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Hello everyone. New member here. Just through I'd type out my thought process and see if you agree. I have not claimed anything on my taxes yet for this house.... read on.
Ohio, USA based. Purchased a home to flip in late 2010, made renovations in 2010 and into early 2011, but then struggled to sell outright. Because of this, I entered into a lease purchase agreement in late 2011. Here are the terms:
Lease term is 12-18 months to perform, starts Jan 1 2012.
10,000 down in late 2011 (5K to me, 5K to real estate agents - All 10K to be applied toward final purchase if buyer performs, else I pocket the 5K)
225,000 purchase price. This is the low end of a fair market price at the time.
1500 / month lease, with no money going toward purchase price. This started Jan 1 2012 and is a fair market monthly payment.
Buyer responsible for ALL repairs.
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I'm guessing that I need to claim all lease payments made in 2012 as income taxed at my normal rate. I can then deduct property taxes paid in 2012 and insurance paid in 2012 against that income, correct? Much as if it were a rental, since I am pocketing every bit of the 1500/month.
Then when the house sells in 2013, I will claim the 225K (which includes the 10K down payment) as long term capital gains after deducting all renovations, holding costs, taxes paid in 2011, vacant homeowners insurance paid in 2011, etc. In conjunction, I would claim the rental payments at my standard tax rate in 2013 much as I did in 2012.
If the buyer walks away, I would then claim the 5K of the down payment along with the "rental" payments of 2013 as income at the standard rate. There would be no long term gains of course. Back to trying to sell it.
Sound right? Still trying to figure out what tax forms I would use.
Ohio, USA based. Purchased a home to flip in late 2010, made renovations in 2010 and into early 2011, but then struggled to sell outright. Because of this, I entered into a lease purchase agreement in late 2011. Here are the terms:
Lease term is 12-18 months to perform, starts Jan 1 2012.
10,000 down in late 2011 (5K to me, 5K to real estate agents - All 10K to be applied toward final purchase if buyer performs, else I pocket the 5K)
225,000 purchase price. This is the low end of a fair market price at the time.
1500 / month lease, with no money going toward purchase price. This started Jan 1 2012 and is a fair market monthly payment.
Buyer responsible for ALL repairs.
---
I'm guessing that I need to claim all lease payments made in 2012 as income taxed at my normal rate. I can then deduct property taxes paid in 2012 and insurance paid in 2012 against that income, correct? Much as if it were a rental, since I am pocketing every bit of the 1500/month.
Then when the house sells in 2013, I will claim the 225K (which includes the 10K down payment) as long term capital gains after deducting all renovations, holding costs, taxes paid in 2011, vacant homeowners insurance paid in 2011, etc. In conjunction, I would claim the rental payments at my standard tax rate in 2013 much as I did in 2012.
If the buyer walks away, I would then claim the 5K of the down payment along with the "rental" payments of 2013 as income at the standard rate. There would be no long term gains of course. Back to trying to sell it.
Sound right? Still trying to figure out what tax forms I would use.
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