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I am currently purchasing my condo under a land ...

Customer Question
I am currently purchasing my...
I am currently purchasing my condo under a land contract. I pay the current mortgage holders $1000 monthly rent, gave them a $15,000 downpayment,and pay the property taxes to the owner to remit to the city. Am I eligible for a homestead property tax credit? If so, do I configure this credit as the homeowner or a renter? I need help ASAP. Thanks.
Submitted: 9 years ago.Category: Tax
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Answered in 19 hours by:
4/3/2008
Tax Professional: Ed Johnson, Tax Preparer replied 9 years ago
Ed Johnson
Ed Johnson, Tax Preparer
Category: Tax
Satisfied Customers: 10,760
Experience: GPHR Cert; U.S. Treasury Tax Advocacy Panel appointee
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DearCustomer

Michigan considers a lease to with the option to buy, even as a land contract, to be a rental situation. You apply as a renter; when you exercise the option, then you can apply as an owner.

 

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Customer reply replied 9 years ago
Reply to Ed Johnson's Post: Thanks, XXXXX XXXXX it took so long on justanswers to get answers, I contacted another tax source. I was told by this person that the land contract payments are equitable payments in the home, and although the contract holders owns the property, I can deduct the property taxes paid on the homestead on my Michigan return, which calls for the taxes levied and the taxable value of the home. Also, since the holder can only claim the credit on their main home, they would be unable to do so on my home. The benefit to me is the deduction of property taxes, the benefit to the contract holder is they don't have to report a lump sum of money as income, but can report it as an installment sale.
Tax Professional: Ed Johnson, Tax Preparer replied 9 years ago

DearCustomer

I am so sorry,

I just re-read your question. For some reason, I got the idea from the content of the question that you had a Lease with option to buy. I believe I got that idea from your use of the terms of paying rent. Most land contracts do not have rent payments.

so if your contract is really a lease with option to buy, with the land being held as collateral, then I stand by my answer.

IF you really do have a Land Contract, then it would not normally have a lease payment, but anything is possible.

So let me coroberate what the other expert said.

that in a pure land contract, you do are able to file as the owner. both situations are covered in this reference:

For land contract:

Complete the affidavit using your name, address, social security number and signature, not the information of the land contract holder

For lease with Option to buy:

Leasing with an option to buy is considered a rental agreement, so the home is ineligible. Once you exercise the option to buy, you may claim an exemption.

REFERENCE

http://www.michigan.gov/documents/2856_11014_7.pdf

 

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