How to Use Hauseit's Co-op Tax Deduction Calculator - YouTube

Hey everyone. In today's video we will show you how to use the Hauseit co-op maintenance

tax deduction calculator.

I'm Nick at Hauseit, check out our website www.hauseit.com to save money when buying

or selling real estate here in New York City.

So, let's get started.

First things first, if you're not already on the calculator page you can get here by

typing in the following address into your browser, the spelling is up above.

The other way to get here is by visiting www.hauseit.com, scroll to resources, calculators and select

the co-op tax deduction calculator.

The calculator itself allows us to compute two data points.

One is the total annual co-op tax deduction dollar amount and the second item is the tax

deduction percentage also known as the percentage of tax deductibility of monthly maintenance.

We've already done a simple example here and as you can see the total co-op annual tax

deduction amount is calculated by summing up the per share amount of mortgage interest

deduction with the per share amount of real estate tax deduction and multiplying that

by the number of co-op shares owned.

So, it's a simple equation we're basically multiplying three different items together

and that gives us the dollar amount on the top right which is $5,607.

So, if you were filing your income taxes and you qualify for a deduction you would input

$5,607 into your tax return to take advantage of the deduction.

Now, the tax deduction percentage is calculated by taking that 5607 figure and dividing that

by the monthly maintenance, times twelve and that's how we end up with 49.18%.

Now, let's ask a question.

Why do co-op buildings have different percentages of tax deductibility?

Well, the reason is that each co-op has its own unique property tax exposure and its own

unique underlying debt structure or form of financing or other sorts of obligations on

the debt side.

One co-op for example might have similar real estate taxes to another but one of these co-ops

might have a huge loan with high interest rate and perhaps the other co-op doesn't actually

have any debt whatsoever.

So, it makes sense that one them would be paying out more in mortgage interest which

would translate into a higher percentage of co-op tax deductibility of monthly maintenance.

So, you may be asking: where do I find the per share tax deduction amounts for real estate

taxes and mortgage interest?

Well, it's a very simple answer.

Every year as a shareholder the accountant for your co-op will send out a form 1098

and the 1098

provides you with the data points that you need.

In front of us is an example of such a document.

As you can see it gives you a per share amount for real estate taxes and mortgage interest.

Now, there's a whole bunch of other information here which is pretty standard from year to

year.

It's just a bunch of disclosures disclaimers about how all of this works and to certainly

contact your accountant for direct questions but the actual mechanics are very simple.

You take these two numbers here and you dump them into the calculator which we've done

already.

Now if we want to go a step further let's take a look at the actual income statement

of a co-op and try to understand where we see the outflows for mortgage interest and

real estate taxes.

So, here we've taken a few screenshots from real financials for a co-op in lower Manhattan.

The first one we're looking at here is a snapshot of a part of the income statement so you can

see revenue at the top interesting things for you to see our items like the laundry

income.

They have a commercial rent from a building downstairs or rather from a unit downstairs

and in the cost of operations you'll see under taxes that this building pays out a whopping

$1.23 million dollars in taxes on an annual basis.

So, this here the size of that line item is a large determinant of the percentage of co-op

tax deductibility.

Furthermore, under financial expenses we see here that there's an entry for $78,000 so

this doesn't say exactly interest payments but based on the other items in the income

statement.

We think this one is most likely representing what the co-op pays out in mortgage interest

on an annual basis we can learn more about the underlying debt of a bill by looking in

the notes of the financial statement.

So, here we have a snapshot of the notes for mortgage payable and what we see here is that

there is a mortgage of $2.5 million dollars now it also tells us basically the monthly

payment amount but it also tells us the interest rate so that could give you a sense for what

sort of data the co-op is carrying.

If we go further down another snapshot from that same notes, we see that there's also

the line of credit so they have a $1.5 million line of credit and whenever they draw

down the funds the interest rate is one month LIBOR plus 2.75%.

So, there you have it that's really how we understand mechanically why there is a tax

deduction for co-ops, co-op pays out, real estate taxes and mortgage interest and because

the co-op itself is the one who's responsible for paying all interest and all taxes on behalf

of shareholders it only makes sense that the shareholders themselves should receive some

sort of deduction for this outflow.

So, going back to the calculator it's really all you need to calculate the dollar amount

of tax deduction and your percentage of tax deductibility a couple of notes about the

calculator you can email yourself the results you can also print a PDF or save it down and

before we let you go we would love to also remind you that we have a number of other

calculators on the Hauseit website.

Two big ones, one is the buyer closing cost calculator so that is super helpful closing

costs for buyers in the city are really high they're anywhere from 2-6% depending on property

type and whether or not it's new development but this gives you a very nice itemized explanation

of what you might expect to pay and you have similar functionality for emailing it and

saving down a PDF.

We also have the seller closing cost calculator which gives you a nice snapshot into what

you might be paying as a seller here in New York City.

For example, you can customize broker commission amounts hopefully you negotiate those down

you can save up to 6% through a service such as Hauseit's assistive FSBO listing platform

and of course you have other closing costs as well.

You have potential flip tax, you have transfer tax, attorney fees and the like.

So, please keep these in mind as you navigate the rather complex industry which is the New

York City real estate marketplace.

Thank you so much for watching.

I’m Nick at Hauseit, if you have any questions or comments leave us a comment below on this

video or you can send us an email to [email protected] and feel free to give us a shout if you're

looking to buy or sell and you're interested in saving money.

Thanks again for watching, we're going to see you on the next one!