tax deduction on bond

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  #1  
Old 02-27-2011, 11:06 AM
PatandBob PatandBob is offline
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Default tax deduction on bond

Just back from our lifestyle preview. We bought a lot in St. James (still feeling a bit nervous about it )

The village realtor told us the interest on the bond payment was tax deductible. This didn't seem right to me ... is it indeed tax deductible?

Thanks for the information!
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Old 02-27-2011, 11:29 AM
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no it's not.... your realtor misinformed you.

However, the payment on the bond (principle plus interest) is collected via your annual property tax bill payment to Sumter County. Many who are not tax-wise will assume that whatever the check amount is that they write to Sumter County Tax Assessor is what they will deduct on their IRS Schedule B (including CDD maintenance, fire safety, CDD bond). I'm sure many have overstated their property tax deduction on their federal taxes.

ps....congrats on buying a lot in St James - best decision you'll ever make. Nerves are to be expected but the adventure awaits.
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Old 02-27-2011, 12:01 PM
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Only Ad Valorem taxes paid are tax deductible.
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Old 02-27-2011, 12:02 PM
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Here's a follow-on question then: Granted, the interest payment on the bond isn't considered to be part of your property taxes (it just happens to get billed/collected with them) and thus isn't deductible as a property tax. But can the bond interest be considered deductible as mortgage interest? I guess "yes" but look to input from others.

Here's my mentality on it: If you purchase a home (elsewhere) in a development where the cost of the development's infrastructure is INCLUDED in the sales price of each home, your home mortgage interest is deductible..........and it includes the amount associated with the infrastructure cost whereas in TV, the infrastructure cost is broken out separately via the bond.

Bill
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Old 02-27-2011, 01:32 PM
kentucky blue kentucky blue is offline
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Quote:
Originally Posted by PatandBob View Post
Just back from our lifestyle preview. We bought a lot in St. James (still feeling a bit nervous about it )

The village realtor told us the interest on the bond payment was tax deductible. This didn't seem right to me ... is it indeed tax deductible?

Thanks for the information!
No, the 7.25% interest payments on your bond are not tax deductible. I am going to pay my bond off with my 3% home equity loan.Besides saving 4.25% on the loan, it's tax deductible.Just wish the real estate sales personnel would give buyers full disclosure on the bond issue right up front, it's not a deal breaker when you have all the facts.Congratulations on your purchase.
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Old 02-27-2011, 02:10 PM
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Originally Posted by kentucky blue View Post
Just wish the real estate sales personnel would give buyers full disclosure on the bond issue right up front, it's not a deal breaker when you have all the facts.Congratulations on your purchase.
Have to say I am very disappointed that the village realtor was misleading about these issue and a couple others. Wasn't necessary. We still would have bought - just gives me an uneasy feeling. If the truth wasn't told on these issues, what else am I going to be surprised about.

