On September 22, 2006, the governor signed AB 2962. This new law amends Revenue and Taxation Code Sections 18662 and 18668, making changes to real estate withholding requirements for all transactions closing on or after January 1, 2007.

Previously it was required that 3 and 1/3 percent of the sales price be withheld from the proceeds of a real estate transaction for non-resident sellers. Now these sellers may choose between the original withholding method or an alternate method where only the capital gains rate is applied to the estimated gain. Instead of waiting until the end of the year to file and get money back, the seller just fills out the necessary forms and submits them to the title company before the close of escrow.

We encourage any seller to consult with their accountant or competent tax professional to determine the best choice for them.

- Mick Orton

Diane Kennedy is the author of the Rich Dad book, “Loopholes of the Rich: How the Rich Legally Make More Money and Pay Less Tax”, has a website dedicated to the ever changing tax laws and how to take advantage of them.

Here is an excerpt from her latest e-mail newsletter.

“Here are the top 3 tax mistakes that I’ve seen over the years. In each case the mistake can be traced back to a failure to understand a crucial element of investing.

1. Failure to understand what TYPE of real estate investor you are. Are you a dealer, developer, professional or investor?
2. Failure to understand WHEN you bought or sold a property. With creative real estate financing and investing this can be tricky, and not as straightforward as you think.
3. Failure to MAXIMIZE the tax benefits of real estate. The loopholes are out there – but if you don’t use them, or use the wrong type of structure to hold your assets, you can lose out on perhaps the most powerful real estate benefit of all – the tax savings!

Understanding what you’re doing (and why it matters) is the subject of this week’s What’s Hot.”

- Diane kennedy