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nyc BLOG estate

1997 Tax Reform - Great for Real Estate!

The Taxpayer Relief Act of 1997 - signed into law by President Bill Clinton together with the Balanced Budget Act of 1997 is probably the most significant change in recent times affecting real estate. This law made some major improvements for Home Sellers, Property Owners and First Time Home Buyers. It simplified taxes for 99% of Homes sold in the U.S.

Since 1997 Home sellers are eligible to exclude up to $250,000 if single or up to $500,000 if married, of the capital gain on the sale of the residence. In order to be able to claim the entire exclusion, the home seller must have owned and resided in his home for at least two years of the last five years prior to the sale of the residence. If eligible for the inclusion, it may be claimed once every two years.
If the home was sold because of a change in employment, health, or other unforeseen circumstance, the home seller may be eligible to claim a partial exclusion of capital gains even if he or she didn't live in the home for a total of two years of the last five before the sale. The portion of the partial exclusion is calculated based on how long the seller lived in and owned the home. The exclusion relates to the gain only, not the gross sale price. Broker's commission is deducted from the gross sale price as is capital improvements and closing costs.
Prior to the Taxpayer Relief Act of 1997 the tax law allowed rollover that required reinvestment in a home of greater or equal value. The previous law also allowed a one-time capital gain exclusion of $125,000 for taxpayers over age 55 who sold their homes.
This tax reform enabled many to keep much of their wealth that they accumulated from the sale of their homes.
The 1997 tax reform law also allows early withdrawals from Ira's without penalties of up to $10,000 for First Time Home buyers. The law defines first time home buyers as any one who has not owned a home for the past two years. The cap gain tax was also lowered from maximum 28% to maximum 20%.
The Taxpayer Relief Act of 1997 has helped many sellers. Many who did not have to wait until age 55 to get an exclusion and helped fuel the hot real estate market these past 10 years.
This same 1997 Tax Reform law also helped to revitalize distressed urban areas by creating empowerment zones. The creation of urban empowerment zones to promote business development.
All one has to do is walk through Harlem today and it is quite evident that this once distressed part of Manhattan is revitalized. New condos are everywhere. Shells of Brownstones have been converted to new condo Townhouses. Major banks, retail chains, real estate brokerages and hotels have opened and are opening on 125th Street and throughout Harlem. Bill Clinton currently has his office in Harlem.
The City of New York offers many programs to encourage home ownership several of the programs are for first time buyers. Many New Yorkers want to buy a home but don't have enough money saved for their down payment and closing costs.
As part of Mayor Bloomberg's "New Housing Marketplace Plan," the New York City Department of Housing Preservation and Development (HPD) created the HomeFirst Down Payment Assistance program. It provides qualified homebuyers with the greater of 6% of a home's purchase price or $10,000 toward the down payment or closing costs on a 1-4 family home, a condominium, or a cooperative in one of the five boroughs of New York City.

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