The IRS Deductions Blog

Posts Tagged ‘interest’

Question: Can interest for non-secured real estate loans be tax deductible?

My husband works for a large financial services firm. We are getting a mortgage for our first home purchase through this company and one “benefit” they offer to employees is, if you get a mortgage through the company, they also offer a $2500 or $5000 (your choice) *non-secured* loan for a five year term. During that five years, you pay only interest and they pay principle. After five years, you pay both P&I. The catch is that the entire loan amount must be used toward a downpayment or closing costs for your refinance or purchase. Since this loan is being used 100% for home purchase purposes, is any of this interest tax deductible?

Answer: It is deductible….Just like the interest on HELOC’s and similar 2nd mortgage instruments are also deductible…

Items on Amazon Right Now for Tax Deductible Loan Interest:

AMAZING STORIES: Couple opens World War II museum in Portage with a story behind each item

A delivery man appeared at the counter. “Do I have to sign for this?” Bonnie Esse asked. A few minutes later, Esse and her husband, Bret, were contemplating a silver-gray cardboard box inside their Portage store, Esse’s Sports World.

Personal Financial Planning Tips : How to Get a Low-Interest Personal Loan

Mortgage financing is the process of placing a mortgage on a house and lot or on a commercial property for the buyer of that property. The mortgage loan financing has two principal objectives.

It can serve as a revenue-generating activity for the lender. It can also be used to refinance the mortgaged property to have more favorable terms of payments, or to establish a line of credit to use for running a business.

Commercial mortgages are loans made for buying structures like the office buildings, health care facilities, retail outlets and apartment complexes. Regardless of the commercial property, the buyers need additional funding to complete the transaction.

During such time, the lender makes money off the interest on the loan. If the borrower has failed to make payments on the commercial loan, the lender reserves the right to start foreclosure proceeding and seize the mortgaged property. Generally, the interests paid on commercial mortgages are tax deductible.

If you plan to apply for a commercial mortgage, you will be given two different types of loan, namely the fixed rate loans and the variable rate loans. These types of loans are applicable for residential and commercial mortgages.

When you choose a fixed rate for your mortgage financing, the interest agreed to, remains in effect, until the loan is full amortized. A fixed rate is a better option, if the bank prime rate increases, pushing basic rates higher. You have always the option to refinance your mortgage should the interest rates go down below your fixed rate.

When the prime rate goes up, the variable loan rates will also go up. Make certain that you understand how variable rates are determined. Find out from the lender how often the variable rate fluctuates. Many people with variable rate loans in the past have had their home foreclosured, because their monthly payments went beyond their budget.

As long as the interest rate on the variable mortgage decreasing, you are at an advantage. You need to worry though if the interest rates increase. When such thing happens, you have to make sure that the monthly payments are still affordable.

There are also mortgage financing where the rate is fixed for the first few years, and then changes into a variable rate loan. In applying for commercial mortgages, make sure that you understand the Early Redemption Charge or ERC.

The Early Redemption Charge is a penalty fee charged to the borrower when he decides to pay the loan in full before its due date. The lenders lose money when the loan is paid in full sooner than the terms applied for.

Having an Early Redemption Charge on your mortgage financing is a common practice among the US lenders. When you see an ERC in print, try to negotiate it with your lenders. If you are not successful, try your commercial mortgage application with another lender.

Mortgage financing is a serious undertaking. It is an investment that needs careful planning. Be alert when you sign the documents. Ask all the questions you have in mind, and negotiate to your advantage.

Items on Amazon Right Now for Deductible Interest:

Of Interest: Jan. 3, 2010

DID YOU KNOW? You can now view Calendars of Events for today and upcoming weeks? A complete and up-to-date list of local events is now available on every section of PressRepublican.com.

Beat the Tax Guy

Question: Do I have to file and pay quarterly tax estimates?

I am single, residing in NY.

