By topic: Interest

COVID-19: IRS Provides Relief from Enforcement Actions

During the COVID-19 pandemic, the last thing you need is the IRS doing bad things, like auditing you or levying your bank account or wages. But don’t worry—the IRS is pausing most of its collection and audit enforcement actions. When you read the article, we’ll tell you what it is stopping and for how long.

TCJA Changes Vacant Land Tax Strategies

The Tax Cuts and Jobs Act (TCJA) likely requires that you rethink the tax strategies you were using on your vacant land investments. And the TCJA changes may be such that you have to rethink vacant land as an investment, at least for the years impacted by the TCJA.

Dealer Got Mad, Sent Customer a Fraudulent 1099 to Get Even

An auto dealer sent its customer a bogus 1099 because the customer refused to return to the dealership and redo the “no interest” loan to an interest-bearing loan. The dealer made a mistake originally and then wanted the customer to help fix the problem—at the customer’s expense. The customer said no. Later, when the bogus 1099 showing interest income from the no-interest loan showed up in this customer’s mailbox, the customer took this dealership problem to the IRS.

Life Insurance Policy Loan: A Tax Nightmare

Do you have an inside buildup of cash value in your life insurance policy? Are you taking loans from the policy or letting the policy ride with premiums being paid from the cash value? If yes, make sure you know the tax consequences of your actions.

Q&A: Did Tax Reform Take Away My Boat Deductions?

The taxpayer in this question-and-answer bought a boat. Tax reform did him considerable damage on two of his tax deductions. Learn what the Tax Cuts and Jobs Act (TCJA) tax reform did to this boat.

Tax Reform Attacks Home Mortgage Interest Deductions

The home mortgage interest deduction rules did not fare well in the recent tax reform. First, a chunk of your home equity mortgage interest is no longer deductible. Second, you now face a new lower ceiling on mortgages that can qualify for the home mortgage interest deduction.

Cashing Out Real Estate Profits without Section 1031

Section 1031 exchanges are perfect when you are going to stay in the real estate rental or investment business. When it’s time to cash out, you need to look at different strategies that help you avoid taxes and give you cash to spend (liquidity).

How to Help Your Adult Child Buy a Home—the Tax-Friendly Way

Your adult child asks a big favor—help in buying his or her first home. If you are lucky enough to be able to help, you want to understand and avoid the tax pitfalls. In this article, you find five possible solutions to help your child while avoiding the tax pitfalls.

Do New Rules Allow You to Double Your Mortgage Interest Deductions?

Home mortgage interest deductions make homes more affordable and save taxpayers thousands of tax dollars each year. Now, if you are single, a new IRS decision creates the possibility for added savings—perhaps double—if you co-own a home or vacation property.

2016 Last-Minute Year-End Tax Strategies for Marriage, Kids, and Family

If you are thinking of getting married or divorced, you need to consider December 31, 2016, in your tax planning. Here’s another planning question: Do you give money to family or friends (other than your children who are under age 24)? If so, you need to consider the zero-tax-bracket planning strategy. And now let’s consider your children who are under age 18. Have you paid them for work they’ve done for your business? Have you paid them the right way? You’ll find the answers here.

Tax Code’s Officially Designed “Rent-to-Own Your Home” Program for Investors and Renters

In this official tax code program, the landlord-investor benefits because he has no vacancies, few hassles, no management fees, and a known cash flow. The tenant-investor benefits because he gets into this home with little or no down payment, builds equity while paying rent, and gets detailed knowledge about the property while living there. At some agreed-upon future point in time, the landlord-investor sells his or her interest in the property to the tenant-investor or the two of them sell the property to a third party.

Tax Tips for Vacant Lot and Unproductive Land

You have tax decisions to make every year when you own a vacant lot and/or unproductive land. It starts with the interest and property taxes and what you can or cannot deduct as itemized deductions. If you can’t deduct some or all of the interest and property taxes, then you can capitalize them by making a formal election in your tax return. But if you incur other costs, you likely sit in a Catch-22 where you simply suffer the 2 percent floor on miscellaneous itemized deductions and the alternative minimum tax (AMT).

Tax Trick When Repossessing a Home You Sold with Seller Financing

If you sold your home using seller financing, you likely don’t look forward to your buyer defaulting on your loan. Here’s a twist: It may not be a bad thing in the end. Under the right circumstances, you could walk away with more cash in your pocket—and you could make some or all of that cash tax-free! But there’s one big trap that you need to avoid.

Q&A: Vacant Lot

 

Make the Closing Statement Work for You When Buying Rental Property

One of your first tax steps in buying a rental property is to go through each line item in the closing statement and assign it to one of the following three categories: (1) basis, (2) loan acquisition, or (3) operations. With basis, you allocate costs to land, land improvements, buildings (including perhaps building components), and equipment. Loan acquisition falls into either costs of getting the loan or costs to reduce the interest rate. The assignments have a direct impact on how quickly you realize the deductions.

Mortgage Interest on Rental Property—Avoid Traps, Maximize Your Deductions

You don’t automatically get to deduct mortgage interest on a rental property. Lawmakers have set traps. One trap can totally destroy the interest deduction. Another trap makes you wait a long time to realize the tax benefits of the deduction. Make sure you know what the traps are so you can avoid their impact on your bottom line.

