tax deduction on bond

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  #16  
Old 02-28-2011, 01:49 PM
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Bill-n-Brillo Bill-n-Brillo is offline
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Originally Posted by mak44070 View Post
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."
Sooooooooooooo......if I interpret the above properly, the amount of the bond adds to the cost basis of the property and is considered to be a non-deductible amount on your taxes, which would make sense. The annual interest charges, however, sound as though they are deductible if you itemize your deductions. You'd have to figure out how much of your annual bond payment went to principal and what part went to interest - the county should be able to provide those numbers. I question, though, how much (if any) of the line item on your county tax statement for 'Special Assessment - Maint" would be considered deductible given that part of it is for maintenance and part of it is simply for operations.

Or am I missing something somewhere in the translation?

Bill
  #17  
Old 02-28-2011, 04:55 PM
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I agree with the member who noted that by separating the bond from the house was misleading to prospective buyers that the house was less. By the way Lake County will not allow a bond and insists it be incorporated into the selling price of the house. Depending on a person's financial status I would suggest that they pay off the bond as soon as possible because you will be paying off the interest first then the principal. If I had known that Lake county forbid breakout of bonds I would have argued more because it was difficult to determine where the costs associated with the bond, lot and house began and ended. Most of us could have better assessed the relative value to asking price. Live and learn. This isjust my personal view.
  #18  
Old 02-28-2011, 05:29 PM
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Quote:
Originally Posted by Bill-n-Brillo View Post
Sooooooooooooo......if I interpret the above properly, the amount of the bond adds to the cost basis of the property and is considered to be a non-deductible amount on your taxes, which would make sense. The annual interest charges, however, sound as though they are deductible if you itemize your deductions. You'd have to figure out how much of your annual bond payment went to principal and what part went to interest - the county should be able to provide those numbers. I question, though, how much (if any) of the line item on your county tax statement for 'Special Assessment - Maint" would be considered deductible given that part of it is for maintenance and part of it is simply for operations.

Or am I missing something somewhere in the translation?

Bill
The interest, as cited in Pub 530, would be interest charged on REPAIRS, not the ORIGINAL assessment. Sorry......
(I'm an Enrolled Agent, and have prepared individual tax returns for 23 years)
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  #19  
Old 02-28-2011, 05:33 PM
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Originally Posted by BogeyBoy View Post
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.)
My point was not to get into the nuts and bolts of Florida real estate licensing law. But, as you say, if the Villages salespeople have licenses, they are most like Real Estate Sales associate licenses, not the more rigorous Real Estate Broker licenses which I previously referred to. And, more importantly, there is a conflict of interest, as they are not working for you, the buyer, they are working for The Villages.
  #20  
Old 02-28-2011, 06:50 PM
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Quote:
Originally Posted by mak44070 View Post
The interest, as cited in Pub 530, would be interest charged on REPAIRS, not the ORIGINAL assessment. Sorry......
(I'm an Enrolled Agent, and have prepared individual tax returns for 23 years)
Mary Ann - Thanks for the clarification.

Bill
  #21  
Old 03-01-2011, 06:53 PM
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Where and how would one find out what his bond interest payment is? Also, I find the workaround of using a 3% home equity loan very interesting as opposed to a 7% interest on the bond. Are not most bond payments figured on 12 years?

TLaD
  #22  
Old 03-01-2011, 07:26 PM
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Originally Posted by kentucky blue View Post
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.
Where do you get a fixed rate equity loan at 3% which is other than a short term teaser??
  #23  
Old 03-01-2011, 08:06 PM
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One work around to the question is if you have sufficient equity in your home, you may be able to get a home equity loan to pay off the bond. In the current market, you should be able to beat the rate and the interest on a home equity loan is fully deductibe.

A word of caution: Do this only if you plan to keep your home several years. When I purchased my home, several realitors advised me that normally, sellers do not recoup the full amount paid on the bond when it is paid off in the first year or two. I calculated my break even on a payoff to be about 7 years - given the interest rate.
  #24  
Old 03-01-2011, 08:29 PM
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Don't hesitate to change your TV salesperson (realtor) if you're not pleased with the one you were assigned. I agree that you ought to talk to one of the sales managers. Tell them what you're unhappy about and ask to be re-assigned. I did and am so glad that I did. I felt the person they initially assigned me was not sufficiently knowledgable and was not motivated to find information that I needed to make a decision. There are many good TV salespeople. Work with one you like and feel you can trust.

