homebuilder credits: tax issues

mrdarrett · Joined: 25 Aug 2007 Posts: 29

Centex has this "$5,000 off closing costs" promotion for buying a new
home.

They also charge 1 point (1% of loan amount). For me, that will be
about $2,000.

Can I still deduct the $2,000 in points?

Do I need to declare the $5,000 promotion as income?

Michael

Archived from group: misc>taxes

Paul Thomas, CPA · Joined: 25 Aug 2007 Posts: 3094

wrote
> Centex has this "$5,000 off closing costs"
> promotion for buying a new home.
>
> They also charge 1 point (1% of loan amount).
> For me, that will be about $2,000.
>
> Can I still deduct the $2,000 in points?

Did you pay at least $2000 at closing or as a deposit? If so, yes.

> Do I need to declare the $5,000 promotion as income?

That would be a basis adjustment. Your cost basis isn't the $105,000 home
purchase price, but the "$100,000 that it actually cost you.

It's kind of like when you buy a car and it's $5,000 off sticker. It's just
a cheaper price (basis). You never have income because they decreased the
price in this situation.

--
Paul A. Thomas, CPA
Athens, Georgia

scott s. · Joined: 25 Aug 2007 Posts: 122

"Paul Thomas, CPA" wrote in$_m.56555@bignews4.bellsouth.net:

>
> wrote
>> Centex has this "$5,000 off closing costs"
>> promotion for buying a new home.
>>
>> They also charge 1 point (1% of loan amount).
>> For me, that will be about $2,000.
>>
>> Can I still deduct the $2,000 in points?
>
>
> Did you pay at least $2000 at closing or as a deposit? If so, yes.
>
>
>
>
>
>> Do I need to declare the $5,000 promotion as income?
>
>
>
> That would be a basis adjustment. Your cost basis isn't the
> $105,000 home purchase price, but the "$100,000 that it actually
> cost you.
>
> It's kind of like when you buy a car and it's $5,000 off sticker.
> It's just a cheaper price (basis). You never have income because
> they decreased the price in this situation.
>

OK, but in the case of rebates it seems like they always charge
sales tax on the full amount. Does the state actually get that
money or is this just a way of getting a little more from the
buyer?

scott s.
..

Paul Thomas, CPA · Joined: 25 Aug 2007 Posts: 3094

"scott s." wrote
> OK, but in the case of rebates it seems like they always charge
> sales tax on the full amount. Does the state actually get that
> money or is this just a way of getting a little more from the
> buyer?

I suspect there are variations in state laws.

A "rebate" is almost always after-the-fact, so you do pay the full price +
tax at the time of the purchase, and submit the paperwork to get some money
back.

A discount coupon, a "two for one" sale, or any other discount is nothing
more than a price reduction, and sales tax should be on the discounted
price.

--
Paul A. Thomas, CPA
Athens, Georgia

scott s. · Joined: 25 Aug 2007 Posts: 122

"Paul Thomas, CPA" wrote in$Mu4.42844@bignews7.bellsouth.net:

>
> "scott s." wrote
>> OK, but in the case of rebates it seems like they always charge
>> sales tax on the full amount. Does the state actually get that
>> money or is this just a way of getting a little more from the
>> buyer?
>
> I suspect there are variations in state laws.
>
> A "rebate" is almost always after-the-fact, so you do pay the full
> price + tax at the time of the purchase, and submit the paperwork to
> get some money back.
>
> A discount coupon, a "two for one" sale, or any other discount is
> nothing more than a price reduction, and sales tax should be on the
> discounted price.

I'm thinking in particular of a car purchase when there is some sort
of manufacturer rebate involved. The consumer doesn't see the rebate
or have any connection to the manufacturer, just a bill of sale which
adds the sales tax and then deducts the rebate to reach the bottom line.

scott s.
..

Paul Thomas, CPA · Joined: 25 Aug 2007 Posts: 3094

"scott s." wrote
> I'm thinking in particular of a car purchase when there is some sort
> of manufacturer rebate involved. The consumer doesn't see the rebate
> or have any connection to the manufacturer, just a bill of sale which
> adds the sales tax and then deducts the rebate to reach the bottom line.

Yeah, well......

Get smart about what the financial dealings are on any big ticket item like
that, and you'll know if it's better for them to skip the manufacturer's
rebate and drop the sales price.

But if you must take that bait, this is no different than buying a printer
from Office Depot, paying the sticker price + tax, and sending in the coupon
to HP (or whatever) to get $50 back.

In the case of the car, the only issue is who gets to see the rebate check.
The dealer or the lender - because it's often not you if you finance.

--
Paul A. Thomas, CPA
Athens, Georgia

Tax Tips 2007 Credits Common Tax Credits After you determine your income tax liability you may be able to reduce that liability by claiming one or more tax credits. Most personal tax credits are allowed to the full extent of your regular tax

Textbook costs for education credits hope credit- text book costs- questionaire seems to specify as required for enrollment? What does that mean? I had to buy books, right?

Getting rid of a decrepit car and nybrid tax issues My '98 Plymouth Breeze is down for the count. It needs more repairs than its worth. I have been wanting to buy a more economical car for a while, so the time is right for me to buy a Prius. My Breeze has served me well since I bought it new ten years ago,

Elder care and tax issues I recently quit my job to care for my 95 year old mother. It is not round the clock care, but she needs someone to drive her, shop and do errands, and generally help her out. I cannot work and do that also. Fortunately, she is willing and able to pay me t

Elder care and tax issues I recently quit my job to care for my 95 year old mother. It is not round the clock care, but she needs someone to drive her, shop and do errands, and generally help her out. I cannot work and do that also. Fortunately, she is willing and able to pay me t