Bond and/or Bond Interest Deductiblitiy
 

Is the bond or the interest on the bond federally tax deductible?

What is the interest rate y'all are paying on the bond?

Do you prefer to pay the bond off over 30 years or just bite the bullet all at once?

Bond interest not deductible
Bond interest differs according to area I have seen from 5 to 7.5 %

Paying off bond depends on your situation IMHO if you will stay in your home and do not intend to move and you can afford it ---pay it off .... if not pay yearly -it is included in your tax bill..

Good luck

Your tax bill has two parts, the ad valorem part and the non-ad valorem part. "Ad valorem" means "based on value". The ad valorem part is tax deductible on your Federal tax return, but the non-ad valorem part is NOT deductible. The non-ad valorem part includes the bond principal and interest payments and the maintenance fee for the common areas of the development. These are not based on the specific value of your house, and, therefore, they are not deductible on your Federal tax return.

Ours is 6.125% ! They also charge an "administrative fee" annually for being so kind as to collect it. Check your amortization statement.

Do you prefer to pay the bond off over 30 years or just bite the bullet all at once?


When selling a house in TV, bond is paid notice is a nice selling tool but doesn’t seem to actually help increase the value/selling price of the home. The fair market values of homes in TV do not include the bonds remaining balance.

You might be interested in reading this site re Villages bonds:
Residential Bond Assessment Information

I hate debt, but, in my opinion, you should not pay off the bond unless you plan to keep the house for a long time. Houses with a bond may be more attractive to a buyer because the buyer has the option to assume the bond or to pay it off. However, if you pay off the bond, you remove the buyer's option because the bond cannot be reinstated once it is paid off.
Of course, a house with a paid off bond is more attractive than one with a bond if the price is the same. But, if you pay off the bond, you need to raise the price to get your money back.

TALK TO A TAX EXPERT...............not Villagers.

Different tax professionals take different positions and they can tell you how aggressive each position is.

I'm quite happy with the aggressive position I have taken.


:popcorn:

There is no free lunch. If you buy a used but relatively young designer home, you are probably looking at $1600/year bond payment. If the bond was paid off, the house should sell for more money because the new buyers would have $1600/year less expenses. The higher price would result in a larger mortgage but it should be a wash. I suspect most people can't do the math and the real estate agents can't explain it. Too bad ...

Our tax code is pretty much based on the honor system. You can talk to as many tax professionals as you want but the bond interest is not legally deductible. If you are deducting it, you should hope that you don't get randomly audited. The chances of a random audit are slim. If you want to legally deduct it, take out a home equity loan and pay off the bond and then deduct the interest on the home equity loan.

As stated not deductible. The cost of your house is not deductible either. Consider the bond as part of the cost of the home. If you are going to have a mortgage see if the lender will led you enough money to pay off the bond and the mortgage interest is deductible.

I don't believe that the bond has any influence on the appraised value for a lending institution on a house in TV. It didn't for me on my house in 2014.

If you itemize your deductions (schedule A), you can deduct the interest portion of your bond payment as mortgage interest.
You can find the break out of interest vs principle vs admin fee for your home on the Villages governance web site.
It is mortgage interest because the bond is secured with a lien on your home.

:laugh:

Not true. The interest portion of your bond payment is not deductible. It is a non-ad valorem payment, not based on the specific value of your house, not the same as mortgage interest, and it is not deductible. It is also why the county provides a separate accounting on your tax bill for ad valorem and non-ad valorem payments. The bond interest is included in the non-ad valorem section of the tax bill. This is the IRS and the TurboTax interpretation of the Federal tax laws. But, you can deduct anything you want as long as you don't get audited.

Smart guy.

Indeed!

But it was the IRS that thought TV's bonds were taxable.


:loco:

OK.so. We own our house and just got the tax bill with the bond added on to the tax. Does anyone know what the amortization period is on the bond? 10 yr, 15 yr 20? Our house is 6 yrs old. THX

Here are the schedules:

Residential Bond Assessment Information

30 years on most homes.....

Bond Amortization Schedules


Look on your I.D. Card to find your "Unit Number" Tax Bill will also have it.

I think they are all 30 years in Sanibel and close to 7% interest.... YOU DID KNOW THAT WHEN YOU PURCHASED? RIGHT?

If you own in a Villa Area (least expensive) you owe over a $1000 a year for the next 26 years.

This was glossed over by our sales agent. We did the research ourselves before buying.

I don't think the gloss over was malicious--I don't think most agents understand the whole bond
concept.

Educate yourself before buying and know what that bond really costs! And, no, no Portion of it is legally deductible interest! It would cost less on many levels if it were simply added to the home price.

Thx for the input. We will probably just pay it off once our existing home closes.

Bond payoff or not?
 

It is not suggested that you pay the bond off. The reason is if you decide you need to sell you have lost that money because a house with a paid off Bond does not sell for a higher price. The paid off Bond helps a house sell faster. To find out what interest rate you are paying you can contact the district office or get on districtgov.org and look it up. The bond are either 20 or 30 years. The 20 year bonds are north of 466 off of Morse. The rest of the homes are 30 year bonds. But it is up to you if you pay it off or not. Just realize if you sell you will not get any of it back in a higher price. Also you cannot pay the bond off now until January 2. You have up to the middle of July before they cut off the pay off of bonds for the year.

