Niman Singh

President Obama signed a sweeping health reform bill – The Patient Protection and Affordable Care Act on March 23^rd. According to the Congressional Budget Office, it is expected to reduce the federal deficit by $124 billion.

Meanwhile its long term impact on landlords, property managers, property management companies and real estate professionals is not clear. If you fall into one of the above categories, you have to consider whether you are an independent contractor, employee or employer as it has different impact on you.

How Health Care Reform rolls out and what happens to who and when:

In 2010

1. Insurance Companies
   1. Insurance companies have to remove life-time caps on illness costs, cannot drop you if you fall ill and cannot deny coverage to kids with pre-existing conditions
2. Independent Contractor Property Managers, Real Estate Professionals and Employees
   1. Children up to the age of 26 can stay on their parent’s plan.
   2. Medicare D participants receive $250 credit
   3. Retirees between age 55-64 are offered re-insurance program
3. Employers – Property Management Companies
   1. If you own a property management company that offers health insurance, you get a 35% tax credit from premium paid
   2. Small employers can get tax credit up to 50% of premium paid

In 2011

1. Insurance Companies
   1. Insurers cannot raise premiums without providing justification or will be taken out of state insurance exchange pool
2. Independent Contractor Property Managers, Real Estate Professionals and Employees
   1. Medicare D participants receive 50% off brand name drugs while in doughnut hole
   2. Employees contributions to Flexible Spending Plans are capped at $2,500 limiting the amount that can be used to purchase health care with pre-tax dollars.
   3. Penalty for non-qualified withdrawals from Health Savings Account (HSA) increases from 10 to 20 percent and 15 to 20 per cent for Archer Medical Savings Accounts (Archer MSAs)

In 2013

1. Independent Contractor Property Managers, Real Estate Professionals and Employees
   1. If you are single filer and earn at least $200,000 per year or a joint filer earning at least $250,000 you will pay additional Medicare tax of nine-tenths of one percent called Hospital Insurance tax on income above these amounts.
   2. Itemized deductions for unreimbursed medical expenses rises from 7.5 to 10 per cent. It has an impact on individuals who itemize deductions.
2. Employers – Property Management Companies
   1. New Medicare tax is to be withheld by property management companies

In 2014

1. Independent Contractor Property Managers, Real Estate Professionals and Employees
   1. All individuals are required to carry health insurance or pay an IRS penalty of $750 per individual or 2% of income whichever is greater
   2. Subsidies for payment of insurance cost are offered and family of four earning up to $88,000 (four times the federal poverty level) will get a subsidy.
2. Employers – Property Management Companies
   1. Employers or property management companies with 50 or more employees are required to provide health insurance or pay a penalty of $2000 per employee per year. State exchanges enable employers like property management companies to purchase insurance at rates similar to employees of big companies.

In 2018

1. Insurance Companies
   1. All insurance plans offer preventative care with no co-pays and no deductible

This is some great info that you can share with your clients, expecially those who have experienced short sales and foreclosures:

Short Sale/Foreclosure Tax Tips

If your mortgage debt is partially or entirely forgiven during tax years 2007 through 2012 due to short sale or foreclosure, you may be able to claim special tax relief and exclude the debt forgiven from your income. Here are 10 facts the IRS wants you to know about Mortgage Debt Forgiveness due to short sale or foreclosure.

1. Normally, debt forgiveness due to short sale or foreclosure results in taxable income. However, under the Mortgage Forgiveness Debt Relief Act of 2007, you may be able to exclude up to $2 million of debt forgiven on your principal residence.

2. The limit is $1 million for a married person filing a separate return.

3. You may exclude debt reduced through mortgage restructuring, as well as mortgage debt forgiven in a foreclosure.

4. To qualify, the debt must have been used to buy, build or substantially improve your principal residence and be secured by that residence.

5. Refinanced debt proceeds used for the purpose of substantially improving your principal residence also qualify for the exclusion.

