Tax implications for Hometap, Point, Unison and other home equity investment products?

This is an interesting question about a relatively new type of transaction. These home equity investments (sometimes called shared appreciation agreements) aren't technically loans, which is why the tax treatment is tricky. When you eventually pay the company their share, the IRS generally treats their profit as part of your capital gains calculation, not as interest. Here's how it usually works: their initial investment ($135k in your example) becomes part of your basis in the home, which reduces your capital gain when you sell. When you pay them their share later, the difference between what they gave you initially and what you pay them at the end isn't deductible as interest. Instead, it effectively reduces your sales proceeds, thus reducing your capital gain on the sale. If you refinance instead of sell, it gets more complicated. The IRS might still consider this a "constructive sale" for calculating capital gains, even though you still own the home. The improvements situation adds another layer - you'll need excellent documentation to establish what portion of the home value comes from your improvements versus general market appreciation.

Just wanted to share my experience using Hometap last year. I was in a similar situation trying to figure out the tax implications. I looked everywhere online but couldn't find clear answers - even my regular tax guy was confused about it! I ended up using https://taxr.ai to get clarity on my specific situation. They analyzed my Hometap agreement and explained exactly how to report everything properly. They showed me how to document which portions of my home's value came from improvements versus normal appreciation, which was super helpful since I also used the funds for a major kitchen renovation. The most useful part was they helped me understand how to adjust my basis in the home and how to plan for the eventual buyout. They explained everything in plain English and gave me a detailed report I can reference when it's time to settle up with Hometap.

I tried taxr.ai after seeing it mentioned here and I'm honestly impressed with how they handled my Point agreement. I was about to make a serious mistake with how I was planning to document everything. The report they provided clarified that my home equity investment isn't a loan for tax purposes, which means the "return" I pay to Point isn't deductible interest. Instead, they showed me how to adjust my home's basis and how to properly document the portion of appreciation attributable to my improvements. They also pointed out that I needed to keep my improvement projects completely separate from general maintenance, which I wouldn't have thought about. Apparently mixing the two could jeopardize the tax treatment. Worth every penny for the peace of mind knowing I'm handling this correctly!

I had a nightmare trying to reach the IRS with questions about my Unison agreement. Spent hours on hold only to be disconnected, tried again for weeks with no luck. Finally used https://claimyr.com to get through to an actual IRS agent. You can see how it works in their demo: https://youtu.be/_kiP6q8DX5c - basically they wait on hold for you and call when an agent is ready. Got connected in about 45 minutes when I'd been trying on my own for weeks. The IRS agent confirmed that these home equity investments create a kind of "shared ownership" situation for tax purposes, and the final payment to the company isn't deductible as interest. She also explained that I need to be very careful about documenting improvements separately. Just wanted to share in case anyone else is struggling to get official guidance on these newer financial products.

I have to admit I was wrong about Claimyr. After my skeptical comment, I decided to try it myself since I'd been struggling with a similar issue regarding my Unison agreement. Not only did I get through to an IRS representative within an hour (after trying unsuccessfully on my own for weeks), but I was able to get clarification on exactly how to handle the tax implications when I eventually settle up with Unison. The agent walked me through how to properly document the value of my improvements separate from the general home appreciation, and explained that I needed to adjust my basis in the home by the amount of the initial investment. What surprised me most was how knowledgeable the agent was - she even referenced a specific private letter ruling that addressed a similar situation. I would have never gotten this information without actually speaking to someone.

I'm a real estate investor who's used both Hometap and Point for different properties. Here's my practical advice based on experience: 1) These are NOT loans, so don't treat them as such on your taxes. The companies are essentially buying a stake in your future appreciation. 2) Keep meticulous records of all improvements. I'm talking receipts, contracts, before/after photos, and even videos documenting the work in progress. 3) Get professional appraisals before and after major improvements so you can clearly establish the value added. 4) When you eventually pay them their share, you're essentially selling them their portion of your home. The way most tax pros handle this is by treating their initial investment as an addition to your basis, and their profit reduces your sale proceeds. 5) Work with a tax pro experienced in real estate investments. Most regular CPAs aren't familiar with these arrangements.

