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When you want to determine property’s taxability for Michigan Sales and Use Tax there are three factors to determine whether an item is tangible personal property or a fixture attached to the real estate:
- Whether there is actual or constructive annexation of the item to real estate – An object will not be determined to be a fixture unless it is attached or affixed in some manner to the realty. Michigan courts acknowledge that there are “innumerable ways” that items may be attached or affixed to real estate. Actual attachment or affixation can be as slight as being bolted or anchored to the ground. Constructive attachment or affixation occurs when an item whose weight, size or character are such that the intent of placing the item was to have that item become part of the real estate even if that object is not physically attached to the real estate.
- Whether the item is an adaptation to the real estate – An object meets this criterion if the item modifies or adapts the application or use of the building. Examples include: a drive up window either at a fast food restaurant or bank, dock seals or doors, or seating which is attached to the floor inside of a venue such as an arena or theater.
No matter the location, size, or value of a second home, certain tax advantages are built in. However, your opportunity to benefit from them depends on how you use the property.
Both property taxes and mortgage interest are as deductible for a second home as they are for your primary residence — and are subject to the same limitations. If you file a joint return, you cannot deduct interest on more than $1 million of acquisition debt ($500,000 for married persons filing separately) on one or two homes.
Two tax advantages of homeownership are not available for a second home — the immediate deduction of mortgage points when purchasing and the capital gain exemption when selling. Both tax breaks require the home to be your “principal residence.” However, you can deduct the points on your second home’s mortgage over the loan’s term.
In Michigan sales and use tax law determining whether an item of tangible personal property remains tangible personal property or becomes a fixture affixed to real estate can significantly affect the taxability of the item in question. This determination may impact whether the taxpayer is considered a retailer or a contractor.
There are also several exemptions in Michigan sales and use tax law for purchases of tangible personal property that do not apply if the item is instead a fixture. The Michigan sales and use tax exemptions for both the agricultural industry and the industrial processing or manufacturing industry include such language.
In real estate, it is common to change the use of property from income producing to some other purpose such as personal use and vice versa. When a change of use does occur, the property may be deemed disposed of at fair market value. There are different types of changes in use that will be discussed further and their respective tax consequences.
In a partial change in use, a taxpayer is deemed to dispose only a portion of the property. For example, if a property is used 60% for business and 40% for personal and now the property will be used 100% for business, then there will be a capital gain or loss on only 40% of the property at the fair market value. This is under the assumption that the property is personally held. If the corporation owned 100% of the property, then there may not be a capital gain on this partial change of use. However, the individual may have to pay rent at fair market value for their personal use portion.
Whatever the location, size, or value of a second home, certain tax advantages are built in. However, your opportunity to benefit from them depends on how you use the property.
Both property taxes and mortgage interest are as deductible for a second home as they are for your primary residence — and are subject to the same limitations. If you file a joint return, you cannot deduct interest on more than $1 million of acquisition debt ($500,000 for married persons filing separately) on one or two homes. Read more
If you’re a homeowner, a residential property tax protest should always be on your radar around this time of year – even if you filed one last year and won.
The truth is, property tax calculations are based on a lot of arbitrary data – data you just don’t have control of. Appraisal districts use recent home sales and other market info to create your home valuation, and in today’s market, a good chunk of properties are being over-valued. In the end, that means a higher property tax rate and more money out of your pocket – year after year. Read more
Deadlines for property tax protests are quickly approaching, and if you want to lower your appraised value – and subsequently your annual tax burden – the time to act is now. To help you get started (and see success) we’ve pulled together some of our top property tax protest tips below. Use them to your advantage to lower your tax bill – both now and years down the line.
- Use a pro. When it comes to property tax protest tips, none is more important than this one. Using a professional to handle your tax protest comes with so many benefits. Most importantly, it gives you an expert, knowledgeable partner who can build your case and boost your chances of success. They know what it takes to win a protest, and they can make it happen. Using a pro also adds convenience for you. There’s no gathering of evidence or tedious forms, meetings or hearings. They do it all for you. It’s easy, simple and hassle-free.
A levy is a legal seizure of your property to satisfy a tax debt. Refusal to pay the tax will have the following result. The IRS will usually issue a levy after they assess the tax and send a tax bill or a Notice and Demand for Payment.
If you still refuse to pay, then the IRS will issue a Final Notice of Intent to Levy and Notice of Your Right to a Hearing at least 30 days before the levy. The IRS may give you this notice in person, leave it at your home or business, or send it to your last known address by certified or registered mail with return receipt request. Read more
It is no secret that tax incentives are commonly offered to businesses in exchange for job creation and community development. It is lesser known, however, that tax incentives serving a similar purpose are also offered to owners of residential property. Community Reinvestment Areas, or “CRAs,” are designated areas within municipalities or unincorporated county areas that local governments designate as neighborhoods containing housing facilities or structures of historical significance and where “new construction” is discouraged. The underlying goal of establishing a CRA is to revitalize, rehabilitate, and remodel existing structures within the boundary of the CRA. Ohio currently has over 400 cities, townships, and villages with established CRAs. Read more
Your home is exempt from Capital Gains Tax (CGT) when you sell it, In contrast, buy to let properties sold at a profit are liable to CGT. However, in certain circumstances, some or all of the gain on a let property is also tax free. This works best when you let a property which used to be your home, for example you trade up but keep your old house, or a couple move in together and keep both houses, one of which they decide to let. However it can also apply if you acquire a property, let it for a few years and then decide to move into it. Read more
During the development phase or period of construction, there are many costs that are incurred. The majority of these expenditures are added to the capital cost of property or to the cost of inventory.
Soft costs do not have to be capitalized once the construction is complete or on the day that the building is substantially (at least 90%) used for its intended purpose. An occupancy certificate or completion certificate issued by the municipal building department is sufficient evidence that construction is complete. Read more