Real-estate tax policies: What would McCain and Obama do?

What are the real-estate tax policies of Senators McCain and Obama?

I’m not sure reliable answers are available. Campaign promises are preferences, not contractual obligations. Circumstances — the economy, control of Congress, competing demands — will shape what either wants to do as President as well as what is feasible. But mostly neither has said.

On fiscal policy, they share some positions. Both appear to like balanced budgets, pay as you go and deficit reduction, but both have proposed policy packages that would increase the national debt—McCain more than Obama.

Both urge tax cuts and spending as part of a post-election stimulus package now being worked up in Washington, but with different components and orientations.

McCain now supports continuing the Bush tax cuts that he opposed when they were enacted. Obama supports tax cuts for the majority of taxpayers and tax increases for the top five percent.

The tax positions that both candidates have taken in their stump speeches differ from the positions their campaign staffs and economic advisers advance. Read more »

Stepped-up basis for heirs

When you buy land, you need to establish your “basis” for tax purposes. Starting basis is basically your purchase price, plus, perhaps, certain expenses that you incurred.

When you buy real estate, you will often need to allocate basis at the time of purchase among several different accounts, such as improvements (house, barns), timber (separate merchantable timber with immediate sale value from pre-merchantable with future value), minerals and land. The total of these basis accounts cannot exceed your overall basis in the property. Individual basis accounts are set up at the time of purchase, because a landowner often does different things in each account, which increase or decrease the individual account’s basis. As you hold the property, each basis account will be adjusted according to what you do. If you build a bridge, the basis in your land account increases, because it is a permanent improvement in the property. If you sell an acre from your land account, your basis will be reduced. Separate basis accounts can help you pay off a purchase through the sale of some assets. Read more »