What is the average bond value and annual payments for a $300k home?

Hard to tell it is according to where the home is located not the price

example--you could have a court yard villa that sells for 375 thousand (golf course view)...and a another in the same development that sells for 210 --the bond will be the same ...in this example the bond is 12,000----about 950 per year

The bond is determined by the infrastructure dollars spent by the developer in a certain area divided by the number of homes in that area.

Using the amortization table for District 10, Unit 193, the bond payment is a little over $1700 per year for 30 years. For 2017 that breaks out at $334.98 for principal, $1267.66 for interest and $109.58 for administration cost. Just like a mortgage, the interest paid way exceeds the principal in the first nearly 20 years of the bond payments.

Over the thirty years a person would pay $22,534.28 for principal, $25,520.36 for interest, and $3,285.79 for administration cost for a total of $51,340.52.

Those are the numbers to consider whether to pay off the bond taking into consideration the interest is not tax deductible. If a person wants to deduct the interest, it might be better to take out a home equity loan and pay it off over time if the house is a "forever" home. A paid off bond in a new area will not be recouped if a person sells the house in the first few years.

That depends when the house was built and the size of the lot.

If the statement that an identical home with a remaining bond balance would sell for the same price as one without a similar lien is correct, TV would be unique in the world of real estate valuations and sales. To assume the existing lien(bond) would mean that you were ,in fact, paying a higher price- not debatable. Can anyone show statistical proof (not opinion) that such an anomaly exists?

Neither applies.

How does the District arrive at the amount? Does everyone pay the same amount?
The Bond Debt Assessment was set at the time the bond used to build the infrastructure was issued. The formula for calculating each lot’s proportionate share starts with the total cost of the bond (including interest) issued to pay for the infrastructure. That cost is divided equally among each assessable acre in the “phase” of the District for which the bond was issued. That gives you a cost per acre. The cost per acre is then multiplied by the number of acres in the unit in which you live. That gives you the obligation for the unit as a whole. The unit total cost is then divided by the number of lots or parcels in the unit, and that computation gives you the amount of the assessment levied against each property. Therefore, each lot within a unit pays the same amount. Amortization schedules for each unit are located on the Districts' website; Village Community Development Districts under the Finance Department link.

The bond amount and the payment can be determined by looking at the amortization table at the CDD website. Find the district and the unit number for the house location. All homes in the same unit have the same bond amount regardless of the price of the home or the lot. For example, all designer homes in district 10, unit 193 which is in Osceola Hills have the same bond amount and payments regardless of lot size and home cost. Units 192 and 194 are also in Osceola Hills but have a different amount from unit 193. Villas are different.

Agree. A ToTV conversation myth.

In my opinion, if you are going to stay in the house for about 5 or more years, and you can afford to, it makes financial sense to pay off the bond. If you are going to sell the house, it makes more sense to keep the bond. That way, the buyer can make the decision to keep the bond or to pay it off. Logically, giving the buyer more options should make the house easier to sell. Although, in today's world, things are not always logical.

For some odd reason, when looking at properties sellers try to make some crazy differential between the two. "Oh, that is not the price of the property, that is the price of the BOND".

Um, no. You dont get the one with out the other. So, anyone with conscious thought would add them together in the "total price".

It would be analogous to a car sales person not including tires/wheels "with" the car - rather making them a separate line item.

Attn: Real Estate Professionals who try to make it seem like they are not part of the cost of a property...bond fee's are.

When the appraisal was prepared on our TV house, new build by Lake-Sumter Appraisals to provide to our lending institution, the bond was not included in that appraisal. It is my understanding that the TV bond is not included in any TV house appraisal and thus does make TV unique in that respect. The asking price may or may not reflect a bond balance.

The developer lists the prices of all new houses on their web site without including the bond costs.

If this this is the case they are violating all the principals of appraisal regulating bodies. The bond is part of total consideration for the house. Should also be included in determining the total consideration for comps. This premise is very strange. I suspect real estate professionals love it as it mis states the purchase price so that bond homes seem to be a better buy and therefore easier to sell. Someone !statistical evidence ---please.

You are partially correct - However what everyone misses here is that it IS deductible if your property is a rental. There is some dispute if you take this as depreciation or as a yearly expense even then. :)

When I am looking at properties to buy in the Villages (I am starting to look for another property to rent), I always look at the bond balance and add it to the price. That is how I compare. Only people who don't understand the bond would not consider it. This is YUGE dollars we are talking about here, and it is at a much higher interest rate then a typical mortgage.

As a separate issue - these must be the same people who do not understand the cost of moving and move to the villages and move 3 times after they are here- that is EXPENSIVE!!! yikes.

Correct on both points. I guess fools and their money are easily parted!:jester:

Who you callin a fool?:laugh: