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10 tax tips for home sellers

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Tax time image via Shutterstock.

The IRS has recently issued a helpful list of 10 tax tips all homeowners should keep in mind when selling a home:

1. You are usually eligible to exclude the gain from income if you have owned and used your home as your main home for two years out of the five years prior to the date of its sale.

2. If you have a gain from the sale of your main home, you may be able to exclude up to $250,000 of the gain from your income ($500,000 on a joint return in most cases).

3. You are not eligible for the exclusion if you excluded the gain from the sale of another home during the two-year period prior to the sale of your home.

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All properties have been assessed for 2011, so many homeowners start wondering whethter they should start a tax appeal or not.

Here are some guidlines about tax appeals I hope this helps you

1. Both buyers and sellers can benefit from tax appeals
    a. the seller can make thier property more appealing to prospective purchasers
    b. the buyer can potentially reduce their taxes by using their purchase price.

2. The Appeal Process:

    a.Filing deadline: APRIL 1st in ALL municipalities that have not had a municipal wide revaluation or   reassessment.

    b. MAY 1st or 45 days after the Final Notice pf Assessment in municipilaties that have undergone a Municipal wide revaluation or assessment.

    c. The filing deadline is STRICTLY ENFORCED. Failure to file your appeal by the deadline will result in you appeal being rejected.

3. Where will the appeal take place?

    a. COUNTY BOARD OF TAXATION    if the assesment is $1,000,000 or less, you must file with the County Board of Taxation (for me it is Monmouth)

    b. TAX COURT OF NEW JERSEY  if the assessment is more than $1,000,000 you have the right to file with   the Tax Court directly.

4. When is the date of Valuation?
    a. The Valuation date for Tax Appeals is  October 1st of the previous year. So in todays case it would be Oct. 1st 2010.

5. How Can I tell whether I am over- assessed?
    a. In New Jersey, most municipalities do not assess at 100% of true value.
    b. At what percentage of true value is my municipality assessing?
                Rumson:         84.96%
                Little Silver:   76.84%
                Sea Bright:     67.90%
                Red Bank:      100%

To find your municipality percentage value :  Tax equalization rate

6. How Does Assesed Value Compare to Implied Value?
     In the following hypothetical example I will use the above towns as an example:
            If your 2011 assessment is $500,000

            In Rumson your property is worth $588,512 using the 84.96%
I took the assessed value of $500,000 and divided it by town percentage value which in Rumson is 84.96%
            Little Silver: $650,703 using 76.84%
            Red Bank:     $500,000 using 100%

7. What does the homeowner have to prove?

    Assessing is not an exact science.

            You must Prove that the Implied Value is 15% TOO High
using the above example the Rumson owner is assessed at $500,000- the owner will have to demnstrate that the value was less than $511,771 as of October 2010 for any relief.

            How did I come up with this number?  on the chart that you clicked the above link, already has it done for you. 
If you want to do it manually you would take the percentage rate in this case 84.96% x1.15= 97.70 (upper rate). move the decimals over to the left. Then divide the assessed value again in this case $500,000ivided by .9770 =$511,770.726 and that' how it is done :)

 8. Appeal at Your Peril!!!
   a. When a homeowner appeals and their assessment is too low, their assessment can be INCREASED!
     b. The possibility of an increase is another reason that it is vital to consider engaging an attorney who focuses mainly on real estate tax appeals to examine the case.

9. Tax Court Value

    Residential Properties
Tax Court Value generally equals Actual Market Value
        Sales Comparison Approach
        Cannot compare assessments or taxes to other properties -  
                    The question is what was the Property Worth as of October 1 2010?
                    in other words Is YOUR VALUE too versus the comparable sales?

10. How can a Realtor Help YOU the Homeowner?
a. A Realtor can gather the information on comparable sale.
      b. A Realtor can use the MLS to locate sales data between October 1, 2009 and October 1, 2010.

