Nehemiah helps home buyer but not tax savings

There is a very popular program, The Nehemiah Program, which gives homebuyers down payment assistance. This program requires the seller to make a contribution to the Nehemiah Corporation of California, a large charitable housing organization. Does this contribution get deducted as a charitable contribution or as a cost of the sale? J.D. - Indianapolis, IN

The Nehemiah Corporation is an organization dedicated to assisting individuals in need with affordable housing and homeownership. The organization provides assistance with down payment and closing costs in home purchases for individuals who can afford a mortgage but do not have the cash on hand to pay the up-front home purchase costs.  

The way it works, according to Robert Locke, Director of Industry Relations for The Nehemiah Corporation, is Nehemiah will pay an agreed upon amount on behalf of the buyer at the time of closing. This amount is used to offset the down payment and closing costs of the buyer.  

After the closing is completed and the ownership of the home has transferred, the seller is required to make a contribution to the Nehemiah Corporation of the same amount that was provided to the buyer. The contribution is taken from the seller's proceeds immediately following the closing of the sale. This contribution is then made available, through The Nehemiah Corporation, to a future homebuyer.  

In addition, there is a processing fee of no more than $950 that must also be paid at closing. This fee may be paid by either the buyer, the seller, or the lender.  

The Nehemiah Corporation is not a tax exempt organization, under the rules set out by the IRS for such organization, therefore none of these payments qualifies as charitable contributions for tax purposes.  

According to Mr. Locke, the seller typically adds his contribution and the processing fee, if he pays that also, to his costs of the sale. If the buyer pays the processing fee, that fee will be considered part of the cost of purchasing the home and will be added to the basis in the home. Since most home sales no longer result in income tax, there will probably be no tax savings on this payment when the home is finally sold.  

It sounds as if the Nehemiah Corporation may be an excellent source for assistance in home buying. But if you want to find a tax advantage in the mix, you may have to look elsewhere.  

I am a nurse and I pay each year to maintain my license. I also subscribe to a nursing magazine. These expenses may seem small, but any tax benefit will help. Are these items deductible? S.B. - via e-mail

Yes.  No.  Maybe.  

Yes they are deductible if you continue to work in your field and if you itemize your deductions on Schedule A. These expenses qualify as miscellaneous deductions.  

Maybe you'll get the benefit of the deduction if you have enough miscellaneous deductions to exceed two percent of your adjusted gross income (AGI). Miscellaneous deductions that don't exceed two percent of your AGI produce no tax benefit.  

No, you can't deduct these items if you aren't actually working as a nurse. Nor will you get any tax benefit if you don't itemize your deductions.  

Have you considered asking your employer to reimburse you for these expenses? You may fare better with a reimbursement, which would normally be tax-free, than you would with a deduction.  

Clarification: Last week's column described circumstances under which amounts may be withdrawn from an IRA account to pay for college expenses, without inducing a penalty. Although it was stated that room and board are not included among the eligible college costs, there are circumstances where the room and board can be included. If the student is at least a half-time student at the school he or she is attending, the room and board costs also qualify for the penalty exemption.