Have you discussed this with your builder? They can usually provide you with some options to assist in tax savings. But it will probably involve paying out some cash.

$100,000 is a large sum to eliminate, are you planning to add the eliminated features sometime in the future?

Who builds a house with 100K of allowances? That just means you haven't done enough research to build that house. An allowance is a "placeholder" for a required product selection not chosen. Most builders lowball allowances to get the job, and then customers can't find $1 a square foot tile that they like so they end up going well above any allowances in their contract as upgrades. You're still going to have to pay for all of the products to put in the house, so there is no "tax savings" at all unless you are simply talking about mortgage interest. In that case, pay cash and don't fold it into the mortgage.

That allowance is indeed for placeholders that product selections that have not been done yet.

$35,000 for cabinets
$25,000 for appliances
$10,000 for landscape
$10,000 for audio/visual
$5,000 for lighting
$4,000 for plumbing fixtures
$2,500 for door hardware (locks, cabinets)

--these I intend to leave in since we don't know what the final amount will be.
55/sq ft for granite
6/sq ft for tile. $10/sq ft for master bath.

Tax savings here is real estate tax savings.
Valuation of the house is done on the purchase price. In this case, the purchase price has this allowance included. If I remove all the allowances and pay for all of these out of pocket, the purchase price will be reduced appropriate. Thus, valuation for taxes will be lower.

On to your question about allowances not being $100k. How could you build this into a spec?

Are you sure that the valuation is based on purchase price?

That would mean that anyone who could pay cash for their house would not pay taxes on it. Usually the taxing agency appraises the value of properties.

Yes, that's use as the starting point. When you pay cash, you still paying something to someone. The house will be re-valuated each year, but only on the exterior. They do not take into account of interior finishes. So if I have $60,000 worth of appliances vs an equally similar house with $5,000 appliances, the house valuation would be the same.

By "tax savings" or real estate taxes, do you mean property taxes? Aren't your property taxes based upon how local jurisdictions (city, school, library, utilities, etc.) determine property assessments each year?

In my area, at least, they don't care what I put in or leave out of a house. They use a formula for comparables.

As said above, $100,000 is a huge sum for allowances. What is your total construction budget? The way allowances are minimized or eliminated is to make all choices and selections before bidding, so that the bid prices reflect exactly your choices. An allowance is just an open-ended Change Order waiting to happen and add expense to your construction cost.

Are ;you sure you're ready to build?

Good luck with your project.

The way you eliminate allowances is to do more research to fill those holes with the exact cost of the exact products that you want to use rather than waiting and having to make decisions under pressure later. Allowances ALWAYS are under what most people think "should" be, and if you've got 100K in allowances, you've got at least 150-200K in real expenses there. That's a huge amount of unknowns for even a luxury home build.

And, looking at those numbers, and your floor plan, those numbers are laughable. 35K for cabinets for that house? In their dreams. 35K won't even do the kitchen unless you're talking builder grade crap built in place cabinets. 25K seems more than generous for appliances, but to put it into perspective, cabinets are usually 40-50% of a total kitchen redo budget, while appliances are 10%. You're either overdoing the appliances or underdoing the cabinets. Or both.

10K for landscaping will get you seeded and an irrigation system. No real landscaping. Just grass.

I'm not into AV. The other half is an audiophile, so the only comment I'll make there is that I've got more than that in a couple of pairs of Klipsch speakers and a pre amp.

5K for lighting will get blown by a foyer fixture. In a house that size, you're gonna be more like 30K in lighting.

4K for plumbing is one really nice kitchen faucet, and maybe one nice faucet for your Roman tub.

2.5K for hardware including cabinet hardware? Try 10K.

Your builder is on some serious drugs here. You've got builder grade numbers plugged in and you're wanting to build a luxury house. Has the builder ever built a home to this level before? I suspect not. That by itself would be a good reason to stop the process, do more research, and get more bids. That will be about 200K more if they're realistic.

Is that what the property tax agency told you? Or perhaps you just heard this second hand? I have never heard of a taxing agency determining property value this way.

I do not believe live wire oak is correct -the numbers are certainly workable. (Depending on where you are located and what your expectations are.)

Anyway it is not their place to judge what is the appropriate amount to spend on cabinets or anything else in your house.

While there are no doubt dishonest builders, most try and determine a reasonable and workable budget based on the clients preferences and their own past cost history - because they do not like getting stuck in the end with a client who can't pay their bills.

If you want to use inexpensive light fixtures off the shelf and then also use expensive appliances that is your right. In many parts of the country job built cabinets are normal. You can find a pretty good kitchen sink faucet for less than $50

Do you have children or grandchildren in school? By shortchanging your taxes, you're shortchanging your them and/or the children in your neighborhood. And your city, county and state. There's a reason you decided to build/buy in your town/county. Property taxes helped it get what drew you to the area in the first place.

In California purchase price is the basis for property taxes. If I understand your question, in theory getting rid of the allowances lowers your purchase price thus your tax basis. However, you can't close escrow without lighting, plumbing, etc. If lowering your property taxes is the goal, and your builder is willing, you could put in the bare minimum to close escrow and then go back and put in the fixtures you really want. That will also affect your appraised value which will affect your mortgage amount and ratios.

It seems to me that this would allow anyone to simply write a contract that pays the builder $1 contract price and pay everything else out of general funds.

The state would basically be giving everyone who was wealthy a free ride.

I am no expert but I think you are misunderstanding how property taxes are determined when improvements are involved.

Yes, when you buy an existing house it's value is determined by purchase price but a new house is appraised by the tax agency. Generally they go by other things than how expensive your appliances are.

http://www.lao.ca.gov/reports/2012/tax/property-tax-primer-112912.aspx

"Property Improvements Are Assessed Separately.
When property owners undertake property improvements, such as additions, remodeling, or building expansions, the additions or upgrades are assessed at market value in that year and increase by up to 2 percent each year thereafter. The unimproved portion of the property continues to be assessed based on its original acquisition value."

When I remodeled my kitchen this summer, the City Assessor came over to determine the value of the renovation. Wouldn't the same happen with new construction?

I seriously doubt this amateurish ploy will result in a tax saving. The tax collector in your town is unlikely to be a complete idiot.

It could save sales tax ,no? It would be illegal but it would save sales tax to get rid of the high allowances and then pay cash under the table. I wouldn't advise it as a money saving strategy but what other people do is thier business.

MFatt16--Where do you live that sales tax is charged on a home purchase? Just curious as I've never heard of a state that charges sales tax. I've heard of transfer taxes, but those have always been capped or the same for all sales.

Maybe it's because it's been a rough week, but something seems out of whack when someone with $100,000 allowance is worried about $1500 in taxes.

Washington state charges sales tax. (fyi) --on all materials for the home as well as all labor and permits, etc.

Some of you have no idea how nice it is that your state has income and sales tax...

Yeah, ^^^^ what kirkhall said.