Deducting 2008 Sales Taxes on Federal (San Antonio, Anton: credit card, construction loan, attorney)

[SurferDude]

I was speaking with my tax accountant, and he told me that current federal tax law allows either the deduction of State Income Tax (which Texas does not have) or Sales Tax on my federal forms. I built a custom home in 2008, and while I did not pay any sales tax on it directly, my builder indirectly paid a significant amount of taxes on almost all materials and services. The problem is that the builder receipts say "Turnkey", and do not break out the sales tax amount.

Is anyone aware of the homeowner taking sales tax credits for the purchase of a custom home? If so, how would one go about calculating it? I would probably assume the following formula:

Home Purchase Price - Land Value - Builder Profit * 6.5% (travis sales tax amount)


Also does anyone actually save all of their local receipts and submit them to their tax accountant? I think I am going to export all of my credit card statements, isolate local purchases, and break down between standard and gas purchases. Any thoughts?

[centralaustinite]

I would not try to deduct the indirect costs of your builder's sales tax on the materials in your home! I would think that the IRS would take a dim view if you were audited.

My household tends to under-consume in comparison with our income so we usually come out ahead with the standard sales tax deduction. We only itemize if we bought a car or other very large purchase.

[SurferDude]

I'll let you know what my accountant says, but the way that I see it is that I hired my builder to make purchases on my behalf, and many of those purchases were taxable. I see this as a legitimate use of the tax code.

Originally Posted by centralaustinite

I would not try to deduct the indirect costs of your builder's sales tax on the materials in your home! I would think that the IRS would take a dim view if you were audited.

My household tends to under-consume in comparison with our income so we usually come out ahead with the standard sales tax deduction. We only itemize if we bought a car or other very large purchase.

[woodinvilleguy]

Um good luck.... I'm not going there. When I sold my house they taxed me in the great state of Washington and I can't deduct that.

[statefan]

We save every receipt for any and everything. We write off all the sales tax for everything we buy and did son in Tennessee before we moved to Texas. Since my husband is self employed, we need all the help we can get.

On another note, my mother passed away back in 2005 and everything we purchased to "improve" the house to sale, had the sales tax written off too.

[centralaustinite]

I could see it (maybe) if you got a construction loan and paid your contractor with individual draws for items and thus you saw the invoices as you went and then paid your general contractor a percentage above real costs (usually 15-20%) AND you had all this spelled out in your contract with the bank and the contractor. ie a custom home built with cost plus financing. But you didn't do this did you?

You set a price and the contractor built it turnkey? Yes? Did you even finance the construction and take draws on the bank money? If the contractor made his bid to build your house and then built it to that price (even though the cost of supplies and labor may had varied, in other words, the contractor took the risk and may or may not have made any profit on the job, he managed all the purchases, invoices and paid the sales tax as part of his cost of business, then I don't think you have any claim to deducting that sales tax.

If you have a contract with the bank and the contractor that let you draw on a loan to pay for specific invoices (which of course you have the copies) and sales taxes on supplies is not addressed in the contractual language (I bet it is) then I'd give ya a qualified "maybe" but otherwise I'd think you are out of luck.

Let me know what a tax attorney says.

[SurferDude]

When I signed a deal with my custom builder, I had the arrangement where there was a predefined profit amount, 15 - 20 draws for the construction loan, and where I have access to actual invoices/costs. It's a cost plus arrangement.

The turnkey packages are how the builders subcontractors package their services, and not reflective of the contract that I signed with the builder.

My Tax Guy said the following: "your contractor is considered your agent in the construction of the home or substantial addition or the performance of a major renovation. The contract must state that the contractor is authorized to act in your name and must follow your directions on construction decisions. In this case, you will be considered to have purchased any items subject to a sales tax and to have paid the sales tax directly."

In the mean time, I'm analyzing all of my local purchases with sales tax for deductions there too!

Originally Posted by centralaustinite

I could see it (maybe) if you got a construction loan and paid your contractor with individual draws for items and thus you saw the invoices as you went and then paid your general contractor a percentage above real costs (usually 15-20%) AND you had all this spelled out in your contract with the bank and the contractor. ie a custom home built with cost plus financing. But you didn't do this did you?

You set a price and the contractor built it turnkey? Yes? Did you even finance the construction and take draws on the bank money? If the contractor made his bid to build your house and then built it to that price (even though the cost of supplies and labor may had varied, in other words, the contractor took the risk and may or may not have made any profit on the job, he managed all the purchases, invoices and paid the sales tax as part of his cost of business, then I don't think you have any claim to deducting that sales tax.

If you have a contract with the bank and the contractor that let you draw on a loan to pay for specific invoices (which of course you have the copies) and sales taxes on supplies is not addressed in the contractual language (I bet it is) then I'd give ya a qualified "maybe" but otherwise I'd think you are out of luck.

Let me know what a tax attorney says.

[centralaustinite]

Yes, if you did cost plus and saw the invoices then I can see taking the deduction.

[Trainwreck20]

Actually, I don't think you pay a 'sales tax' on a house, so although the builder could possibly deduct the sales tax, I am pretty sure you can't.

A co-worker of mine kept all their receipts (actually, his wife did ) for several years now, and they apparently come well ahead of the standard allowance....and they are pretty frugal people. You can take the standard deduction and add large-bill items to that (such as cars, not sure what else).

[Tillery711]

Surfer Dude, What did you do. I'm in the same situation in San Antonio. Started building last year. I have some receipts but not all. So I can speak intelligently to my bulder what did you ask for. Thanks so much!
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