GO Zone Update and Tax Incentives Explained
March 9, 2010
With Tax season right around the corner, I am sure that on everyone’s mind is the topic of getting every (legal) tax benefit that they can get. We thought it was appropriate given the season to overview the GO Zone benefits and update everyone on what they can do to take advantage of this offer from the IRS.
GO ZONE EXTENSION UNTIL 12/31/2010
As you may already know, the IRS extended the benefits of the GO Zone out until the end of this year. That’s the good news. There are a few items you need to be well aware of before breaking out your checkbook to purchase properties.
#1: LOCATION, LOCATION, LOCATION!
When the GO Zone extension took place, the IRS ONLY extended benefits in certain areas of the original GO Zone. This includes certain areas of Mississippi and Louisiana, but NOT Alabama (AL GO Zone benefits ended back in 2008). Mississippi Counties where you can still purchase GO Zone properties and receive benefits are Harrison, River, Hancock, Stone, and Jackson Counties.
So, as an example, if a newly built single family home in Gulfport Mississippi was purchased in December 2009 and was put into rental service in February 2010, it would qualify with the extension since Gulfport is in Harrison County, MS.
#2: IT’S ALL ABOUT TIMING
There is one more very important items that you need to be aware of with the GO Zone extension that has to do with the way the IRS Code is written. The short story* is that according to the IRS, you will only get Bonus Depreciation benefits on the portion of the home that was completed ON OR BEFORE December 31st, 2009.
* If you want the “long version” of the story that digs into the depths of the IRS code, drink some coffee, click “here“, and then scroll down towards the bottom of the article.
Confused yet? Let’s look at a real example. Supposed you had a new home built and completed in 2009 in Gulfport, MS.
Purchase Price: $119,000
Land: $20,000
Total Construction: $99,000
Bonus Depreciation: $49,500
Since the construction was completed before the IRS deadline, then the bonus appreciation available to you is $49,500.
Let’s consider another example. Suppose that someone was offering the following Duplex in Ocean Springs, MS (Ocean Springs is in Jackson County). However, the unit was not started until after January 1st, 2010.
Purchase Price: $198,000
Land: $20,000
Total Construction: $178,000
Bonus Depreciation: $0
Note there was no portion of the construction completed before the IRS deadline, there is absolutely no GO Zone benefits for this Duplex purchase.
AM I TOO LATE?
Good new is that there are still some quality GO Zone Single Family properties out there. The bad news is that given the IRS deadlines imposed in the extension, finding not only qualified properties, but also properties that make sense are becoming harder and harder to find. So to answer the above question, NO - you are not too late. There are still some prime quality properties out there for you to take advantage of (i.e. reduction of your tax liabilities through GO Zone benefits). You just need to know what to look for and where to look.
WHERE DO I LOOK?
We are constantly on the look out for quality homes that make purchasing sense in the GO Zone. If you are interested in receiving details once they come in, simply click here to e-mail me.
Go Zone Extension - Is There Still Time?
April 20, 2009
There is still a lot of confusion about when does GO Zone benefits end, especially for real estate investors. Every time that I send out an email about the Go Zone, I get several emails in return saying “didn’t that end after 2008?”.
The reason for the confusion is that MOST LOCATIONS DID END in 2008…… but not all. There was an extension put into place for some of the hardest hit areas from hurricane Katrina.
Bottom line is that in certain locations in Mississippi and Louisiana, you can claim bonus depreciation benefits through 2010. In Mississippi, the eligible counties are:
* River;
* Stone;
* Hancock;
* Harrison; &
* Jackson.
For Louisiana, there is a much longer list of parishes including:
* Calcasieu;
* Cameron;
* Orleans;
* Plaquemines;
* St. Bernard; and
* St. Tammany.
In Alabama, no addition counties will remain open for bonus depreciation or GO Zone benefits after 2008.
The American Institute of Certified Public Accountants has published a handy guide that really summarizes all the rules, dates and locations. Click here to get their PDF report.
Go Zone Webinar - Tuesday, April 21
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Go Zone Real Estate: Let Uncle Sam Pay Your Bill
March 28, 2009
Since I have been immersed in the Katrina Go Zone for the last two years, it amazes me that many real estate investors and tax professionals have no idea what the Go Zone is or how it can help them reduce taxes to zero for this year, and potentially 5 years to come.
But I realize that even though I have been living & breathing this for the last several years, in reality this is an obscure piece of tax code that most people, and most tax professionals know nothing about…. That is unfortunate.
For purposes of this blog post, let me give you a short primer of the Go Zone legislation and then point you to a great resource if you want to learn more:
- Tax code enacted in 2005 to help Hurricane Katrina impacted areas;
- Allows investors to deduct up to 50% of the purchase of SOME real estate the first year on their taxes;
- This is called “Bonus Depreciation” and can result in tax savings of 10s, 100s, or even millions of dollars;
- Not a new concept….. The Government used this same trick after 9-11: called the Liberty Zone;
- This best applies to three classes of people:
- Real Estate Professionals;
- People with adjusted gross incomes less than $150,000
- High income W-2 earners but with spouses not working.
- Typically property must be new and put into rental service;
- Currently limited to a few counties in Mississippi and a few parishes in Louisiana;
- You need to own your structure before the END OF 2009 based on current legislation
If you want to learn more about this, go to this resource:
Go Zone Extension For 2010
March 28, 2009
There is still a lot of confusion about when does GO Zone benefits end, especially for real estate investors.
Bottom line is that in certain locations in Mississippi and Louisiana, you can claim bonus depreciation benefits through 2010. In Mississippi, the eligible counties are:
- River;
- Stone;
- Hancock;
- Harrison; &
- Jackson.
For Louisiana, there is a much longer list of parishes including:
- Calcasieu;
- Cameron;
- Orleans;
- Plaquemines;
- St. Bernard; and
- St. Tammany.
In Alabama, no addition counties will remain open for bonus depreciation or GO Zone benefits after 2008.
The American Institute of Certified Public Accountants has published a handy guide that really summarizes all the rules, dates and locations. Click here to get their PDF report.
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