Avoiding Business Taxes

If you are self employed, tax law allows you to deduct ordinary business expenses from your tax liability. This can be helpful in making sure you owe fewer taxes each year, but making sure all reported expenses are accepted by the IRS can be tricky. For this reason, it is important to have clear evidence that all reported expenses can be attributed to your business.

One recent example of such an issue comes from a man running his own masonry business. In 2010, the taxpayer reported $25,000 of business income, while the IRS concluded he had received $35,000. The taxpayer claimed the remaining $10,000 was from the sale of damaged property and checks deposited into the business account by his son. Unfortunately for the taxpayer, when the case went to trial, the court ruled against him, as they assume any deposit into a business account is business income, unless there is … Read More

Private Mortgage Insurance

How long will I have to pay for private mortgage insurance?

It depends. There are generally two ways that private mortgage insurance (PMI) can be removed from your mortgage loan. The first is if you request PMI cancellation directly from your lender. The second is through termination by your lender.

You can request PMI cancellation directly from your lender once you have reached the date when the principal balance of your mortgage is scheduled to fall to 80% of the original value of your home. You can find this date on the PMI disclosure form that was given to you when you first obtained your mortgage. The cancellation request can be made earlier if you have made additional mortgage payments that have reduced your principal balance to 80% at an earlier date. Your lender may also require you to meet certain other criteria in order to cancel your PMI, such as … 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