6. Proceeds of refinanced debt used for other purposes – for example, to pay off credit card debt – do not qualify for the exclusion.

7. If you qualify, claim the special exclusion by filling out Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness, and attach it to your federal income tax return for the tax year in which the qualified debt was forgiven.

8. Debt forgiven on second homes, rental property, business property, credit cards or car loans does not qualify for the tax relief provision. In some cases, however, other tax relief provisions – such as insolvency – may be applicable. IRS Form 982 provides more details about these provisions.

9. If your debt is reduced or eliminated you normally will receive a year-end statement, Form 1099-C, Cancellation of Debt, from your lender. By law, this form must show the amount of debt forgiven and the fair market value of any property foreclosed.

10. Examine the Form 1099-C carefully. Notify the lender immediately if any of the information shown is incorrect. You should pay particular attention to the amount of debt forgiven in Box 2 as well as the value listed for your home in Box 7.

Homeowners who participated in short sale or had their real estate property foreclosed, take full advantage of the tax benefits available to you and pay no taxes on forgiven debt.

For more, check out every single rental property tax deduction.

You can save on 2009 taxes by taking action before the end of the year. As always you should always consult with your accountant or tax consultant on how these tax strategies apply to your personal situation. Also the tax tail should never wag the business dog.

Be sure to take action on these tax strategies if they put more money in your pocket:

1. Buy a heavy SUV to haul your tools around and deduct up to $25,000 in depreciation expense. New and pre-owned "heavy" SUVs used over 50% for business qualify for a first-year Section 179 depreciation write-off of $25,000 Read More

2. Buy other business equipment - including software, computers, office furniture - and you can write-off as much as $250,000 in depreciation expenses.

3. Take full advantage of 50% first year bonus depreciation for qualifying new equipment placed in service by December 31, 2009.New real estate land improvements (sidewalks, drainage systems, and so forth) and certain leasehold improvements qualify too.

4. Accelerate expenses by paying vendors and others before end of the year and delay receiving income payments until Jan 1 of 2010. Read More

5. Create a Net Operating Loss by taking the above steps and then use take the 2009 Net Operating Loss, carry it back for up to five years, and recover taxes paid in those years

Read more detail about the 5 year end strategies for saving on 2009 taxes by CLICKING HERE

Commercial Real Estate Investments – Is it a Generational Opportunity?

Current good deals for real estate investors and landlords are deals that turned bad for previous investors and lenders that provided financing to the investors. Commercial property values have declined considerably and in some areas, as much as 40%, which has led some of the experts to suggest that the commercial real estate market has hit the bottom.

Other real estate industry members are predicting that the commercial real estate will not hit the bottom until 2011 or later and it would be risky to make any investments earlier than 2011. Some of the phrases that are being used to forecast the commercial real estate market are “Early is the new wrong” or “Slow motion train wreck” as compared to residential real estate market that blew up.

Commercial real estate market will start recovering when the lending market opens up and the current short-term loans with high rates on decreased property values are either refinanced or paid over longer time. Some lenders are taking the approach of extending the loans hoping that property values recover and they are able to collect on most of their loans. Is commercial real estate at 40% below 2004 prices a good deal?

Read more at Dallas News

Foreclosures and REO’s are bringing many investors out of the woodwork - and some of the new investors who are novices are making many mistakes in selecting and purchasing of undervalued residential real estate.

RealtyTimes published an article that discusses a situation where a novice investor purchased a property and outsourced property management to a property manager. The property had lots of defects and improving the property to get it ready for rental proved expensive for this investor. The investor was blaming the property manager for the expenses.

Before becoming a Do-It-Yourself or absentee landlord, the 3 tips that investors should follow for success are:

1. Understand the market you are purchasing your investment property.

2. Be clear of your end goal and write it down

3. Calculate the costs of owning the investment property

These key rules will help you make good decisions when you are purchasing investment property.