Cash Flow Planning for Life

This is the fourth installment of Tax Deductions & You: What You Need to Know which can also be downloaded from our free eBook library.

Although most people understand that mortgage interest is deductible, many people may not be aware that there are certain situations in which it actually creates a greater savings not to claim a deduction as mortgage interest.

Under Treasury Regulation 1.163-10T(o) a taxpayer may elect to treat mortgage debt as not secured by a qualified residence.

Once this election is made, it is effective for all subsequent years and can only be revoked with IRS permission. The advantage of this election is if a taxpayer has allowable mortgage interest that is limited by the $1,000,000 or $100,000 rules on indebtedness.

Let’s say you have a home equity loan that is used for a business. The interest deducted on a business return or “Schedule C”, in most cases, will create a greater tax savings than if the interest was deducted as mortgage interest.

Here’s an example:

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I would like to take this opportunity to say “Thank You” to our clients and our web followers of Makara & Associates. This month marks our company’s 5th Year Anniversary. We could not have achieved this continued success without the support of our clients and people like you.

Due to this continued growth, I am happy to announce that we have welcomed two new staff members to our team at Makara & Associates. We would like to introduce you to Stan English and Theresa Cosey. Please feel free to contact them at any time with questions regarding your tax returns or other accounting needs.

As we advance into 2012, the staff at Makara & Associates is continuing to find ways to ensure that you receive unparalleled customer service. In addition to increasing our staff, we have also created online resources which provide you with information and answers to your questions, 24 hours a day, 7 days a week.

Some of these resources include a new website, www.Makara-Assoc.com. This website provides you with in-depth information about various services that are available to you through Makara & Associates. It also includes a “Learn More” page, which outlines common questions about accounting practices, payroll, tax planning, controllership, Social Security, Quickbooks, and much more, providing you with comprehensive answers to these questions. In addition, we have also implemented a Blog site, www.cashflowplanningforlife.com, which further provides tips and informational resources about everything to do with accounting and financial stability for you, your family, and your business.

Again, we thank you for your continued loyalty to Makara & Associates, your referrals, and for your help in making the past 5 years a success. We look forward to many more to come!

Wishing you and your loved ones a wonderful Holiday season and a happy, prosperous New Year!

Sincerely,

Mark Makara and the Staff at Makara & Associates

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This is the second installment of Tax Deductions & You: What You Need to Know which can also be downloaded from our free eBook library.

Any loans that fall under the nondeductible category need to be reviewed along with your cash or equity availability. If possible, they also need to be re-characterized to a deductible form of interest.

An example of this would be having availability on a home equity loan (balance after transfer must be below $100,000) and paying off an auto loan or credit card. This will increase cash flow two fold:

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For this blog post, I’m happy to have Patricia Briggs as a guest blogger for you:

There is no doubt that bankruptcy must always be the last resort. Before filing a bankruptcy, you should try every option available. It may be either credit counseling or debt settlement programs. You can also go for a debt consolidation through a home equity loan or ask your creditors for a reduced payment plan or a discounted lump sum payment. In this article, we will discuss about the last method as it has some pitfalls.

Often, lenders agree to compromise the balance if it is paid in one lump sum payment. However, troubles arise when they compromise more than $600 on the bill. If done so, the bank has to file form 1099C with the Internal Revenue Services (IRS) declaring that discount as an income. Now, you have to pay tax on that money, as IRS will consider it as taxable income. The IRS has a very instructive publication on this issue. However, there are always exceptions. In this case, there are the following:

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Hiring your children that are under the age of 18 can…

…also make your tax planning easier, as you can get an income tax deduction.

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If you buy your parents’ home and rent it back to them…

…you can create a nice tax break.

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Have you taken care of your…

…tax deductions and year-end planning yet?

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Are you looking to make some…

…charitable deductions this year?

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Do you like to give back to the community…

…and help those in need?

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2009′s estate tax rate was 45%, and…

the 2009′s highest income tax rate was 35%, so:

If your estate was larger than the 2009 exemption amount of $3.5 million you may have been able to save 10% in estate taxes by converting to a Roth IRA.

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