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I have a General Contractor (GC) building my new home. I got a 30 year loan from a bank and the bank is giving 5 draws to the GC that total to the entire loan. In my contract with the GC there is a $20,000 allowance for the kitchen cabinets and appliances. I spent $20k of my own money to purchase the cabinets/appliances. The General Contractor wrote me a check for $20k to reimburse me. Do I have to pay taxes on the $20k that I received from the GC? How would I report this on my taxes?

  • Getting money back from what amounts to a loan is not taxable income. If you were getting interest on it, the interest would be taxable, but... Don't worry about it. – keshlam Dec 15 '15 at 5:59
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    I wouldn't be as calm as keshlam. Depending on how this was reported, you may get questions from the IRS. If you covered the loan within 60 days (IIRC), that should be fine, if documented properly. Otherwise you won't be taxed on the reimbursement - but may not be able to deduct the interest on the 20K from the loan. – littleadv Dec 15 '15 at 7:32
  • I'm assuming this is in the US, since you didn't bother mentioning a country (from my experience, only USians do that) – littleadv Dec 15 '15 at 7:33
  • littleadv Yes this a United States tax question. – ShawnLane Dec 15 '15 at 14:13
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As I understand your scenario, you paid the contractor twice for cabinets - Once by paying the $20k in cash on the original contract and once "in-kind" by providing the cabinets yourself. The $20k that you got from the contractor is not income to you, it's just a refund of your overpayment.

I don't think you need to report that at all. Just make sure that you can document that the check that you got back from the contractor matches what you paid for the cabinets and keep that record.

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