Q. My wife and I purchased the model house in a new development, including all the furnishings within the home. I guess I should have been more vigilant at settlement but the real estate transfer tax was based on the total sales price of the home. It was only recently that I obtained a copy of the appraisal and learned that the appraiser included nearly $80,000 for the furnishings within the home, which meant I paid almost $800 more in transfer tax than I should have. Do you think if I petition my local county tax office there’s a chance of getting a refund?
A. It never hurts to ask; the county tax office can say no. Unfortunately, counties throughout the country are desperate for money, and they may give you a hard time.
But even if they refuse, and if their next tax assessment includes that additional $80,000, you should consider filing a tax assessment appeal. Every jurisdiction allows such a procedure, although the process differs from state to state.
In the final analysis, don’t forget to include the full amount of the tax when you compute your tax basis. Although you cannot deduct the recordation or transfer tax when you file your annual income tax return, that amount can be added to the purchase price, thereby increasing your tax basis. The higher the basis, the less tax you have to pay — assuming of course that you cannot take the up-to-$250,000 exclusion of gain (or up to $500,000 if you are married and file a joint tax return). And even if you are eligible for the exclusion — because you have lived and owned the house for two out of the five years before you sell it — many homeowners have made (or will make) more than the exclusion allows.
Accordingly, then it is important to include every legitimate dollar you can so as to increase your tax basis.