In 2007, I was a W-2 employee. I ended up having to pay $1037 in taxes in 2007. I would have received a refund, however, I had cashed some savings bonds and had to pay taxes on the interest I received. That is why I had to pay taxes, and not get a refund.

Now in 2008, I am a “1099″ employee, and my employer does not take out any taxes. Only my health insurance is deducted from my check, no taxes.

So every month in 2008, I will be receiving $1250(wages)-$400(health insurance).
I will end up with a check for $850 every month in 2008.

Do I have to file a 1040-ES and pay quarterly estimates?
Is my health insurance tax deductible?

Thank you for your time.

Thank you.

Answer: You’re employer should go to jail. You are an employee from the sound of it and he’s cheating you out of paying half of your social security taxes and cheating the government out of taxes due. The rule is no more than 80% of your income can come from a single source…if you have set hours, an office, and he can tell you what to do – you are an employee.

That said….if you are 1099 you should pay quarterly taxes.

edit: You need to file a 1040 with a Schedule C. Your health insurance is deductible.

Items on Amazon Right Now for Bond Tax Deductible:

ACC seeks holiday help

‘Tis the season for giving, or so the Arts of Collin County hopes. The ACC is searching the communities for that last bit of support that will get the first shovels in the ground on the project.

TurboTax Winner for Americas Cutest Last-Minute Tax Deducti

Question: I bought a home this year (2009). Is my mortgage interest, points,property tax deductible on NJ state tax?

Is mortgage interest paid + Points + real estate taxes deductible only for federal or for both fed & state.

Thanks

Answer: Mortgage interest, points (just another form of mortgage interest), and real estate taxes are deductible on your federal return. In NJ, you get either a partial deduction for only the real estate taxes or a $50 tax credit. (It depends on your income which you get.)

I hope this helps.
Gary

Items on Amazon Right Now for Tax Deductible Interest:

Redraw mortgage

Can I pay off/down loan for the interim then redraw later to regain negative gearing benefits when this property is used as investment again?

Credit & Debt Consolidation : Interest-Free Debt Consolidation

When buying a new house and going in for a home mortgage refinance loan, you need to do a lot of research to help you take the correct decision. This will be one of the most important decisions of your “financial” life. While you look around in the market for kinds of mortgage loans available, you’ll come across several types of mortgage loans. It is important that you analyze and study all aspects of various loans, and understand their advantages and limitations. The following information about ARMs and 80 20 loans can be helpful in making the right decision.

Adjustable rate mortgages

An adjustable rate mortgages aka ARM is a mortgage loan on which the interest rate is variable throughout the tenure of the loan, based on various indices. Unlike a fixed rate mortgage, where the interest rate remains constant throughout. The changes on an adjustable rate mortgages occur periodically, making the monthly payments go up or down accordingly.

Advantages of ARMs:

>> The starting interest rate with this type of mortgage is lower than that on a fixed rate mortgages

>> ARMs are an affordable mortgage solution for those planning to stay in their property on a short term basis

>> Adjustable rate mortgages are subject to repayment reductions when interest rates fall

>> ARMs are most advantageous due to their flexibility, which is missing in FRMs. ARMs benefit greatly from falling interest rates, which FRMs fail to do

80/20 Mortgages

An 80 20 mortgage is a way of purchasing a home with 100% financing, but avoiding what is called “PMI” or Private Mortgage insurance. You acquire two loans in which the first one consists of 80% of the sales price and the second one for 20% of the sales price, so you don’t have to make any “down payments”. You only pay for the closing costs. The first loan usually has a better interest rate than the second does, but if you have a good budget, you can sometimes payoff the second loan before it is due, and increases your equity of your home. If your credit is good and the market is on the rise, you can refinance both loans into one loan later on.

Items on Amazon Right Now for Mortgage Interest Tax Deduction Rate:

Speed up your mortgage? Consider alternatives first

“You have nothing to lose and so much to gain — $103,162!”

Do investors and First Home Buyers buy the same property?