In some instances, it is possible for individuals to deduct the interest of such home equity loans on their state and federal taxes, which are, or at least should be, filed annually the Internal Revenue Service.

Despite the fact that the money can be used for reasons other than to buy, build or improve an individual's place of residency or home, the debt for which the home equity loan is used may still allow the loan's interest to qualify as home equity debt. No matter how the individual uses the money that they received as a home equity loan, the interest that is paid by the individual each year can be deducted on the individual's taxes in an itemized list. However, there are limitations that have been placed on the individuals who do so when it comes to the amount of money they can deduct on their taxes in relation to the interest that they have paid on their home equity loans.

These interest amount limitations are based on the individual and are put in place regarding the amount of money the individual pays in interest on their home equity loan each tax year. A couple may deduct up to $100,000 in interest from their home equity loan each year on their taxes. An individual who is married but filing jointly from their spouse may deduct half of this amount annually, provided the individual is able to meet the other criteria and regulations set forth by the Internal Revenue Service. These individuals may only deduct a total of up to $50,000 on their taxes.

A home equity loan is very different from a home equity line of credit and it is important to note this when filing taxes since there are separate requirements and paperwork that needs to be done for each. Despite the fact that they sound similar, the two loans have different things that affect them, including interest. When individuals use their home equity loan money in order to take care of certain aspects of their home or in order to pay off some of their personal loans or debts, the money can be deducted up to the $100,000 or $50,000 limits. These limits are put into place as a generalization. Some other limitations may be put on individuals if they meet certain other criteria.

These limitations can be determined by tax professionals on a case by case basis, but it is important to note that the cap for interest deductions for home equity loans are stopped at $100,000 for couples, or $50,000 for married individuals who are filing their taxes separately. Regardless of the amount that the individual can deduct from their taxes, the interest needs to be deducted on the 1040 form, Schedule A. The interest needs to be placed under the itemized deductions.

Article source: Free Taxes Articles.

Purchasing a new home is an exciting process. At the same time, it can be a bit overwhelming and confusing as you try to determine precisely what you need in your home. After all, you will be investing a great deal of money into your home and you certainly want to be sure you care happy with the purchase.


Determining Your Budget

The first thing you need to decide when you begin house shopping is your budget. You will need to take a look at your current income versus your current bills in order to determine how much you can afford. Many house hunters prefer to get pre-qualified for a loan before they begin searching for a new home. This way, they can have a much clearer idea of what they can afford to pay. Getting pre-qualified also makes the official qualification process much easier when the time comes to make a purchase.


Selecting the Style and Age

There are many different styles of homes to select from. For example, you need to decide if you want a single-story ranch home, a two story home or a multi-level home. You also need to determine whether you want townhome, a patio home, or even a condominium.


Even the age of the home is an important consideration. While a newer home may have fewer problems and may offer a modern look, you might prefer the styling and charm of an older home.


Getting the Right Features

When selecting the type of home you want, you need to determine the features you want the home to have. Much of this decision will be based upon your lifestyle and the number of people in your family. Be certain to consider your future needs. For example, if you are a couple that is just starting out but plans to have two children in the near future, you might want to purchase a home that will accommodate your future family needs.


In order to make sure your family is comfortable and happy in the home, you should make sure it has plenty of bedrooms and bathrooms to suit your needs. If you have a home based business or bring work home on a regular basis, you might also want to purchase a home with a study or an office. A formal dining room might be important to you if you make it a point to eat together as a family. Similarly, a family room is essential for entertaining and for spending time together as a family.


In addition to the inside of the home, you should consider the outside as well. While a nicely landscaped home will cost more than one that is not landscaped, it will save you the trouble of doing the work yourself. So, unless you prefer to get your hands dirty and do your own landscaping, look for a home that is already nicely landscaped but requires minimal maintenance.


Other features to consider include:

Attractive views
Privacy
A Large Lot
Pools
Gourmet Kitchens
Oversized Garages


Each of these extras will generally drive up the price on the home. Therefore, you need to decide if they are 'musts' or if they are features that you can do without.


