Death and Taxes
I will never forget the first paycheck I received. I was fresh out of college, and I had gotten my first big girl job. I had always waited tables during college, so this was my first salaried position. Of course, I knew about taxes. I had a college degree for gosh sakes–albeit it was in English Lit. But I had heard the old saying before: “There are only two certainties in life–death and taxes. However, when I opened my first paycheck, I was stunned. Where the hell was all of my money?!Who was FICA, and why did I owe him so much of my hard earned cash?Needless to say, I eventually got used to it. I guess. Tax surprises are never good, and when selling property in Alabama, there can be a few.
One particular tax issue that comes to mind is if you decide to sell your property here in Alabama, but you live out-of-state. For instance, you buy a condo at the beach, you are not an Alabama resident, and you pay $300,000 for it. Several years later you decide to sell. The good news is, the condo has appreciated in value to $400,000. The bad news is, you will have to pay Alabama state taxes on the $100,000 gain. If the property is held in your name, the withholding tax is 3% of the gain. If the property is held in a company, such as an LLC, the taxable amount is 4% of the gain. This is a very basic example, however. This does not take into account any tax deductions you have taken, such as depreciation while owning the condo. Nor does this include any improvements you have made to the property, or any assessments you have paid. This also does not include commissions and closing costs–these can be deducted as well.
This is not meant to be taken as tax advice, we just want you to be aware. Please consult your accountant or tax professional for all of the details and explanations of tax laws in Alabama. Of course, when you decide to sell your beach property, the fine folks at the Henry Group will be thrilled to help you!
Written by: Helen Henry