            What is a comparable?
            It must have similar location, square feet, acreage, HOME TYPE, age, condition, amenities (pool, basement etc.)

     c. Make sure that the Comparable Sales are high Quality.
     d Questions to ask:
            -Was the sale marked non-usable? ( the SR1A's will have that marked, these are the papers that the town has on each property sale).
Was the property exposed on the market for a very long time?
            -Were there several offers made?
            -Was the seller UNUSUALLY motivated to sell?

Monmuth County Appeal paperwork

for more detailed information on assessments

Before starting the appeal proces you may want to get an appraisal done cost can be anywhere from $450 up.

As a buyer who has a contract on a property and feels that taxes and assessment is high can legally start an appeal before they close on the property. This way they can benefit from the appeal during their first year in the new home.

Please feel free to contact me or Ted Kuch contact below for more information. 

This information was obtained by me from a seminar that Edward Kuch held. He and his firm handle Real Estate Tax Appeals to contact them:
                                                    Edward J Kuch III 
                                                    Skoloff & Wolfe ,P.C. 
                                                    [email protected]

Let them know where you got your information.

This information is deemed reliable and nnot guaranteed. Consult your professionals for accurate information pertaining to your individual situation.



Be Sure to Know Whether You Qualify for the Earned Income Tax Credit

Be Sure to Know Whether You Qualify for the Earned Income Tax Credit 

The Earned Income Tax Credit, commonly referred to as EITC, can be a financial boost for working people adversely impacted by hard economic times. However, one in four eligible taxpayers could miss out on the credit because they don’t check it out. Here are the top 10 things the Internal Revenue Service wants you to know about this valuable credit, which has been making the lives of working people a little easier for 35 years.

1. Just because you didn’t qualify last year, doesn’t mean you won’t this year. As your financial, marital or parental situations change from year-to-year, you should review the EITC eligibility rules to determine whether you qualify.

2. If you qualify, it could be worth up to $5,657 this year. EITC not only reduces the federal tax you owe, but could result in a refund. The amount of your EITC is based on the amount of your earned income and whether or not there are qualifying children in your household. New EITC provisions mean more money for larger families.

3. If you qualify, you must file a federal income tax return and specifically claim the credit in order to get it – even if you are not otherwise required to file.

4. Your filing status cannot be Married Filing Separately.

5. You must have a valid Social Security Number. You, your spouse – if filing a joint return – and any qualifying child listed on Schedule EIC must have a valid SSN issued by the Social Security Administration.

6. You must have earned income. You have earned income if you work for someone who pays you wages, you are self-employed, you have income from farming, or – in some cases – you receive disability income.

7. Married couples and single people without kids may qualify. If you do not have qualifying children, you must also meet the age and residency requirements as well as dependency rules.

8. Special rules apply to members of the U.S. Armed Forces in combat zones. Members of the military can elect to include their nontaxable combat pay in earned income for the EITC. If you make this election, the combat pay remains nontaxable.

9. It’s easy to determine whether you qualify. The EITC Assistant, an interactive tool available on, removes the guesswork from eligibility rules. Just answer a few simple questions to find out if you qualify and estimate the amount of your EITC.

10.   Free help is available at volunteer assistance sites and IRS Taxpayer Assistance Centers to help you prepare and claim your EITC. If you are preparing your taxes electronically, the software program you use will figure the credit for you. If you qualify for the credit you may also be eligible for Free File. You can access Free File at

For more information about the EITC, see IRS Publication 596, Earned Income Credit. This publication – available in both English and Spanish – can be downloaded from or ordered by calling 800-TAX-FORM (800-829-3676).



Tax Topic 601, Earned Income Credit

Tax Credit chart with explanations also for current home owners

Congress has extended and expanded the homebuyer tax credit. The modifications in the column labeled

“December 1 – April 30, 2010” become effective when President Obama signs the bill. All changes made

to the current credit become effective on that date, as well.

Download Government_affairs_tax_credit_ext_chart_110409

Attn: Homeowners of 5 yearsTake Advantage of the Extended Tax Credit!

President Obama has signed into law the Unemployment Compensation Extension Act (H.R. 3548) that included, as an amendment, the extension and expansion of the Homebuyer Tax Credit.