Last edited by mrdarcy; 03-01-2011 at 09:04 PM. Reason: Meant "ask", not "asked"
  #25  
Old 03-01-2011, 10:32 PM
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Originally Posted by Challenger View Post
Where do you get a fixed rate equity loan at 3% which is other than a short term teaser??
I've been paying 3% on my home equity loan for over 2 years now, and with this no growth economy , it will be at that rate for a long looooooooooooooooong time.The bond interest rate of 7.25% is amortized over 30 years, so your bond payments are basically interest only with very little principle reduction. If and when the home equity rates dramatically increase, i'll just pay it off, but in this no growth economy,incredible high unemployment with home prices still on the decline, the Federal Reserve will not touch interest rates.The leader of the Fed, is a student of The Great Depression, and realizes he can't increase interest rates, if he wants to get the economy moving again. Living in"the bubble" only 6 months out of the year i still must deal with reality and the real world.
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  #26  
Old 03-02-2011, 05:34 AM
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my equity rate is nearly twice 3%. Haven't seen much less around here (MD)
Can you suugest a good bank with a 3% rate (not a 6 month teaser)
  #27  
Old 03-02-2011, 06:08 AM
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Default We old people have to argue about everything! Glad I'm not old.

That post about the sales people for The Villages not being real estate agents made it sound like the sales people for the villages are out to get you and that they will hoodwink you in a heart beat..These new buyers, these REAL people are having a little touch of buyers remorse, (as many of us did) and they sound scared. We almost all thought...what have we done??

Than we found that what we had done is buy a place that will bring us much happiness. I would NOT trade the last three years of home ownership here for anything. They are some of the happiest in my entire life.

Having a bond here is pretty easy to absorb if you just add it to the cost of the house in your mind. Our Camellia cost 228K and the bond was 20K...so the house really cost 248K. The costs for the infrastructure are part of the cost of the home in our previous life. They are separated here.

How much would a person pay yearly on a bond that is about 20K...at the rate of 7.25? That is the figure that we are thinking about. And whether we can add that amount as a deduction to our taxes. Sounds like Mak knows and Mak told us.

You can pay the bond off all at once...(The opportunity to pay it all off comes once a year) which we do NOT intend to do because we expect to sell this lovely house and buy another here when we decide to move down for year round living.
  #28  
Old 03-02-2011, 10:10 AM
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Originally Posted by Challenger View Post
Where do you get a fixed rate equity loan at 3% which is other than a short term teaser??

Sun Trust ran a special just before Christmas

2.99 on the first draw for a home equity ---

You had to write a check on you home equity within 7 days of the approval

that amount of that draw would stay 2.99 for the life of the loan and additional draws go to Prime plus..
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  #29  
Old 03-02-2011, 12:08 PM
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Quote:
Originally Posted by Challenger View Post
my equity rate is nearly twice 3%. Haven't seen much less around here (MD)
Can you suugest a good bank with a 3% rate (not a 6 month teaser)
I've had my H.E.L. with my bank in Lexington for several years now.It's tied into the prime rate. The 3% has been my rate for over 2 years, and with Bernanke at the helm, i don't see it changing anytime soon. I do know, if i opened a new loan now, the best rate would be 4.5%. I've learned alot, since the financial meltdown,while dealing with several banks on real estate transactions .As long as you don't need the money they are willing to lend, heaven help you if you actually need the money, and these are the SOB's that got us in this crisis!!!!!!!!
  #30  
Old 03-02-2011, 08:12 PM
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Default tax deduction on bond

Keep in mind most banks will only give a home equity line of credit on your primary residence. Some will approve you on a second home but will ask for 2 to 3% above prime. The best I could do was 1% over prime, min. rate 4.5%. We have not paid off our bond yet, we will wait until we move down full time.
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