Federal Taxation Essay Example
John Smith tax issues:
What is your determination regarding reducing the taxable amount of income for both (a) and (b) above?
John would have to account for all qualified business expenses and only net income will be taxable. Annuity payments are usually equal payments made over a course of time. In some cases it may be a few years or it may be even longer. What makes annuity payments preferable over lump sums is the fact that annuity payments are tax-free. They could also defer income tax liability by making contribution to the retirement fund.
How is this lease reported on my income tax returns (either personally or for my business which is a separate law practice established as an LLC)? - LLCs are generally treated as disregarded entities for income tax purposes and all income and expenses are reported on owner's tax return as self-employment income on the schedule C. (1) Lease expenses are deducted on the line 20.The office lease payments will be reported as a business expense on your business tax return.
Do I get better tax benefits for paying the lease or for buying the building? What are the differences? – The office lease payments will be reported as a business expense on your business tax return. If you own the building you will deduct mortgage interest, depreciation over 39 years, real estate taxes, owner's insurance, and some other expenses related to maintain the property.
Jane Smith tax issues:
What are the different tax consequences between paying down the mortgage (debt) and assuming a new mortgage (debt) for Federal income tax purposes? If you pay off your mortgage, you'll lose the mortgage deduction on your federal income taxes. That lowers your overall return from repaying the mortgage. If you sold your main home, you may be able to exclude up to $250,000 of gain ($500,000 for married taxpayers filing jointly) from your federal tax return. If you want a bigger house you have to see what the interest rate is
What is your determination regarding reducing the taxable amount of income for both (a) and (b) above?
John would have to account for all qualified business expenses and only net income will be taxable. Annuity payments are usually equal payments made over a course of time. In some cases it may be a few years or it may be even longer. What makes annuity payments preferable over lump sums is the fact that annuity payments are tax-free. They could also defer income tax liability by making contribution to the retirement fund.
How is this lease reported on my income tax returns (either personally or for my business which is a separate law practice established as an LLC)? - LLCs are generally treated as disregarded entities for income tax purposes and all income and expenses are reported on owner's tax return as self-employment income on the schedule C. (1) Lease expenses are deducted on the line 20.The office lease payments will be reported as a business expense on your business tax return.
Do I get better tax benefits for paying the lease or for buying the building? What are the differences? – The office lease payments will be reported as a business expense on your business tax return. If you own the building you will deduct mortgage interest, depreciation over 39 years, real estate taxes, owner's insurance, and some other expenses related to maintain the property.
Jane Smith tax issues:
What are the different tax consequences between paying down the mortgage (debt) and assuming a new mortgage (debt) for Federal income tax purposes? If you pay off your mortgage, you'll lose the mortgage deduction on your federal income taxes. That lowers your overall return from repaying the mortgage. If you sold your main home, you may be able to exclude up to $250,000 of gain ($500,000 for married taxpayers filing jointly) from your federal tax return. If you want a bigger house you have to see what the interest rate is