Sub2 Sticking Points For WA?
Hi everyone! I was wondering if anyone has done Sub2's in Washington State, and if so, what state specific things should I be on the look out for? Want to avoid the pitfalls and get these things moving through the pipeline! Thanks for any help and advice!
Andy
Just make sure you understand how the 1.78% excise tax works and factor that into your equation.
Other than that kick some butt!
Hi Goose_man,
I'm just now learning about sub2's. Can you explain the 1.78% excise tax? And is this for every state, or is this for Washington State?
I'm located in GA....Thanks!
You shouldn't have to worry about it in GA.
Here in WA the seller has to pay something called an excise tax. It’s basically a transfer tax on what ever the selling price of the house was.
So when you go to the window at the county office with title in hand the clerk asks you nicely for the excise tax affidavit. This affidavit lists the selling price of the house and is signed by both the buyer and the seller. The clerk sees the selling price was 250k and then factors in the 1.78% tax and you then owe $4450 at the window before the title is recorded in your name….
Trust me when I say that “there is no way around it, pay your tax”. Washington has locked down its “taxable events” pretty tight. And even though you may take the property sub to for 500 bucks someone still has to pay the tax on the TOTAL price of the house. I hope that helps a little, I’m not the best at explaining things.
Goose Man-
So if you get into a house for $500.00 and assume the original loan at say 200K you will need to pay excise tax on 200,500.00? The sure find some Creative ways to get our money in WA! Have you done many Sub2's?
Andy
[ Edited by rjones on Date 01/22/2004 ]
Goose Man-
I did some investigating on the trust and excise tax thing. you can put property into a trust tax free( excise ) but no change of beneficial interest. One could argue that the assignment of benificial interest doesn't get recorded so who will know. To risky for me, I'll pay my taxes.
Source: WAC 458-61-411 Exemption -- Irrevocable trusts.
AxisInv: You will pay the tax on the 200k. Just use it in your favor to sweeten the deal when you are talking to your prospective sellers. I'm personally still working on my first sub to deal. Just sent out my first wave of post cards yesterday.
rjones: I personally wouldn't mess with the trust thing to get around the tax. You might be able to avoid paying your tax via the trust for a while but if the Gov ever finds out you will likely be hit with tax evasion...OUCH. I don’t think I would sleep well with that risk hanging over my head.
edit: er umm I don't remember where I heard this but I do think WA recognizes a transfer of beneficial interest of a trust as a taxable event. Don't quote me on that because I'm certainly not 100% sure on it.
Moral of the story.. Pay your taxes![ Edited by Goose_man on Date 01/22/2004 ]