Taxes and selling points

[Laurabearz]

We are selling a contract or two and I wanted to know what i need to know come tax season 2015...

Is this considered income?

What if the points sell for the same amount that we paid for them?

What documents will we need to keep for tax purposes?

Thanks!

 

[drusba]

Yes, it is income but in the form of capital gains due to sale of real estate. You report the sale price minus your purchase price and costs of the sale, such as payment to broker or filing fees. For many that results in a loss rather than a gain and thus there will be no tax. if there is in fact a gain, it will be treated as a capital gain at your applicable gains rates on your federal return; how it is treated by states varies and it may be applicable to the same tax rate as any other income. For tax return purposes you will need to fill out forms that cover real estate sales and capital gains or losses, and documents you should keep are those involving your original purchase showing the purchase and purchase price and those involving the sale by you, including any closing documents showing price and closing costs and proof of payment of any costs that you might claim.