Use Seller Financing to Create Wealth

If you are selling a rental property or your home, you should consider seller financing as a possible method to achieving a rate of return better than you are receiving from your current investments. This article gives you six ways to improve the structure of your seller financing so you can pocket more cash.

How to Deduct Mortgage Interest When You Need Someone Else’s Name on the Deed

Tax Truth about Home Equity Loans

Your home may be your biggest investment and storehouse of cash. While interest rates remain low on home loans and home equity lines of credit, you may be tempted to pull money out of your home with a loan. Before you act, you need to know 1) how much interest you can deduct, 2) what the limitations are on those deductions, and 3) when you get slammed by the alternative minimum tax (AMT). Read this article and find out how to make sure that your home equity interest produces tax benefits for you.

When You Can (and Can’t) Deduct Mortgage Insurance

When you buy a house with less than 20 percent down, your lender will almost always force you to buy mortgage insurance. This protects the lender in case you default. Tax law used to help a lot people with the cost of mortgage insurance by allowing a deduction to certain taxpayers. That selective help on personal homes expired in 2013, but there’s hope for an extension, and existing deductions continue for your rentals and office in the home.

Use Corporate Advances to Escape Double Taxation

Corporate advances are a nice way to get around the double tax problem of C corporations. But there is a hidden danger. If you take a loan from your corporation without taking all the right steps, then you are asking the IRS to apply its double-tax system (plus penalties). Read this article to learn the right way to take your corporate advances.

Big Mistake with Life Insurance Policy

Once you borrow money from your life insurance policy, you need to pay attention and ask some questions. First, are you using the loans for a business purpose? Second, are you repaying the loans? Third, if you’re not repaying the loans, what happens when the loan balance causes the insurance company to terminate your policy? If you know what happens, you’re prepared. But if you don’t know what happens, you’ll be unhappy when you receive your tax surprise.

IRS Agent Denies Mortgage Interest on Home-Office Deduction

Tax law limits the home mortgage interest deduction to a maximum mortgage balance of $1.1 million. But what happens when you have an office in your home for which you claim tax deductions and also have a mortgage in excess of $1.1 million? In this article, the IRS agent incorrectly disallowed some home-office mortgage interest, and the tax professional had difficulty finding the tax law that would overcome the disallowance.

Buy or Lease a Business Vehicle: Which Costs Less?

Although personal considerations come into play, the choice between buying and leasing a vehicle for your business ultimately boils down to cost. So it’s essential to understand how to compute and compare the costs and to have the right tools to make those computations easy. This article gives you what you need.

Pay More Taxes Now

The fiscal cliff is coming on December 31 unless lawmakers do something. What does that mean to you? Does it mean you should pay more taxes this year? Perhaps. For insights into what you need to consider, read this article.

Finding Tax Deductions for Your Timeshare When You Use It Personally and/or Rent It

Your timeshare can qualify as a second home for the mortgage interest deduction easily if you don’t rent or attempt to rent it. Once you introduce rent into your timeshare equation, you trigger two tough rules: (1) a special mortgage-interest-deduction rule for the personal part of the timeshare and then (2) the dreaded vacation-home rental rules for the rental part.

Make Your Home Mortgages Produce Tax-Deductible Interest

You would think that tax law could make deducting mortgage interest straightforward. Perhaps that’s too logical; for certain, it’s not true. The rules on deducting mortgage interest contain a number of twists and turns that you that need to know to make sure your mortgage-interest payments qualify as tax deductions.

The One Best Way to Claim a Home-Office Tax Deduction for the Owner of a Corporation

How does the owner of a corporation claim a tax deduction for an office in the home? Rental is not the best method. Deducting employee business expenses as miscellaneous itemized deductions is not the best method. The best method is to use an accountable plan, as you will learn in this article.

Tax Benefits for Thinking About and/or Starting a New Business

If you are thinking about a new business, you need to know the rules on how to deduct start-up costs right now. Why? Your deductible costs could start accumulating simultaneously with your thinking about this new business.

New Revenue Ruling Enhances Alternative Minimum Tax Deduction for Home Mortgage Interest

The IRS has issued a new revenue ruling granting bigger deductions than the courts have granted on home mortgage interest deductions for alternative minimum tax purposes.

Home Equity Loans Pros and Cons—Learn How to Avoid Tax Pitfalls

Your home equity loan can give you a full, partial, or no deduction for your interest. If you will get zero or a reduced benefit, make the necessary changes to protect your tax benefits.

 

Beware of AMT Mortgage Interest Rules

Beware! Learn how the Alternative Minimum Tax (AMT) taxes the mortgage interest deduction that lawmakers granted you under the regular income tax. Ouch!

Use Imputed Interest Rules to Increase Profits on Sales of Property

Do you own an asset whose sale will produce a capital gain to you? Are you going to take back a note for some of the sales proceeds? If so, consider the “imputed interest” rules as a net-worth building opportunity. You can get up to 57 percent reduction in your tax bite, without changing the buyer’s out-of-pocket spending.

New Ruling on Investment Interest Above the Line

A new IRS rule says that you may deduct investment interest above the line when you pay interest on debt incurred in the conduct of certain trade or business activities. Above the line interest reduces your gross income. This is good news.

Zero Interest on Car Loan

There is no such thing as zero interest for tax purposes.

Son Pays the Mortgage Interest

Your son may not deduct the interest on the mortgage payments he makes on your behalf. You need to reconsider and restructure this arrangement.