The bill provides a new incentive for existing homeowners who have owned their current homes at least five years, making them eligible for tax credits of up to $6,500 when they purchase a new home. I believe this provision benefitting existing home owners, combined with historically low interest rates, will help engage a large number of qualified move-up buyers who have been sitting on the sidelines hesitant to list their current homes… if they act now!

The bill also extends the previous incentive for first time homebuyers – or anyone who hasn’t owned a home in the last three years. Those buyers will still get up to an $8,000 refundable tax credit.

The legislation includes other qualification provisions. For example, the credit is available only for the purchase of principal homes (no second or vacation homes) costing $800,000 or less and the credit is scaled back and gradually eliminated for individuals with annual incomes above $125,000 or couples with incomes above $225,000.

To qualify under either provision, buyers must sign a purchase agreement by April 30, 2010 and close by June 30. This is likely to be the last tax credit that the government will offer to first time and move-up buyers. The window of time is shorter than it may seem, especially for potential buyers who need to list and sell their existing homes. We must do everything we can to help them take complete advantage of it.

Great News regardign NJ Property Tax Proposal

I recieved a letter from Senator Kean stating THANKS TO ALL OF US opposing the tax property proposal the Governor has withdrawn his proposal. To view the complete letter click on this link Download Taxstateltr.

To Keep or Not to Keep

To Keep or Not to Keep?

Eliminate the monthly mountain of paperwork by keeping only what you need.

You probably have dozens of documents you know you should hold on to, whether they're in clearly labeled, well-organized files or scattered around your house or office. Trouble is, when you finally get a chance to sort through them and weed out the ones you don't need anymore, it's not always easy to know what's essential and what isn't.

That's why I created the charts on the following pages. Keep in mind that what often separates the papers you need -- and how long you keep them -- is whether they're related to anything you deducted when you filed a tax return.

Save every tax-related document for at least three years after you file the return, which is the length of time that the IRS has to determine that you owe additional taxes -- that is, if you reported all of your income. If you didn't, and the amount that you didn't report is more than 25% of the gross income on your tax return, the IRS has six years to assess additional tax. And if you didn't file a return or filed a fraudulent one, the IRS can knock on your door anytime.

However, you might want to save most tax-related documents for seven years or more -- even though that's longer than the IRS and some accountants recommend. (We'd rather be pack rats than show up empty-handed to meet with someone from the IRS.)

Of course, you should keep the most recent version of legal documents, such as a will, forever. But as for bills, statements and receipts for items and services that you aren't deducting -- it's your call. Just remember -- shredding is the best way to dispose of papers with your account or Social Security number on them.

For the official IRS guidelines, read Publication 552: Recordkeeping for Individuals.
IRS Publications

Toss After One Year

Item: Automobile records (for a car you no longer own)
Exception: If you donated the car to charity, keep proof of donation and related documents for at least seven years.

Item: Cable bills (household)
Exception: If you're deducting the cost of cable, keep the bills for seven years.

Item: Cell phone bills (personal)
Exception: If you're deducting the cost of the cell phone or of any calls, keep the bills for seven years.

Item: Certificate of deposit (that's expired)

Item: Credit card receipts and statements (personal)
Exception: If you're deducting items or services you've charged, keep the receipts and statements for at least seven years.

Item: Passport (expired)
Exception: If you've replaced the expired passport, you can destroy the old one or keep it as back-up ID.

Item: Professional dues (that you're not deducting)
Exception: If you're deducting the dues, keep receipts and canceled checks for at least seven years.

Item: Receipts (for items you didn't deduct or get reimbursed for)

Item: Service agreements (expired)

Item: Social Security statements (from prior years)
Exception: Keep the most recent statement.

Item: Telephone bills (personal)
Exception: If you're deducting any calls or the cost of telephone service, keep canceled checks and itemized bills for at least seven years.

Item: Utility bills (household)
Exception: If you're deducting any utilities, keep canceled checks and bills for at least seven years.

