Large Escrow Accounts in LA –
When dealing with large real estate transactions in Los Angeles, it’s essential to understand the tax implications of holding funds in an escrow account. At Secured Trust Escrow, we help clients navigate these tax-related details, ensuring they’re informed and prepared.
Key Tax Consideration
For buyers, one key tax consideration is property taxes. In California, property taxes are generally based on the purchase price of the property. Once the escrow closes, the county assesses the new property value, and this reassessment can lead to an increase in property taxes, especially in high-value transactions. Buyers should factor in this potential increase when budgeting.
Interest earned on escrow accounts can also have tax implications. For million-dollar escrow accounts, any interest generated may be considered taxable income. This is especially important for longer escrow periods, where interest can accumulate significantly. At Secured Trust Escrow, we advise clients to discuss interest earnings with a tax professional, so there are no surprises at tax time.
For Sellers
For sellers, there may be capital gains tax to consider. When selling a high-value property, capital gains taxes can apply if the sale price exceeds the original purchase price by a certain amount. Sellers should consult with a tax advisor to understand potential capital gains taxes and explore any exemptions available.
Lastly, filing accurate tax paperwork related to the escrow transaction is essential. At Secured Trust Escrow, we help ensure all documents are correctly processed to avoid any tax issues. Being aware of these tax implications can help buyers and sellers make informed financial decisions during high-value real estate transactions.
