Airline subsidy is a great investment.
Steamboat Springs was the first ski community to develop a subsidized airline program to allow easier access to our guests in the winter season. This program was really what put Steamboat on the map as a destination ski resort and has been tremendously successful as well as wonderfully managed. The problem is that with the merger of the airlines, along with several other factors, the cost of these subsidies or revenue guarantees are ever increasing.
Originally the cost of this program came primarily from the Ski Corporation with assistance from the Chamber and its members. The burden of a yearly drive for these monies and the fact that the contracts for the airlines needed to be accomplished almost immediately following the ski season, this way of raising funds was too unstable. In 2004 the community passed a 2% lodging tax that provided us with a nice cushion and surplus. However the past two years have proven to be more expensive and the reserves have been deeply cut into. This past winter saw a 27% reduction in airline seats and the economic affect was visible. Without doing anything those reserves will dry up in another two years.
This fall we have a sales tax initiative on our ballot. The sales tax would be an increase of twenty five cents (one quarter) for every one hundred dollars purchased. This initiative also has a sunset of five years. The hope being that with the increase the 27% reduction in seats could be reversed and as more seats are available meaning more people flying in meaning increased sales tax and increased lodging tax. Hopefully in five years we will have a nice reserve that will allow us to retire the sales tax. I would argue that even if that doesn’t occur the increase in sales tax is a worthwhile investment into our community.
The only argument that I have heard against the tax increase is that we are subsidizing a major corporation (Ski Corp) and that they should foot the entire bill. But is the ski area truly the only benefactors of this tax increase? How about the lodges and restaurants and the grocery stores and the ski shops and the clothing stores and the Real Estate market? All benefit from an increase in winter traffic and those that benefit should help pay. Statistics show that the airline subsidy program pays about $30.00 per passenger that flies in to the Yampa Valley Regional Airport. That passenger will spend an average of $1,100.00 during their stay in Steamboat. Hmmmm, let’s see, for a $30.00 investment we receive a $1,100.00 return. I would call that a pretty good return on investment. I wish I could get the same on my stocks and bonds.
This is an issue that will greatly benefit all that live in the community and not just those who have a direct tie to the winter ski season. The City could see an increase in tax revenue with more people flying in allowing them to maintain the beautiful parks and trail system that we all enjoy. Businesses in this community are hit hard with requests for donations for worthwhile projects and non profits and a healthy business community means more support for these projects.
We have also improved the airport to the tune of around thirty million dollars over the past decade and now have a comfortable functional facility that can easily handle the increased flight loads. It is why Buyer’s Resource and its Agents have contributed time and money to support this initiative. We hope you agree and support 2B on this falls ballot.
Archive for the ‘Taxes’ Category
Tuesday, October 25th, 2011
Two Ways to Use the Long-time Homeowner Credit
Monday, February 15th, 20101. Get Your Start in Investing
Buy a new home and rent out your current home. And Voila! You are now a real estate investor and Uncle Sam has helped you out with a $6500 tax credit. If you have owned your current home for five years, consecutively, out of the past eight, you qualify for the long-time homeowner credit. You do need to move into the new home and live in it as your primary residence for three years. But you can do whatever you want with the first home once you move into the new one.
2. Buy Now, Sell Later
Buy your new home now while the inventory is plentiful and mortgage rates are low. Since you don’t have to sell your current home in order to get the tax credit, you don’t have to be in a rush to sell it. You can keep it until prices go back up again. In the meantime, either rent it out or just keep it empty while you are trying to sell it. But remember that in order to avoid Capital Gains taxes you’ll need to sell it within three years after you move out.
Just like with the height requirements for the cool Disneyland rides, there are set requirements you need to meet to get the credit. To see if you qualify for the credit, take this painless eligibility test:
http://www.homebuyertaxcredit.com/eligibility.aspx
Then let’s go shopping! We have until April 30th to get something under contract.
Mortgage Rates (& Prices), Falling Like Snowflakes!
Wednesday, December 9th, 2009By Susana Field
The average 30-year fixed-rate mortgage dropped to a new record low of 4.71% this last week, according to Freddie Mac. The week before it was 4.78%, while last year the average for a fixed-rate, 30-year mortgage was 5.53%.
The first-time homebuyer’s tax credit has been extended through next spring, and it was expanded to include folks that have lived in their primary home for at least 5 years and wish to move up.
We are also seeing more and more housing deals come on the market here in Steamboat Springs, Colorado. And buyers are taking advantage of this by gobbling up Steamboat’s housing opportunities.
This October Steamboat Springs saw 20% more deals close than a year-ago October. And although the number of deals was up, amazingly the total amount of money spent on those deals was down 33% this year from last. Twenty percent more deals, with a 33% price drop since last year!
