So what is passive interest anyway? Any rental or royalty generating property is normally a passive activity, which can limit your current deductions in it depending on whether you actively manage the property or not (having a property manager doesn’t mean you don’t actively manage the property.)The financing on this property is considered passive interest expense and, like all the other rental expenses, is governed by the passive loss rules. Here is an article from Turbotax that covers all passive items in detail:http://turbotax.intuit.com/tax-tools/tax-tips/Rental-Property/Real-Estate-Tax-and-Rental-Property/INF12039.htmlAs usual, if you have questions, call me at 818-317-6035 or email me at bstonercpa@sbcglobal.net and we can discuss them.On Monday we can talk a little about charitable contributions.You can count on us to count for you!
Brian’s Tax Musings
What is business interest? Whether you are a sole proprietor or have a corporation or an LLC, if you use debt to finance your business the interest on that debt is deductible by the business. Any ordinary and necessary expense for a business is deductible by the business. Here is an explanation form Investopedia about business interest:http://www.investopedia.com/terms/b/business-interest-expense.asp#axzz1jLYKPaCZ Just remember that if you use personal debt to finance your business you need to have your business entity reimburse you before the entity can deduct the interest.Tomorrow we look at rental (or the dreaded passive) interest deduction.You can count on us to count for you!
Brian’s Tax Musings
Investment interest is a strange animal compared to other interest payments. Most interest is deductible or not deductible; investment interest is deductible sometimes. If you have investment income (interest and dividend income, capital gains if you elect to treat as investment income), you can take investment interest as an itemized deduction up to the amount of your investment income; the rest will be carried over until there is investment income to offset it.Here is an article by Kay Bell in LoanShoppers.net about investment interest:http://www.loanshoppers.net/how_to_deduct_interest.htmIf you have any questions, call me at 818-317-6035 or email me at bstonercpa@sbcglobal.net and I will try to answer them.Tomorrow we can talk about business interest.You can count on us to count for you!