Latest Expert Exchange Queries

GST Demo Service software link: https://ims.go2customer.com
Username: demouser Password: demopass
Get your inventory and invoicing software GST Ready from Binarysoft info@binarysoft.com
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
 
 
 
 
Popular Search: due date for vat payment :: Central Excise rule to resale the machines to a new company :: articles on VAT and GST in India :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: ARTICLES ON INPUT TAX CREDIT IN VAT :: ACCOUNTING STANDARDS :: ACCOUNTING STANDARD :: VAT RATES :: form 3cd :: empanelment :: TDS :: cpt :: VAT Audit :: TAX RATES - GOODS TAXABLE @ 4% :: list of goods taxed at 4%
 
 
News Headlines »
 Tax Return Preparer (Amendment) Scheme, 2018
 Tax-saving for young earners simplified
 How to save income tax? Here are 6 investments with tax free income
 10 Top salary deductions that can save tax for you
 What are the tax saving options beyond Section 80C?
 The penalties for not paying tax on time
 How to make your salary tax efficient
 I-T Department may go into overdrive this quarter
 Ways to reduce the TDS deduction from your salary
 4 Tips for choosing who prepares your 2017 Tax Returns
 Processing of income-tax returns under section 143(1) of the Income-tax Act which were filed in Forms ITR-1 to 6 & applicability of section 143(1)(a)(vi)

Is your home a tax trap?
September, 26th 2007
Have you refinanced your mortgage and taken a chunk of the equity in cash? Will you do so when your adjustable-rate loan resets its interest rate? If you fail to follow some little-known rules for calculating your home mortgage deduction, you may be writing off too much interest.

Instead of saving on taxes, you could wind up owing them. In general, the IRS lets you deduct 100% of the interest you pay on one or more home mortgages, up to a total loan value of $1 million.

But when you refinance and withdraw cash, the rules change: Only the interest on your original mortgage balance, plus an additional $100,000, qualifies for a deduction. (If you want to take out more cash, use a home-equity loan or line of credit. The law allows a separate deduction for interest on borrowings of up to $100,000.)

Its easy to get this deduction wrong. Banks and mortgage companies send borrowers a Form 1098 early in the new year, which most use to prepare their taxes. This document shows total interest paid for the year, so many assume the number on the form is the one they should use in filing taxes. Schedule A, the tax form on which you enter home mortgage interest, makes no mention of limits on refi-related deductions, though the instruction booklet does.

Lenders seeking refi customers usually dont play up that little catch. They have no incentive to educate borrowers about the tax consequences of refinancing, says Douglas Dachille, CEO of First Principles Capital Management, a New York investment firm.

Their promotions may include a fine-print caveat to check on the tax effects of a refinancing, but they dont spell out the rules. Dachille says this refi issue came to the fore when he was considering investing in subprime mortgage-backed securities. The tax provision could affect homeowners cash flow, so its yet another reason to avoid the subprime market.

Heres how the refi tax trap works. Lets say you borrowed $500,000 at 8% in 1998 to buy your house. By 2003, the house had appreciated substantially and the mortgage balance had been whittled down to $450,000. Then you refinanced, taking a new loan of $650,000 at 6%. At tax time, Form 1098 would show that you forked over about $39,000 in interest on the $650,000 mortgage in 2003.

Increasing Interest

If you use that $39,000 figure to calculate your annual mortgage interest deduction and youre in the 33% marginal tax bracket, you would wind up taking $1,980 more in deductions than youre entitled to, according to William Lazor, a CPA at Kronick Kalada Berdy in Kingston, Pa.

Thats because you may take a deduction on a mortgage of only $550,000the $450,000 left on the original loan plus $100,000. On $550,000, the interest paid would be $33,000, says Lazor.
 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2018 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Privacy Policy

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions