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Uh-Oh: Cars/Vacations/Flat Panels Not Tax Deductible

Here's some more bad news for John Q. Public:

We all know that the fun of the past few years Housing binge / ATM withdrawal / GDP Party is long since over. But it turns out that the hangover isn't nearly done.

Why is that? Well, one of the advantages of Home Equity financing is that if you use the proceeds for capital improvements to the home -- *new floors, walls or lighting, installing central A/C, removing trees, refurbishing bathrooms, new lawns or gardens -- then it has the same tax deductiblity as if it were a primary mortgage.

What abut if you use the proceeds for other, non-capital improvement purposes? 

From Realty blog Patrick.Net:

"Word from the IRS is that they are auditing people based on refiances on their house. If you refied and pulled money out of the house and use for other purposes than home improvement you can not claim that as Mortgage Deduction, needs to be claimed as Interest expense. Guess what, they want proof of home improvements…"

Uh-Oh !

Why do I smell some big trouble coming down the road for some people?

>

Source:
Refi Interest Trap?
March 28th, 2008
http://patrick.net/wp/?p=594

_______________________
* What we did to our home

Monday, March 31, 2008 | 06:30 PM | Permalink | Comments (22) | TrackBack (0)
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Comments

That's going to hurt. A lot of people have been using that loophole for a long time to buy vehicles and whatever else.

Irony is, the government giveth in the form of lender mitigation, yet the government taketh away in the form of tax "gotchas". The IRS will have a bountiful harvest on this, but since uncle owns the note as pawn, it will end up making this mess much messier.

Posted by: Rich_Lather | Mar 31, 2008 6:47:40 PM