Real Estate Taxation research
The differences between taxes and other levies are that they are unrequited and compulsory (Tadić, 2016). Taxes are not paid with the exchange for certain things or any other material. Citizens of any country have the responsibility of paying taxes ("Taxation", 2018). Real estate taxation entails tax regimes that are applicable to physical individuals, who undertake selling and buying operations or lease of real estate items, and to legal entities that are engaged in economic transactions that involve the particular property (User, 2018). Taxation of individuals is among the avenues used by the governments to raise revenues. There are different aspects of the law that makes taxation of real estate in the US different between the citizens and non-citizens (Sun, Titman & Twite, 2014). Examples of policies that are likely to prevent or act as blockades to investment include the taxation of the disposition of real estate, increases of the tax and the country’s tax reporting necessities.
Real estate’s organizations over the years have provided clarification on existing policies. Such efforts have achieved certain degrees of achievements in the past. For example, in the recent past, there have existed several relief provisions added and clarifications to tax policies that govern real estate investment trusts (“REITs”). An American individual is subject to the United States of America’s income taxation on their worldwide income (Kim, 2017). Persons who are residing in the U. S are subject to the country’s gift, estate, and generation-skipping transfer taxation on their global properties (Malma & P. C, 2015). Non-Americans will only be subjected to income tax only on their assets in the U. A nonresident gross estate includes both intangible and tangible property in the U.
S territory in which the decedent had interest at the time of death or those which he has certain power or rights. A nonresident’s taxable estate range from 26 to 40% of the assets whose value exceeds a $60,000 exemption. 40% tax rate only applies to taxable estates with values above $1. A nonresident’s estate is not allowed a marital deduction except for the surviving spouses is an American citizen (Malma & P. Investments via foreign irrevocable trust or foreign corporation would not have that result (Malma & P. C, 2015). US persons are subject to American gift tax on gifts made from their global assets such a gift tax is imposed on the donor. On the other hand, donors are not subject to income or gift tax on receiving the gift (Sun, Titman & Twite, 2014).
Gifts that are taxable range from 18 percent to 40percent on their fair values worldwide. Americans with rental income pay taxes both at the federal and state levels. Rental income is considered an investment income at the federal level and non-residents may choose to have it categorized as FDAP-Fixed Determinable Annual Periodical income or as ECI Effectively Connected Income. When an individual not residing in the US gets income regular or fixed sources or when such income can be determined prior before it is earned, such kind of income is categorized as FDAP income (“Global Property Guide”, 2016). Under the FDAP, income from rent is to undergo a 30% withholding tax, which is levied on gross amount, without personal allowances, offset for deductions, or credits.
If the taxpayer opts to have his income from rental property classified as ECI, the progressive tax is executed after allowable subtractions have been done. The end implication of this calculation is the assessment value, where the tax will be imposed (“Global Property Guide”, 2016). Taxation of any source of income to individuals by implies that real estate investors are subjected to taxation from their income. On the other hand, seven states do not impose taxes on income, they include Alaska, Nevada, Texas, Florida, South Dakota, Wyoming and Washington State. However, New Hampshire applies tax only on interest and dividend income. Another special classification is Tennessee, where taxes is imposed on income from bonds and stocks (“Global Property Guide”, 2016). There are different perceptions from various groups of people concerning real estate taxes.
Economists have different opinions on property taxes. Some view property taxes as benefit tax with the aim of generating revenue to pay for local amenities (Mauck & Price, 2015). Others perceive tax on properties as a tax on capital with the aim of serving to present returns to capital and also to distort investment considerations across the United States of America. Features such as efficiency and progressivity depend on them in the interpretation of the tax’s theoretical classification. However, such excludes flip and fix investors (Bethell, 2018). When an individual is categorized as a dealer, profits gained from a flip is subjected to tax at the individual’s prevailing income rate. Ordinary income tax as at now ranges from 10 to 37 percent. Additionally, such profits are subjected to self-employment tax which stands 15.
3 percent, double the amount paid as a W2 employee. Corporate taxation, investment and productivity: A firm level estimation. Journal Of Accounting And Taxation, 3(7). http://dx. doi. org/10. Global Property Guide. Retrieved 30 April 2018, from https://www. globalpropertyguide. com/North-America/United-States/Taxes-and-Costs H. Harris, B. Review of Real Estate Tax and Value Added Tax regarding Real Estate Trust. Wonkwang University Legal Research Institute, 33(1), 153-174. http://dx. doi. org/10. , & P. C, D. Tax Guide For Foreign Investors In U. S. Residential Real Estate (1st ed. org/10. 12229 Sun, L. , Titman, S. , & Twite, G. REIT and Commercial Real Estate Returns: A Postmortem of the Financial Crisis. ECONOMICS, 4(1). http://dx. doi. org/10. 1515/eoik-2015-0021 Raya, J. Retrieved 28 April 2018, from http://www. bankpedia. org/index. php/en/124-english/r/23346-real-estate-taxation-ret.
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