Once you have decided on the type of home you are looking for, make sure to discuss it with your Realtor. The better idea your Realtor has of what you want, the faster the house hunting process can be completed.

Author: Crystal Guthrie

About the author:
Purchasing a new home is an exciting process. At the same time, it can be a bit overwhelming and confusing as you try to determine precisely what you need in your home. After all, you will be investing a great deal of money into your home and you certainly want to be sure you care happy with the purchase.

Article source: Free Taxes Articles.

If you owe back taxes with the IRS it is very important to get them paid off. There are many ways you can pay IRS back taxes or you work with the IRS for a solution that works best for you. The IRS will get their money from you in one way or another.

If you owe IRS back taxes you don't want the IRS coming to you to get them. The first thing you need to do is contact them regarding what you owe. Tell them what you are planning on doing and work with them entirely. You do have many options and the IRS will work with you if they know you are willing to pay what you owe. Owing back taxes to the IRS is not a good thing. If you do not remain in touch with the IRS and try to evade the taxes, eventually they will catch up to you. They have the power to seize assets in your name and any possessions in your home worth the amount of money you owe. The last thing you want to happen is for the IRS to arrive at your front doorstep and begin hauling your furniture and other belongings away.

One option many people consider is hiring a tax professional. If you do not know what you owe because you never did file at all this may be the best option. It is very common for people who avoid filing their taxes to have no idea what they owe. The problem is that years of IRS back taxes gain interest and the numbers may be significantly higher at this point in time. You have to begin paying on these amounts quickly to minimize the total interest you will have to pay.

You can stop collection from IRS back taxes if you can prove a financial hardship. If you are financially in a position that you cannot pay your taxes then the IRS will work with you to temporarily stop any collection efforts against you. This will allow you to keep your car, home, and other belongings while you get back on your feet.

The IRS will work with people on their taxes. They will allow you to make a payment plan and pay off your debts in a manner that is affordable for you. If you owe a significant amount of money in IRS back taxes then they do understand most people cannot write a check for the total amount.

The IRS is also willing to compromise with people regarding their IRS back taxes also. It doesn't matter if you owe to the local state or to the federal government. The method is called an offer in compromise. You will need to be able to pay the amount compromised in full on the date of the deal. The IRS will be willing to take a settlement offer for what you owe. There are a set of qualifications you must meet before they will allow this to happen.

If you owe IRS back taxes you need to take the initiative to pay the amount owed. No matter what your circumstances are you need to call the IRS and tell them what you can do. Some of your options are to hire a professional, set up a payment plan, and prove your inability to pay, or even make a settlement offer.

Author: Manuel Davis Jr

About the author:
Manuel Davis Jr. is a CPA and Tax Resolution Expert for BackTaxesHelp.com. If you need Help with IRS Back Taxes we can help! Call us at 800-717-2797 or visit our site on more information on resolving tax problems.

Article source: Free Taxes Articles.

Like many successful people, physicians are often so busy dealing with their practices and personal lives that they never take the time to deal with the important challenge of creating a tax-wise estate plan for their families. In fact, a recent survey showed that fewer than 5 percent of all doctors had a proper estate plan in place.

In this article, we will examine the most significant mistakes physicians make when creating (or ignoring) their family's estate plan. We'll also cover simple tools that you can use to avoid such mistakes and allow your family to elude the unnecessary costs that come with poor planning.

Mistake No. 1: Losing half of your family's life insurance proceeds to taxes. Life insurance is highly recommended as a tool to pay the estate taxes due when you die -- because the funds will be available immediately to your survivors, without any delays or expenses involved with liquidating tangible assets. Furthermore, clients who set up policies in advance of their retirement years enjoy powerful leveraging of today's dollars. Nonetheless, more than 90 percent of physicians fail to utilize a simple trust that enables all of the insurance proceeds to be estate tax-exempt.