November of 2009 saw 58% more deals close than November of a year ago, with a total price increase of only 17%.
Low mortgage rates, tax credits, and great prices! Maybe it’s time to… “Have yourself a Merry Little Christmas…” with a Steamboat house key under the tree. Give us a call and we’ll help you go shopping.
Ouch! Government Tightens Capital Gains Exclusion on Your Home Sale
Sunday, June 28th, 2009By Susana Field
You can almost tell how old someone is, or how recently they’ve sold their primary residence, by their working knowledge of the Capital Gains Laws.
[To put you "in the know," in this blog post I'm going to share with you a bit of history and the latest tax-law twist; the closing of a loophole, so to speak, but one which could come with a bite for some of our second home owners.]
My dad is in his eighties and although still an active real estate investor, hasn’t changed his primary residence recently. Thus he was arguing, when I recently had my home for sale, that I’d have to use the profits from the sale of my home to buy another, more expensive, house within the next two years, if I didn’t want to pay capital gains tax on the profit. Or that I could wait until I turned 55 to sell my home, at which time I could take a one-time tax-free gain of up to $125,000.
This is a test: How many of you still believe this too?
Well in 1997 the Tax Payer Relief Act changed the law from how my dad (and maybe you) had known it. Starting in May of that year, if you’d lived in your home two out of the previous five years from the date of sale(regardless of whether you’d owned the house 15 yrs, 7 yrs, 4 yrs, or 2), you could exclude up to $250,000 if single, and $500,000 if married filing jointly, of your profit, from your taxable income. Not bad making, say, $300,000 in tax-free money, huh?
I, being an avid fan of making money in real estate, sold two primary homes in Steamboat Springs over the past three years, pocketed the profits from each, and didn’t pay a cent in Capital Gains Tax. (My dad demanded that I send him – snail-mail- a hard copy of the law.) Test: How many of you have done this too?
My husband, son and I happened to have lived in our two homes for all the years we owned them (seven years in one and three in the other). But, according to the Tax Relief Act of 1997, we didn’t have to have lived in them the whole time to keep 100% of the profit. Remember, the law said we only had to have lived in them for two of the previous five years, meaning we could have bought them as a second home or a rental investment property, and only moved in the last two years before the sale.
Now introduce Section 3092 of Housing Assistance Tax Act of 2008 (H.R. 3221). Test: Have you heard of this one? If so, you must be a tax advisor!
To be able claim 100% of your eligible profit now, it has to start out being your primary residence for two years (the first two years of the five years before the sale,at which point you can rent it if you’d like, for the next three years. But not the other way around. Starting January 1st, 2009, the clock, so to speak, starts ticking.
Example: Let’s say you and your husband bought a great ski-in, ski-out condo here in Steamboat on January 1st, 2009, for $500,000. Since you’re only going to use it four weeks a year, until you move out here, you put it in a rental pool to make enough income to pay your HOA dues. On January 1st, 2011 you take it off the rental pool and begin using it as your primary home. Your mother gets ill and you move out on January 1st, 2013 to take care of her back east, and sell the condo for $800,000 on January 1st, 2014.
Until this recent change in the law your entire $300,000 profit would have been eligible for capital gains tax exclusion, because you lived in it as your primary residence for two of the previous five calendar years.
But with the new law, you have to start out with it being your primary residence for two years before you can rent it to someone, if you want to keep 100% of your tax exclusion. So in the example above, the period 2009-2010 will be considered a non-qualifying period because the condo didn’t start out as your primary residence! The year 2013, after you moved out but before you sold it, is a qualifying use; you weren’t there and you could have rented it even. So, those first two rental years (2/5 or 40%) are counted as non-qualifying use, and the next three years (3/5 or 60%) are considered qualifying use.
Of the $300,000 profit, you will now have to pay taxes on 40% of it ($120,000; the non-qualifying time because you were renting it)! Ouch! You can still exclude from taxes 60% of the profit ($180,000; the qualifying time).
(FYI:The law states that they won’t go prior to January 1st, 2009, for the pro-rationing, so as long as you lived in the house for two out of the past five years you are okay.)
This law is meant to close the loophole which was allowing someone to buy a vacation home, put it in the rental pool or even leave it empty for however many years, move into it for two years, then sell it and not pay a cent on the profit. Now they’ll have to pay taxes on at least some of their profit.
Bottomline:
1. If you’ve been planning all these years on using the loophole to your advantage, you’d better move into that vacation home now, because the clock is ticking and you’ve already lost 6 months!
2. If you want to buy an investment property, consider living in it for the first two years and rent it for the next three.
3. Most importantly: When it comes to real estate, always consult with your tax accountant.
And if you’re thinking of buying real estate in Steamboat Springs, come talk to us!
