Tax Liability Questions
Do you need to know what tax liability means? Are you selling a second home and need to know how that affects you? When dealing with tax liabilities, questions arise but often a person doesn’t know where to turn for the answers. Read below where Experts have answered questions pertaining to the different types of tax liabilities.
What is tax liability?
Tax liability is the tax used to fund money to an authority due to certain taxable situations that may occur. They can be determined by applying the correct tax rate to what is connected with a tax base. Events that are taxable may include the annual income of an individual or business, assets being sold, and inheritances.
Would a person avoid tax liability on the profit (capital gains) from the sale of a home if they buy a new home, with a mortgage, with that money, in a different state?
In many cases, a person will not avoid tax liability on the profit, but it is possible to avoid a certain amount of the capital gain if the person resided in the house and it was noted as being the primary residence from a 2-year time span out of a total of 5 years. A person will need to obtain a new mortgage due to the interest being tax deductible. The location of the state of the new home will not matter.
What is the tax liability on the sale of a second home in MA and the primary residence of the owner is in CA?
The money that would be earned from the sale of the house would be taxed as gain that will be associated with using for purposes that was at the federal level. The gain would be added by using the selling price and the basis being lessen. The house has a basin which is the original purchase price that is added to what the improvements may cost.
The person would have to pay state taxes to MA because it is where the house is located. The state of MA has a 5.3% flat tax rate. The person would have to inform the IRS that the same gain to the CA residence that the person lives at. The IRS will let the person to have credit for what was paid in the state of MA.
What is the tax liability to a grandchild receiving a distribution from a generation skipping trust in 2012?
A person may obtain a generation skipping trust because it helps in trying to avoid estate, gift, and transfer taxes.
What is the tax liability on a Quit-Deed of property to another person?
A property that has a deed over it and is classified to be on sale; it only happens if the items are transferred. The property can also be given to a person has a gift and will not have to pay taxes on it.
Tax liabilities are ways to help people that may struggle from interest on taxes. The taxes sometimes may benefit some people and but not others. Since tax can be complex for many, it is often better to seek the advice from an Expert than to take matters in your own hands.