The IRS Deductions Blog

Archive for February, 2010

Question: TAXES – I own a home which is rented out. How can I get the biggest tax break?

My mortgage is $1550 per month and taxes are $6500 per year. I rent the house out for $1375 per month at a loss every month. BUT… If I file taxes reporting the rental home as an active income generator (at a loss) I can only deduct “X” dollars for my loss (this of course would include maintenance fees, home owners insurance, HOA dues, etc.). If I just deduct the mortgage interest and taxes I get a bigger deduction.

Is it OK for me just to deduct my interest and real estate taxes and get the bigger deduction? Or do I HAVE to report it as an income generating venture even though I take money out of my pocket every month just to hold on to the house?

How would the IRS look at it? The way I see it I get penalized for owning my home and renting it out. I guess I would have to be losing alot more money every month to make it work in my favor…

Any experts out there? Thanks.

Answer: No, you have to report the rent as income.

The taxes and interest are both deductible and don’t forget you can take a depreciation deduction for the house. That will be worth several thousand dollars.

Since this is new to you it would be worth getting professional help on your return.

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How lawmakers turn perks into profit

WEST SACRAMENTO – After long days of representing Orange County residents at the state Capitol, Assemblyman Van Tran returns here, to a gated community where he lives with wife and kids in a 2,658-square-foot house with two fireplaces and a…

More Tips For Your Next Move – FirstAmericanTV.com

Question: Are setllement legal fees deductible?

I filled a lawsuit against a company and settle out of court and received a settlement award, however I spent a lot of money on legal fees, the legal fees were spent from 2002 through 2005 can I deduct all the legal fees involved, on my 2005 tax return?

Thanks.

Answer: No. Ask your tax consultant, but it is not a cost of doing business…

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Newly divorced? Here is some tax advice

Worried about having to sit down with your ex at tax time? If you were divorced as of Dec. 31 then you can file as single or head of household for that tax year.

Bethany Adoption Agency Racist Propaganda Film

Question: Tax Deductible Mortgages, anyone tried in Canada?

I’ve read up on a bunch of articles and very interested in this concept because this will allow me to realize a dream of owning a home earlier. Most notably, Garth Turner’s (Ottawa MPP) article back in 2001, info on The Smith Manoeuvre, and info provided by monstermortgage.ca. It sounds too good to be true. Just wanted to know if anyone’s tried it yet? Success? Failure?

Answer: I can’t find any evidence it’s been tried, but the Toronto Star reports two cavaets:

(Quoting the article)

“Under CRA rules, interest paid on money used from a mortgage to produce capital gains is Not Tax Deductible.”

“”If you are doing this with your principal residence and you claim 100 per cent of your mortgage interest as a business expense, then there is a strong argument that your home is a business and as such, you are not exempt from capital gains on the sale of the residence,”

I won’t touch the non-tax problems with the system, as the HELOC would be refinanced every 10 years or so under US law and practise. Canadian law and practise may be different, and I can’t answer the question of whether the HELOC might be called, and if the market takes a dive, you’ve lost your house.

Items on Amazon Right Now for Interest Tax Deductible Canada:

INTERACTIVE MEDIA:

New mortgage rules unveiled by the federal government Tuesday may be a good idea, but they won’t have any major effect on the market, local experts say.

Protecting Lake Superior July 15: Classical benefit concert

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Applying Actionable Analysis to the Risks of Health Benefits Plans

Risk managers can transfer the risks of self-funded benefits plans to a traditional stop-loss carrier, or even a captive. Here’s how and why.

Tax Tips: Haiti Earthquake Donations – January 2010 (ASL, Captions & Voice Over)

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SEACOR Holdings Announces Fourth Quarter Results

FORT LAUDERDALE, FL–(Marketwire – 02/18/10) – SEACOR Holdings Inc. (NYSE: CKH – News ) today announced its results for the fourth quarter of 2009. Net income attributable to SEACOR Holdings Inc. for the quarter ended December 31, 2009 was $22.2 million, or $1.04 per diluted share, on operating revenues of $476.5 million. During the fourth quarter, the Company called and settled all of its …