Item: Warranties (expired)

Toss After Three Years

Loans (that you've paid off)

Promissory notes (that you've repaid)

Toss After Seven Years


Accident reports and claims (related to a closed case)
Automobile records (for a car you donated to charity)
Bank account statements
Back-up copies of financial documents on your computer's hard drive
Brokerage statements (for stocks or mutual funds you've sold)
Cable bills (that you're deducting)
Canceled checks (for expenses you're deducting or for legal matters)
Cell phone bills (that you're deducting)
Certificate of deposit (that's related to your business and has expired)
Capital improvement receipts (related to rental income from real estate)
Charitable contribution receipts
Child care payment receipts
Credit card receipts and statements (for expenses you're deducting)
Dependent care payments
Flexible-spending account (receipts, statements)
Home office equipment, supplies (that you're deducting)
Insurance policy (for a home you've sold)
Interest expenses (that you're deducting)
Invoices (for items and services you're deducting)
IRS Form 1099
IRS Form 1099-G
IRS Form 1099-R
Lease agreements (related to rental income from real estate)
Mortgage interest payment receipts
Property records (related to property you've sold)
Professional dues (that you're deducting)
Purchase documents (related to property you've sold)
Sale documents (related to property you've sold)
Stock option agreements (which you've exercised)
Tax returns (personal and business)
Telephone bills (that you're deducting)
Title (to property you've sold)
Utility bills (that you're deducting)

Keep Forever

Item: Adoption papers

Item: Appraisals
Exception: If you donated the item to charity or sold the item, keep appraisal and related documents for at least seven years.

Item: Bank account statements (that include alimony payments you received)
Exception: If you aren't going to sue for back alimony, you can destroy these after the payments have stopped and the person paying alimony dies.

Item: Birth certificate (certified copy)

Item: Brokerage statements (stocks, bonds and mutual funds)
Exception: After you sell the stock, bond or shares of a mutual fund, keep the statements for seven years.

Item: Citizenship papers

Item: Closing statements (related to property you've sold or to rental income from real estate)

Item: Confirmation slips (from the purchase or sale of securities)
Exception: After you sell the stock, bond or shares of a mutual fund, keep the confirmation slips for seven years.

Item: Custody agreement(s)
Exception: Once all of your children have turned 18, you can throw out any custody agreements.

Item: Deed(s)
Exception: Keep even if you sell the property -- you never know when you'll be hit with a lawsuit.

Item: Deferred-compensation agreements

Item: Divorce decree(s)

Item: Distributions from tax-deferred retirement plans

Item: Financial aid documents
Exception: After the student has graduated and begun repaying loans, keep the documents for at least one year.

Item: Gift-tax returns

Item: Home improvement receipts

Item: Home inventory

Item: IRS Form 942

Item: IRS Form 2119

Item: IRS Form 4070A

Item: IRS Form 5498

Item: IRS Form 8606

Item: IRS W-2 forms

Item: Lawsuits or other legal actions

Item: Marriage certificate (certified copy)

Item: Medical records

Item: Military records (including discharge papers)

Item: Partnership agreements

Item: Paycheck stubs (the last one you receive each year)

Item: Pension plan documents

Item: Power of attorney

Item: Property-related paperwork
Exception: If you sell your home and don't roll over your profit/gain to the next house you purchase, you can toss the following seven years after the sale: title, insurance policy, purchase price, settlement or closing costs, cost of any improvements, casualty losses you've deducted and insurance reimbursements for casualty losses.

Item: Religious documents (ketubah, baptism certificate)

Item: Retirement plan contributions

Item: S corporation documents

Item: Separation agreement

Item: Stock certificates

Item: Service agreements (in effect)

Item: Stock option agreements
Exception: Keep until you've exercised them; then keep for at least seven years.

Item: Tax returns

This information is for informational use only. Consult your accountant, lawyer etc for professional advice.

Sources: Canby, Maloney & Company, Framingham, Mass.; Cleveland Financial Group, Cleveland, Ohio; Dennis & Dennis, Rancho Bernardo, Calif.; Financial Planning Association; Larry Foster, CPA/PFS and partner, Richard A. Eisner and Company, New York; IRS publications. Better Homes & Garden Article.