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Contract for Deed Deductions

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D_Chacon

Junior Member
What is the name of your state (only U.S. law)? va

i sold a home via a contract for deed using a 3rd party who collects the payments. the contract states that the monthly payments are to be considered interest payments with a balloon payment due at the end of the contract and that the payments are to include the real estate taxes and hoa fees.

with this said, I still have a mortgage on the home that I make payments on and I wanted to know if I can deduct the interest I pay the mortgage company. what about the real estate taxes and hoa fees? can I deduct those expenses as well if the expenses are in my name and I'm still paying them directly?
 


justalayman

Senior Member
can I deduct those expenses as well if the expenses are in my name and I'm still paying them directly?
but you aren't paying them directly. The buyer of your home is indirectly paying them. You are paying nothing towards them.


the mortgage interest you pay your lender is another issue but if this is not your residence, are you allowed to deduct the mortgage interest of a property that is not your residence?
 

D_Chacon

Junior Member
for a rental property you can deduct real estate taxes, hoa fees and mortgage interest (even though you are not living in the home). i know that it works differently for a contract for deed which is why I asked the question. i don't think i can deduct the real estate taxes, but what about the hoa fees and mortgage interest on the mortgage loans that I'm still paying on?
 

justalayman

Senior Member
if you don't pay them, you cannot deduct them. If your contract is written that that buyer pays the property taxes and HOA fees, then you are not paying them.
 

justalayman

Senior Member
what about the mortgage interest? can i deduct that?
as long as you are paying it and it is acceptable to claim it on a rental property (I honestly do not know if that is the case), sure. Your mortgage has nothing to do with the current purchaser of the property. They are separate issues.
 

LdiJ

Senior Member
if you don't pay them, you cannot deduct them. If your contract is written that that buyer pays the property taxes and HOA fees, then you are not paying them.
That may not be correct...

Example:

The third party collects the payments and remits them to the OP. The OP receives a 1099 from the third party. The OP is then responsible for remitting the payments for property taxes and HOA fees. The OP can deduct those fees because the payment coming from the buyer goes into the OP's income.

Opposite Example:

The third party collects the payments and remits the property taxes and HOA fees directly to the state/county and to the HOA. The third party remits the balance to the OP and issues a 1099 for only the balance. In that instance you are correct, the OP cannot deduct those taxes and fees.
 

justalayman

Senior Member
That may not be correct...

Example:

The third party collects the payments and remits them to the OP. The OP receives a 1099 from the third party. The OP is then responsible for remitting the payments for property taxes and HOA fees. The OP can deduct those fees because the payment coming from the buyer goes into the OP's income.

Opposite Example:

The third party collects the payments and remits the property taxes and HOA fees directly to the state/county and to the HOA. The third party remits the balance to the OP and issues a 1099 for only the balance. In that instance you are correct, the OP cannot deduct those taxes and fees.
can I weasel out by arguing the OP is in fact not paying the fees since the money being used to pay the fees is not his?:eek:

Would the fact the contract is written to specifically apportion part of the payments to taxes and HOA fees change things? By doing so, the payments are not income to the OP but merely pass through payments to the entitled entity being made by the purchaser.
 

LdiJ

Senior Member
can I weasel out by arguing the OP is in fact not paying the fees since the money being used to pay the fees is not his?:eek:

Would the fact the contract is written to specifically apportion part of the payments to taxes and HOA fees change things? By doing so, the payments are not income to the OP but merely pass through payments to the entitled entity being made by the purchaser.
It all depends on whether or not the amount of money involved is reported as the OP's income. If the third party issues a 1099 to the OP that includes that money, then the OP has the right to deduct it no matter what the contract says.

If there is no third party, then technically the OP could simply omit the taxes and HOA fees from income (although that might make things sticky in an audit) and simply report the interest income that they are receiving.

Bottom line, if its included in income its deductible. If it is not included in income then it is not deductible.
 

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