About real estate: Transferred military personnel can qualify for big tax break
A little-known federal law allows many members of the armed services who are transferred to another state a chance to keep their income taxes to a minimum — or sometimes to avoid them altogether.
Q. I am in the military and serve at a naval base in Florida, which levies no state income taxes. But now I am about to transfer to a base in California, which has one of the highest state income taxes in the U.S. Is it true that I can keep Florida as my state of legal residency to avoid paying income taxes, even after I move to the West Coast?
A. Probably, as long as you meet a few basic requirements set by the Internal Revenue Service.
Only seven states — Florida, Texas, Washington, Nevada, Alaska, South Dakota and Wyoming — levy no state income taxes on their residents. Tennessee and New Hampshire tax only dividend and interest income.
Military personnel tend to move more often than civilians, so Congress and the IRS give them some well-deserved tax breaks. The one you’re asking about will allow you to keep Florida as your “domicile” state and continue to avoid paying state income taxes even after your relocation to high-cost California.
The catch: You technically must have the intent to one day live in Florida again, even if the return never takes place. And while the money you make from your duties in the armed services in California likely will be free from state taxes, you will still have to file a federal tax return and might also have to pay state taxes on the salary you get if you take a second job there or have other types of earned income.
If you’re married, your spouse also may qualify for this same money-saving break even if he or she is not in the military.
Check with an accountant or the legal-assistance office on your new base for more details. Also visit the Department of Defense’s video-oriented website, www.dodlive.mil, and get a free copy of IRS Publication 3, Armed Forces Tax Guide, by calling the agency at 800-829-3676 or by downloading it from www.irs.gov.
Q. Several months ago, you wrote that the Los Angeles mansion where singer Michael Jackson was living until he passed away a few years ago was up for sale. Did someone ever buy it?
A. Yes. The 17,000-square-foot estate in the swanky Holmby Hills area of L.A. finally sold a few weeks ago for a reported $18.1 million. The real estate broker wouldn’t name the buyer, but insiders claim it’s a top-level executive at a private investment firm.
A concert promoter had been renting the home for Jackson for about half a year — at $100,000 per month — until the entertainer died there in June 2009. It has seven bedrooms and 13 bathrooms.
The sellers first put the estate on the market shortly after Jackson’s death, but took it off when no one approached their $29 million asking price. It was re-listed earlier this year for $23.9 million before they finally accepted the $18.5 million offer, proof that even rich people have “suffered” from the long downturn in prices!
Q. I am 71 years old and would like to move into a large “seniors only” development. The problem is that I have a live-in nurse in my current home, and she is only 28 years old. Would this prevent me from buying in the new complex if she moved with me?
A. Probably not. The federal Fair Housing Act generally allows such communities to ban younger people from buying or renting in the development if either 100 percent of the homes are occupied by people who are at least 62 years old, or 80 percent are occupied by at least one person who is 55 or older.
The law generally provides an exemption, though, for caregivers, personal medical attendants and the like who live in the development to provide their services to an owner or tenant. So, the age restrictions likely couldn’t be used to block your planned purchase.
Call your local fair-housing agency for more information. You also could contact the federal Housing and Urban Development Department, which enforces fair-housing laws, at (800) 669-9777 or visit its website at hud.gov.
Real estate trivia: About 248 million turkeys were raised on 3,405 farms covering 836,551 acres in the U.S. last year, according to the Agriculture Department. We’ll eat another 45 million of the birds Thanksgiving Day.
Ÿ For the booklet “Straight Talk About Living Trusts,” send $4 and a self-addressed, stamped envelope to David Myers, P.O. Box 4405, Culver City, CA 90231-4405.
© 2012, Cowles Syndicate Inc.