I’m hoping to reduce my tax bill as it’s one of the highest in the US (around 2.1% of selling price) by reducing the selling price. I’d like to offer 1,400,000 but use $50,000 of the good faith deposit to help the builders finish the construction (pay for the landscaping, labor, appliances, carpet and items they haven’t bought yet). Therefore in the contract to buy the property it would be 1,350,000 and I would give them 50,000 as soon as it was signed (or right checks for the various items totaling $50,000). I’ve seen in a sample spec sheet that the client bought all the cabinets, counters, lights, tile and paid for the labor associated with instillation.
Have you ever heard of this being done?
Is it a good idea?
I may be saving some on the yearly taxes this way ($1,000/yr) but it may negatively affect me when I sell the home eventually as the buyer will see that I bought it for 1.35 not 1.4 million (what it actually cost).
On the flip side I may be saving taxes every year but when I eventually sell it I would have a bigger capital tax bill (unless I could count the 50,000 I put into it as a home improvement even though it was done before closing on the home). Also perhaps I want the price show to be high as possible (having builder put in all upgrades we want into selling price rather then paying for it later) since there is a lot on the market now and I don’t want to effect the market and show that you can get 15% under the list price as I’d like the market to be strong for when I sell it and to show a that I paid a high price for that time period may increase the value in the new buyers mind 4 years down the road when we do sell.