The greatest misconception most people have when it comes to life insurance is that the proceeds are entirely tax-free. Wrong. The proceeds are income tax-free but are subject to both federal and state estate taxes. Federal estate taxes alone start at 37 percent and very rapidly rise to 50 percent. Why should you lose potentially hundreds of thousands of dollars of your policy proceeds after you paid those premiums so diligently -- especially when you don't have to? A simple trust can take the IRS out of the picture and provide better protection for your beneficiaries.

An irrevocable life insurance trust (ILIT) is simply an irrevocable trust that owns a life insurance policy. The ILIT saves you estate taxes because the trust owns the life insurance policy. Since you are not the policy's listed owner, its proceeds will not be part of your net estate when you die (as long as you survive three years from the transfer to the trust). Thus, the proceeds will not be subject to the estate tax. This can save your family a great deal of money.

The ILIT gives you much more control over what happens to the policy proceeds than you would get from a bare insurance policy.

With an insurance policy alone, your only decision is to whom you will leave the proceeds; the insurance company will simply pay these people when you die. With an ILIT, you can control not only who gets the proceeds, but how they get it. You can have the trustee pay the beneficiaries directly or pay them over a period of months or years. You can incorporate spendthrift provisions and anti-alienation provisions to protect against your beneficiary's financial problems or that of their spouse. In fact, an ILIT gives you all of the benefits of a trust arrangement while allowing you to provide for your family just as you would with a bare insurance policy.

That's why we recommend to physicians that they use an ILIT to own a life insurance policy in their estate plans.

If you have already purchased a life insurance policy or are presently making payments on an existing policy, it is not too late. You can always transfer a policy to an ILIT. There may be some gift-tax issues associated with this maneuver, but they will be very minor compared to the large tax savings your family will ultimately enjoy.

Mistake No. 2: Leaving property to the IRS. While no physician leaves property to the IRS intentionally, quite often this is the effect of a physician's estate if she has not implemented a gifting program during her lifetime. Simply put, after the exemption amount, any property not given away 'in title' during your lifetime will be taken, in part, by Uncle Sam. To prevent this -- along with the strategies explained above -- you can 'gift' property to family members.

Most of our clients initially hesitate to begin a gifting program, as they think they will have to give up control of the underlying assets. This is not true. You can use legal entities to remove asset values from your estate, thus lowering your estate taxes, while maintaining total control of the assets while you are alive.

Through entities like family limited partnerships (FLPs) and family limited liability companies (FLLCs), you can share ownership with family members, yet maintain control. In this strategy, you and your spouse gift ownership interests to children over time (using your combined $22,000 annual gift-tax exclusion), removing those interests from your estates for tax purposes. Still, as long as you and your spouse are the FLP general partners or FLLC managers, you will maintain control of the underlying assets. Confused? Consider this example:

Robert Jones, a 63-year-old retired physician, owned almost $1.1 million in mutual funds and real estate assets. He set up an FLP to own the mutual funds, naming himself the sole general partner. He initially owned 95 percent of the partnership interests, gifting 1 percent each to his five grandchildren. Since each 1 percent was worth approximately $11,000, the gifts to the grandchildren were tax-free.

Robert can continue to gift each grandchild $11,000 in FLP interests each year, tax-free. If Robert lives to age 75, he will have given $660,000 in FLP interests to his grandchildren. This $660,000 will not be subject to the estate tax since it is no longer in Robert's estate. Because his other assets put him in the 50 percent estate-tax bracket, his tax savings using the FLP will be $330,000. Because he is the FLP's sole general partner, Robert completely controls the mutual funds while alive and can distribute the income to himself or sell some of the funds for his expenses. Robert maintains control of his assets for his lifetime, pays less estate tax, and also provides more for his grandchildren.

Many clients put their families in an estate planning mess because of the mistakes described above. Clients with larger estates have even more potential pitfalls to avoid in their planning. There is no substitute for consults with a licensed professional experienced in these matters. In this way, an estate planning 'physical' is the real first step in any worthwhile estate plan.

This article originally appeared in the May 2007 issue of Physicians Practice.