Last edited by PatandBob; 03-02-2011 at 02:58 PM.
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Old 02-27-2011, 07:55 PM
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Quote:
Originally Posted by PatandBob View Post
Have to say I am very disappointed that the village realtor mislead (want to say lied) about this issue and a couple others. Wasn't necessary. We still would have bought - just gives me an uneasy feeling. If the truth wasn't told on these issues, what else am I going to be surprised about.
I surely understand your disappointment! It is unacceptable that the TV realtor would give you incorrect information. This persons manager needs to be told, maybe it's a training issue?
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Old 02-27-2011, 09:10 PM
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Quote:
Originally Posted by PatandBob View Post
Have to say I am very disappointed that the village realtor mislead (want to say lied) about this issue and a couple others. Wasn't necessary. We still would have bought - just gives me an uneasy feeling. If the truth wasn't told on these issues, what else am I going to be surprised about.
Just for future reference, The Villages does not have realtors working for them, they only have salespeople. In other words, the salespeople are not licensed or bound to a code of ethics that a licensed real estate broker would be.
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Old 02-27-2011, 09:16 PM
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We asked our village salesperson, Deb Park, if the bond was deductible. She made it very clear that it was not. Better to have that information up front than to be disappointed later.
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Old 02-28-2011, 05:58 AM
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Originally Posted by philnpat View Post
We asked our village salesperson, Deb Park, if the bond was deductible. She made it very clear that it was not. Better to have that information up front than to be disappointed later.
Our salesperson also was clear that the bond interest was not deductable. Somehow , though, this seems to defy logic since it is clearly part of the costs included in a home purchase in other areas of the state and country. Has ther been any effort to challenge the non deductablability with the IRS?
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Old 02-28-2011, 06:43 AM
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Originally Posted by IowaParkersburg View Post
The bond is the cost per lot of the infrastructure costs that in other places is included in the cost of building a home like nails and concrete and shingles for the roof. Bond is roads, side walks, curbs, etc. Don't blame the tax man, this one is on the developers. No offense, I just except that I paid 250K for our house and not 230K plus 20K bond. It is a way to make the house appear to be 20K less than it really cost you. Nothing sinister, just a Marketing tool.
You are making my point, these are legitimate housing costs. Has the deductability been tested. If so, when and what was the decision and or legal opinion? Does anyone posting here know? I think that the purpose of the bond was more a financing strategy than a marketing tool. Most housing affordability issues revolve around monthly out of pocket, and less on nominal purchase price.
  #12  
Old 02-28-2011, 12:40 PM
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According to IRS Publication 530:


"Assessments for local benefits. You cannot deduct amounts you pay for local benefits that tend to increase the value of your property. Local benefits include the construction of streets, sidewalks, or water and sewer systems. You must add these amounts to the basis of your property.
You can, however, deduct assessments (or taxes) for local benefits if they are for maintenance, repair, or interest charges related to those benefits. An example is a charge to repair an existing sidewalk and any interest included in that charge.
If only a part of the assessment is for maintenance, repair, or interest charges, you must be able to show the amount of that part to claim the deduction. If you cannot show what part of the assessment is for maintenance, repair, or interest charges, you cannot deduct any of it.
An assessment for a local benefit may be listed as an item in your real estate tax bill. If so, use the rules in this section to find how much of it, if any, you can deduct."
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  #13  
Old 02-28-2011, 12:49 PM
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By the way the interest rate on the bonds vary depending upon when the house was built. For example we just checked ours today and it was 5.something% not the 7% shown earlier in this thread. Ours was built in 2005.
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Old 02-28-2011, 01:14 PM
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I think that you should call back your Rep and ask again. These folks know their stuff...perhaps you misunderstood. They would not mislead you on this issue.
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Old 02-28-2011, 01:17 PM
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Quote:
Originally Posted by Taj44 View Post
Just for future reference, The Villages does not have realtors working for them, they only have salespeople. In other words, the salespeople are not licensed or bound to a code of ethics that a licensed real estate broker would be.
I believe you are incorrect.

You are correct that they are not Realtors. But they are still required to have a license to sell real estate in the state of Florida. Under Florida law certain disclosures have to be made to the buyer. The sales person may have told them that there is a bond on the property but did not do a very good job of explaining exactly what that meant to the buyer. If the bond was not disclosed properly the buyer would be able to void the contract.

This would fall under the umbrella of misrepresentation - the act of a licensee who, either intentionally or unintentionally, fails to disclose a material fact or makes a false or misleading statement that is justifiably relied on by another.

If it were me I would be contacting the sales person's manager and at least point out the misinformation.

People who sell real estate in Florida are "Real Estate Sales Associates". With further education and experience they can become "Real Estate Brokers". None of these people are required to be a "Realtor", but in most cases if you aren't a Realtor you have no access to the MLS. TV obviously does not need the MLS for their sales team, so they are not Realtors. (Probably a lot of them have been at some point in their career.)
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