Tax Tips for People Looking to Invest In Real Estate

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It comes as no surprise to most of us real estate agents that so many people today are delving into the realm of property investment.  Today’s great value in terms of low prices, coupled with the unprecedented affordability factor that today’s interest rates provides – makes it almost a foregone conclusion that investment activity will be on the rise.

Despite a challenging economy with less than to be desired jobs rates in most states, more and more buyers are getting into property buying as a long term investment.  In fact, even world-renowned investor Warren Buffett has recently stated that real estate is among the strongest asset class right now.

Here are a few things to think about when considering property invesments:

Local Tax Auditor – Great Resource for Tax Values

If you are looking for preemptive tax values one of the best resources is your local tax auditor. Contact their office and share with them your intended use for the property in question and you will likely find out what kind of tax payments or implications you will be looking at.  They will also be able to confirm whether or not you will be considered owner/occupant status or otherwise and provide you with useful information about what taxes you can expect.

Homestead Tax Exemption for Seniors and Disabled Citizens

Until 2007, there were income level requirements that hindered the eligibility for the Homestead Tax Exemption for many homeowners.  But after the program was expanded the benefit became available for anyone 65 years of age and older or permanently and completely disabled individuals.  One other key change that was made was to include a flat $25,000 property tax exemption amount on the value of homes meeting eligibility requirements.  For more information on this program, visit the Ohio Department of Taxation’s Homestead Exemption frequently asked questions page. During your search for your investment property if you are looking for something that would qualify for this exemption, contact your auditor’s office to find out the amount of projected taxes for that property.

Investment Property Vs. Owner/Occupant Homes Taxed Differently

Most people new to investing in real estate do not realize that property taxes vary depending on the type of ownership involved.  If you are looking solely to invest in a property rather than use the home as your primary residence, then the tax implications will be different for each.  It is important to meet with your Realtor to discuss the potential differences in this regard to get as much information as possible about the expected property tax amount.

Land Used for Farming Is Taxed Lower Than Other Properties

The Current Agricultural Use Value Assessment in Ohio is a program designed to allow farmers the benefit of being taxed based on the agricultural value of the property as opposed to the full market value.  Typically this translates to a lower tax rate for those property owners.  During the transfer of property in these cases, if the new owner intends the land for development use then often the CAUV tax does not apply.  Additional tax implications for the new owner will ensue, so it would be worthwhile to consult with the tax auditor to find out what you may be dealing with.
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This is a great time to buy real estate.  Whether you are getting into your first home or moving up to seize the affordability factor and buying a better home for nearly the same monthly payment – this could not be a better time.  Equally, investors are popping up all over the place.  In as little as seven or eight years, the property you invest in today will likely bring a good return – reason for many Americans to buy property nowadays!  If you would like further assistance with your real estate endeavors or seek additional information about the tax considerations in this article, contact us today!