Author: By David Mandell, and Vance Syphers

About the author:
David B. Mandell, JD, MBA, is an attorney, lecturer, and author of 'The Doctor's Wealth Protection Guide' and 'Wealth Protection, MD.' He is also a cofounder of The Wealth Protection Alliance, a nationwide network of independent financial advisory firms whose goal is to help clients build and preserve their wealth.
Vance Syphers is president of the Wealth Preservation Group in North Carolina and provides sophisticated business planning to physicians around the country.

Article source: Free Taxes Articles.

Ask any new parent, and they will tell you that the costs associated with a new baby are many, everything from bottles to diapers to cribs, strollers, and high chairs, and all of this before the child even learns to walk and talk and beg you for a pair of $500 designer jeans. Parenting is one of the most rewarding, and important jobs that a person can have, in addition to being one of the most expensive. The good news is that there are two tax breaks offered by the federal government that the majority of parents can qualify for, which are the dependent exemption and the child tax credit.

The dependent exemption is a tax break that allows you to receive an additional tax deduction of as much as $3,000 each year until your child turns 19. This is addition to the standard tax exemption that the IRS allows per person to cover basic living expenses. Single people are allowed one exemption, while married couples have the option of taking two of these exemptions per year.

The amount that you will save with this exemption depends on your current tax bracket, and generally, the higher the tax bracket, the more money you will receive, unless your income is too high to claim an exemption, but again, most people will qualify. This dependent exemption is only phased out for married couples filing jointly with an adjusted gross income of more than $300,000. Limits for single parents exist as well, and it is important to research these limits, both for married and single parents, to be sure that your income does not exceed them. If you qualify for this exemption, you can simply fill out the required lines on your tax form, including an adoption taxpayer identification or social security number for each child.

The child tax credit is available for married couples filing jointly with a reported gross income of below $13,000, although again, it should be noted that income limits for both single and married parents are revised frequently. With this credit, it is possible to receive up to $1,000 per child.

Determining the amount of credit that an individual can claim requires the completion of the child tax credit worksheet, which can be downloaded from the IRS website. You will need to provide a social security or adoption taxpayer identification number for each child in order to qualify. As with all tax information you should always check with a professional because tax laws can change every year.

Article source: Free Taxes Articles.

Practically every small business has receivables that it cannot obtain from clients. If your small business doesn't have any such receivables, consider yourself lucky. For those small businesses that suffer from uncollected receivables, solace can be taken from the fact you can claim a tax deduction.

Bad Debt Tax Deduction

A small business can write-off bad debt losses if it meets nominal requirements. To claim such a tax deduction, the following must be shown:

A. The existence of a legal relationship between the small business and debtor;

B. The receivables are worthless; and

C. The small business suffered an actual loss.

Proving there is a legal relationship between the small business and debtor is fairly simple. You must simply show that the debtor has a legal obligation to make a payment. Most businesses issue invoices or sign contracts with debtors and these documents suffice to prove the legal relationship. If you are not putting your business relationships in writing, you should begin doing so immediately.

Proving receivables are worthless is slightly more complex. A small business is required to show that the debt has become both worthless and will remain so. You must also show that you took reasonable steps to collect the receivables, but you are not necessarily required to go to court to meet this requirement. A clear example where you would meet this requirement is if the debtor filed bankruptcy.

While proving that you suffered a loss may sound like the easiest requirement to meet, the issue is a bit more complicated. The Tax Code defines the loss as an amount that is included in your books as income, but is never collected. A classic example of such a situation would be a manufacturer that provides products to retailers on credit. The manufacturer can show a real loss if the retailer files bankruptcy. Unfortunately, there is almost no way to claim a loss if you provide hourly services and use a cash accounting method. The IRS does not consider the expenditure of time and effort to be a sustained economic loss.

Small businesses suffer all to often from uncollected receivables. If you failed to claim such losses as a tax deduction during your last three tax filing years, you should file amended tax returns to get a refund.

Article source: Free Taxes Articles.