WV Panhandle Real Esate

January 1st 2008

Non-Resident Sales Tax Now

Withholding now at  Settlement

West Virginia Code §11-21-71b was enacted during the 2007 legislative session.  It requires the real estate reporting person (the settlement agent) to withhold tax from the proceeds from the sale of real property owned by a non-resident person or entity, and to pay the tax over to the Tax Commissioner within 30 days of the date the amount was withheld.  "Date withheld" is not defined within the section, but it can be presumed to be the settlement date.

The amount of tax to be withheld is 2 ½% of the net proceeds of sale, or, in the alternative, 6 ½% of the estimated capital gain derived from the sale (or exchange).

The effective date of this statute is January 1, 2008.

There are exemptions from the requirement.  If the transferor certifies under penalty of perjury that he/she/they/it are exempt, no tax need be withheld.  The certification may be set forth in recitals in the deed or in an affidavit recorded with the deed.

Exemptions include:

1.  Transfers by residents;

2.  Transfers pursuant to a foreclosure or deed in lieu of foreclosure, including the resale by the mortgagee to a subsequent purchaser;

3.  Transfers by the USA, the State of WV, or any political subdivision;

4.  Transfers of the principal residence of the transferor(s);

5.  Transfers for zero consideration.

The statute is attached for reference.  You should begin incorporating the certification in all deeds beginning January 1.

The Tax Commissioner is, by statute, to provide forms for reporting the amount of tax withheld as well as forms for certifying the seller is not subject to taxation.  At this time, however, the Tax Commissioner has not published the forms to be used.  We will advise you further as soon as the forms become available.  Until that time, we recommend that if a transaction is subject to the withholding tax, you should collect it and retain it in a separate account.

West Virginia Code §11-21-71b  (Click Here t

Real Estate Tax Deductions

Tally Up Home-Related Deductions at Tax Time

Homeownership carries lots of responsibilities and occasional expenses, but at tax time owning is almost always better than renting. That’s because Uncle Sam allows homeowners a laundry list of tax deductions on everything from mortgage interest and capital gains to maintaining a home office or even a second property. If you’re organizing taxes now, be sure to take advantage of any of the following deductions which apply:

• Deduct interest on home loans. You can deduct the interest portion of your mortgage payments each year, thus reducing the income figure which is used as the basis for calculating your taxes due. You may also deduct the interest on home equity loans, as well as interest on home improvement loans.
• Deduct “points” on a loan. Points are the equivalent of 1% of a loan’s principal and lenders charge points as part of your loan. You can deduct points on the purchase of a home, but not points related to a mortgage broker’s fees. Deductions for points can take place when you purchase a home or when you refinance a home loan.
• Deduct property taxes. Local and state-level property taxes get a full deduction.
• Capital gains exemption. Single homeowners need not pay taxes on the first $250,000 of profit (or “capital gains”) on the sale of their home, and married homeowners are exempt for up to $500,000 in profit on the sale of a home.
• Home office deductions. Homeowners can deduct a percentage of their home’s costs proportionate to the percentage of the home used as a home office. If you use 10% of your home as a home office or to run a home-based business, that means you could deduct, for instance, 10% of electrical bills; you can also deduct for repairs, renovations, furnishings or other expenses related to the home office space.
• Home sale deductions. Sellers can lower capital gains taxes by deducting agents’ commissions, legal costs, title fees, marketing, and inspection fees. You may also deduct repairs and renovations completed up to 90 days before you list the home for sale if those repairs were completed in order to make the home more marketable.
• Energy-related home deductions. Homeowners who upgrade their properties with energy-efficient heating or cooling systems, windows, doors, insulation, and other systems designed to reduce energy waste may be eligible for tax credits. Those who use solar energy or other alternative energy systems may also be eligible for breaks.
• Moving costs deduction. Buyers and sellers who are moving at least 50 miles from their last address and who are moving within one year of starting a new job may be able to deduct moving costs, storage costs, or moving-related travel costs (lodging, food). In order to qualify, you will also have to prove you’ve worked at least 39 of 52 weeks at your new job once the move is complete.
• Mortgage tax credits. For lower-income new home buyers, it’s possible to receive a tax credit for up to 20% of mortgage interest paid on your home. The program requires that buyers secure a mortgage credit certificate, and credit amounts may vary by locality.
• Second home deductions. If you own a second home, you are eligible for many of the same deductions that apply to a primary home—mortgage interest, property taxes, capital gains exemptions etc. The IRS allows many of the above-listed deductions on one primary home plus one second home. If you rent out the second home, however, you will need to decide whether to treat it as an investment (meaning you are making money from renting it out) or a second home devoted mostly to personal use, as deductions will differ depending on your decision.

For more information, check the IRS’s information on real estate-related tax deductions:
http://www.irs.gov/faqs/faq3-6.html