Child’s First House

Loaning a down payment on a house?

For a lot of young people today, it’s difficult to purchase a home without at least some financial assistance. As a result, many young adults turn to their parents or other family members for help with a down payment.

If you plan on lending your child money for a down payment on a house, you should try to assume the role of a commercial lender. Setting the terms of the loan in writing will demonstrate to your child that you take both your responsibility as lender and your child’s responsibility as borrower seriously.

While having an actual loan contract may seem too businesslike to some parents, doing so can help set expectations between you and your child. The loan contract should spell out the exact loan amount, the interest rate and a repayment schedule. To avoid the uncomfortable situation of having to remind your … Read More

What is the Net Investment Income Tax

Understanding the Net Investment Income Tax

It’s been around since 2013, but many are still struggling to come to grips with the net investment income tax. The 3.8% tax, which is sometimes referred to as the Medicare surtax on net investment income, affected approximately 3.1 million federal income tax returns for 2013 (the only year for which data is available) to the tune of almost $11.7 billion.1 Here’s what you need to know.

What is it?

The net investment income tax is a 3.8% “extra” tax that applies to certain investment income in addition to any other income tax due. Whether you’re subject to the tax depends on two general factors: the amount of your modified adjusted gross income for the year, and how much net investment income you have.

What income thresholds apply?

Modified adjusted gross income (MAGI) is basically adjusted gross income–the amount that shows up on line … Read More

Medtronic’s Acquisition Causes Anxiety Among Shareholders

Medtronic, the world’s largest medical technologies company, recently made headlines when the Minneapolis-based company bought the Irish healthcare products company, Covidien, for nearly $43 billion.

The purchase, according to Medtronic executives, will enable the company to invest more aggressively, cut back taxes drastically, and thus create a bigger profit for shareholders—but the investors themselves have not been so quick to celebrate.

See, Medtronic allowed the foreign company to keep a 20% stake in the merger in order to keep the majority of its profits overseas free from American taxes. This move, called an inversion, qualifies as a “taxable event,” and the company’s shareholders are the ones left with the bill—as much as 33 cents on the dollar.

Medtronic urges shareholders, especially individuals, to remain patient as the long-term benefits of the recent acquisition begin to emerge. But this promise hasn’t satisfied everyone. The repercussions of this transaction are complicated, and many … Read More