Insider’s LEGAL Accounting Tactic Gets you $2000 IRS Refund For Costs You DIDN’T Pay When Buying A Northern Virginia Home For Sale.
Anytime it comes to getting every dime you are entitle to from the IRS, I am more than happy to share it with everyone, especially when it comes down to tactics that are totally legal, yet not very well known or utilized.
In this case, I almost had to learn this special tip the hard way. On my Real Estate radio show I was interviewing the accountant a very well known and large residential DC area Real; Estate Investor. This particular interview was all about uncovering hidden write-offs and legal accounting and bookkeeping strategies for investors. But as we got into the interview this accountant dropped an IRS refund bombshell that I never even knew existed. And, as it turns out, 70% of tax preparers don’t even know this special cash reimbursement strategy legally exists. I guess this is one of those reasons why theses high dollar accountants get the big bucks and generate big fess from their high dollar clients, because they actually earn it!
Here is the story, when a typical homebuyer purchases a home, they have to come up with their down payment which is usually from %5 to 20% down payment plus they need to come up with another 3%-5% for closing costs. Well this really starts to add up for most homebuyers,, and in the case of our high dollar investor, he wants to buy as many houses as possible, so he would also rather minimize his out of pocket costs. So many buyers will ask the seller to assist them in paying their closing costs. In many cases this is negotiated so the seller pays an example amount of 2%- 3% towards the purchasers closing costs at settlement. In an average transaction of a $350,000 home, this equals about $7000 – $10,000.
Well in the average scenario, everyone is happy, the house is sold and the buyer has no additional tax write off, since they did not pay their own closing costs. But in the world of educated Real estate insiders and high paid accountants, our buyer gets legally take that write off on losing costs he DID NOT pay and get an IRS refund of over $2000!
Why? Well if the buyer had originally paid their own closing costs, and if those costs included mortgage discount points, which is the biggest part of closing costs, they would get to write off all the mortgage ‘points’ that were paid at settlement, because those mortgage discount points’ are viewed by the IRS as a mortgage interest expense.
But they didn’t pay the points, the seller did. However in a little known IRS ruling, (one of those rare ones that actually benefits the consumer) the IRS declared that even if the seller is paying the mortgage discount points on behalf of a home buyer, then the home buyer can take the write off. The logic for the IRS’s ruling is that if the points were not paid by the seller on behalf of the buyer, then the buyer would have been able to get a price reduction of an amount equal to the points that would have been paid by the seller, therefore the IRS feels that the buyer actually (in a roundabout way) paid the mortgage points by not getting a price reduction instead. So the buyer is allowed to take the write off, and in our example of the $7000-$10,000 of points paid by the seller, the buyer can write these off on their tax return and get $2000-$3000 cash back for the IRS (the exact amount depends on your tax bracket). I have to hand it to the IRS, in this rare case, they have used sound logic. I also have to tell you that since I’m not an accountant, I can’t give you direct tax advice so you need to check these figures and statements with a your own tax advisor. And if they don’t’ know about this strategy, which won’t be unusual, then tell them to research it, or you better find another tax advisor!
I guess it’s true, what you don’t know really can hurt you!
You can find out more about how we are currently using Insider Strategies learned from my Real Estate Radio show to save homebuyers tens thousands of dollars on their home purchase and financing everyday right here in Northern Virginia, just check out my free Live online webinar, at www.HomebuyerInsideSecrets.com, that’s www.HomebuyerInsideSecrets.com.
You can also get all of these insider techniques applied to your personal home purchase with our Free ‘Insiders Access Homebuyer Savings Program’ and get a minimum guaranteed savings of $25,000 or more. And the best part is we guarantee you save at least $25,000 or more with my exclusive strategies, plus the service is no cost to you. Go to www.NovaHomeSavings.com and find out why even other realtors and mortgage lenders actually use me as their buyer broker on their own personal home buying transactions, instead of relying on themselves, that’s www.NovaHomeSavings.com.
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Your ‘Insider’ Real Estate Advisor,
Thierry Roche SFR, CDPE
Host of Talk Radio’s,
‘Inside Real Estate’
P.S. If you would like more detail on the types of ‘Insider’ strategies that would work best for your personal home buying needs, then call my office for a FREE, over-the-phone consultation with me.
Then, you’ll learn how I can represent you at no additional cost whatsoever!
Call 703-222-6714. You can also e-mail me.