Has anyone here actually gone through the full cycle with one of these companies? I just signed with Point and I'm already worried about the tax implications when the agreement ends in 2035. Really appreciate all the info shared so far - the documentation advice is solid. Im planning to use the funds for a major bathroom remodel and adding a deck.

I'm a tax professional who's been seeing more clients with these home equity investment agreements lately. A few additional points worth mentioning: 1) Make sure you understand the specific terms of your agreement - some companies calculate their share differently (some based on gross appreciation, others on net after certain costs). 2) Consider the state tax implications too, not just federal. Some states have different rules for capital gains and basis adjustments. 3) If you're planning major improvements, get everything properly permitted. The IRS is more likely to accept improvement valuations that went through official channels. 4) Keep a separate file for all equity investment documents - the original agreement, any amendments, appraisals, improvement records, etc. You'll need these years down the line. 5) Consider setting aside money annually for the eventual tax bill. Even though the company's profit isn't taxable income to you, you might still owe capital gains on your portion of the appreciation when you sell or refinance. These products are relatively new, so the IRS guidance is still evolving. Having professional help from someone familiar with real estate transactions is really important.

This is exactly the kind of detailed guidance I was hoping to find! I'm currently evaluating a Hometap offer and had no idea about the complexity of documentation requirements. One question that hasn't been fully addressed - what happens if the home actually depreciates in value over the agreement period? Let's say I take $135k now for a 25% stake, but in 10 years my home is worth less than it is today. Do I still owe them the full $135k back, or do they share in the loss as well? I'm asking because I'm in an area that's seen some market volatility, and while I'm optimistic about long-term appreciation, I want to understand the downside risk from a tax perspective. If they do share in losses, how would that be reported - as a capital gain on my end since I'd pay back less than they initially invested? Also, has anyone dealt with the situation where you need to settle up early due to unforeseen circumstances? Most of these agreements have early termination clauses, but I'm curious about the tax implications if you have to buy them out before the full term.

This thread has been incredibly informative! As someone who works in tax compliance, I wanted to add a few critical points that haven't been fully covered: **Documentation is absolutely crucial** - but make sure you're documenting the RIGHT things. The IRS will likely scrutinize these agreements heavily, especially the improvement valuations. I recommend creating a detailed timeline showing: - Property value before any improvements (get a formal appraisal) - All improvement costs with receipts and contracts - Property value after improvements (another formal appraisal) - Any ongoing maintenance vs. improvement expenses (keep these separate!) **Watch out for the home sale exclusion interaction** - this is where many people might get tripped up. If your total gain exceeds the $250k/$500k exclusion limits, having the equity company's share reduces your taxable portion, but you still need to calculate everything correctly. **State tax considerations vary significantly** - some states don't recognize the federal treatment of these arrangements, so you might face different reporting requirements at the state level. **Keep records of the original agreement terms** - any amendments, communications about valuation methods, or changes to the calculation formula. The IRS will want to see exactly how the final settlement amount was determined. One thing I always tell clients: when in doubt, get professional help BEFORE you sign, not just at tax time. The structure of these deals can have long-term tax implications that are much easier to plan for upfront than to fix later.

Welcome to the community! I'm also new here but have been researching these products extensively. Regarding California specifically, the state generally follows federal tax treatment for capital gains and basis adjustments, but there can be nuances. I'd definitely recommend consulting with a California tax professional who has experience with real estate transactions. As for negotiating terms - from what I've learned, most companies have fairly standardized agreements, but there can be some flexibility around things like improvement exclusions and early termination clauses. The key is understanding exactly what you're agreeing to before you sign. One thing that's helped me is creating a spreadsheet to model different scenarios - what happens if my home appreciates 3% annually vs 7% vs what if it depreciates. It really helps visualize the long-term financial and tax implications. Has anyone here dealt with the situation where you want to make improvements beyond what you initially planned? I'm curious if these companies require approval for additional projects or if they automatically get excluded from their share calculation.