So, you have filed your income tax return with the IRS and your state, and are now waiting for the refund the government(s) owe you. You are thinking of all the things you can do with that money when you get it. Here are some things to think about as you wait: 1. These refunds are in effect interest free loans you have made the government(s) over the year through excess withholding. They are just paying you back money you earned over the previous year that won’t even earn interest unless you file an extension and wait even longer for your money. This is even worse than that bet that your buddy owes you because at least you know where to find him if he doesn’t pay you right away. With our government you call on the phone and wait an hour for them to tell you that the refund is being processed or go on their website and find out there is a problem and you have to call anyway! 2. You could be earning some income on this refund if you take it with each paycheck instead of putting it into additional withholding. Even with the low interest [...]
Tax Musings of a Burbank CPA: The Four Fingers of Interest Deductions (and One Thumb!)
When you think of interest expense you normally think, ok, a tax deduction. There are four main ways interest can be a tax deduction, and one big way it can’t be! Let’s talk about the four fingers of deductible interest and the thumb of nondeductible interest: 1. Mortgage Interest: If you have seen my other blogposts about mortgage interest, you know the interest on the first $1,000,000 of acquisition indebtedness and the first $100,000 of home equity indebtedness on your principal residence and a second home that is not being rented is deductible as mortgage interest. The mortgage(s) have to be secured by the property(ies), you have to be on title of the properties and make the payments to claim the deduction as an itemized deduction on Schedule A of your personal tax return. 2. Rental Interest: If you are renting a property to a third party, the interest you pay on the rental property’s loan can be deducted as a rental expense and reduce the rental income. It can sometimes create a deductible rental loss. Again, the mortgage has to be secured by the property, you have to be on title of the property and make the payments to claim the deduction [...]
Financial Musings of a Burbank CPA: How a $2 debt almost turned into $90,000
Just to show that not paying a little credit card bill can affect borrowing in the future by killing your credit score, look what almost happened to Sheila Blair, a former FDIC chairperson who almost got nailed for wanting a 15% discount using store credit. She writes about it in CNN Money: http://money.cnn.com/2013/11/13/pf/sheila-bair-store-cards.moneymag/index.html So keep track of all your credit cards and make sure you make at least the minimum payments, or you could get it in the credit score, even if you are not a former FDIC chairperson! For financial, accounting and tax musings, You can count on us to count for you! Email: bstonercpa@sbcglobal.net Phone: 818-317-6035 Website: www.briantstonercpa.com https://twitter.com/bstonercpa