there's flexibility because those periods don't have to be continuous and there are hardship exceptions.

One huge benefit of buying a home is deducting the mountains of interest you pay, property taxes, certain loan costs and other miscellaneous expenses rather than settling for the standard deduction every taxpayer is entitled to.

But there is a limit to what you can write off. You can deduct interest on up to $1 million of acquisition debt and up to $100,000 of home equity debt -- caps that can seem low considering the average home in Destin hit $658,000 in 2005.

Home warranties have increasingly been gaining interest. So what's a home warranty really worth?

There are essentially two types of home warranties. Builders offer home warranties on new homes and home warranty companies offer warranties. Builder’s warranties are usually for 7 to 10 years on major components and a year on minor items.

The warranty spells out what is covered and outlines procedures for requesting repairs. Federal law requires builders to warranty major components 10 years.

On an existing home, a buyer or seller can purchase a one-year warranty which works like an extended service contract. The warranty usually costs $350 to $600 and covers electrical, plumbing and mechanical components of the house. But they increasingly don't cover items like the roof, washer, dryer or air-conditioner without additional options.

The key to purchasing a home warranty that covers what you want is selecting a warranty that clearly spells out what it covers. Like any other product, some home warranties are better than others.

If something breaks down, the homeowner calls the warranty company, which dispatches a local contractor. The homeowner pays a minimal fee. If the repair falls under the warranty, that's the only cost the homeowner has to pay.

Impact fees may soon be used to help with affordable housing if some Florida lawmakers have there way.

Among the requirements passed by the State legislature in the "pay-as-you-grow" growth management law last year, was the creation of a task force to determine if certain impact fees needed law makers approval.

If approved by law makers, impact fees may soon provide some sort of help for affordable housing needs. Local governments, including county and city officials in Destin and South Walton County may also add more documentary tax stamp fees for new roads, schools and other infrastructure.

"We want to be careful not to direct the (local government) how to deal with it, but by the same token we didn't want a local government to ignore affordable housing," says University of North Florida President John Delaney, the head of the 15-member Florida Impact Fee Review Task Force.