Eric, I am in a professional environment. I always deal with individuals making lots more than $95,000 a year. You can start a business, you can be a car sales person (to be specific), go into real estate, e.t.c Getting education is very important, as it changes a individuals perspective. Most people see a degree as a way to make more money, they are not wrong but for me education enhances your abilities and skills to think of different possible outcomes for a given problem. I hope I was able to help, but please do keep in mind that I am a professional and my expertise is coming up with tax saving strategies both short and long term, but I am not an expert and I'm not in a position to give you best advice on how you can exactly make $95,000 a year.
Good luck.
5 comments:
I currently have (2) mortgages, one on my primary residence (single family dwelling in NJ) and one on my motorhome. I can deduct the interest on both of these. I would like to remodel my kitchen in my primary residence. I currently have the cash (about $40,000) to perform the remodel. This cash is in an account earning about 5 1/4 percent. Does it make sense to take out a home equitly loan (which I assume that I can deduct the interest) to pay for this remodel or should I just use my cash?
You currently have different options open to you.
You can leave the cash as it is and earn interest at 5.25% which is excellent rate. But if you want to consider using home equity line then you have to consider two things mainly. First is do you want to add another monthly payment to your bills? if answer is yes then ask the second question. Do you want to earn 5.25% and pay out about appx. 8% or higher on home equity line, paying about $3200 or more in interest and earning about $2100 per year (calculated on simple interest method and this valuation does not consider time value of money). Ofcourse, you will pay taxes on $2100 depending on your tax rate and will get the deduction for the amount of interest you paid out.
Lets say for example You make $100000 per year and you are single, you paid $15000 in interest and you have no other sources of income. You would pay appx. 17500 in federal taxes. Lets say you have 100000 in wages and 2100 interest income and your mortgage interest increased to 18200 then your federal taxes would be about 17250. By this example you are obviously saving 250 a year in taxes and paying about 1100 or more in interest. Now you decide whether it is worth your time to write one more payment towards your equity line payment or not. Keep in mind the higher your equity line interest rate the more tax savings you will have.
I owned a business that unfotunately went into foreclosure. The bank has done an auction on the equipment and property and there is still a debt left over on the loan which I personally guarenteed of $350,000+. My accountant is tellin me that I may have to pay a substancial amount in taxes because the debt was canceled and there were big gains in the sale of the assets, even though technically the debt wasn't canceled becuase I still owe the debt. I was an S corporation. Does this seem right to you and/or do you see another alternative to me not having to pay taxes if there is still a large loss for me?
Thanks,
Jeff
I owned a business that unfotunately went into foreclosure. The bank has done an auction on the equipment and property and there is still a debt left over on the loan which I personally guarenteed of $350,000+. My accountant is tellin me that I may have to pay a substancial amount in taxes because the debt was canceled and there were big gains in the sale of the assets, even though technically the debt wasn't canceled becuase I still owe the debt. I was an S corporation. Does this seem right to you and/or do you see another alternative to me not having to pay taxes if there is still a large loss for me?
Thanks,
I am sorry to hear that you went out of business. I am trying to answer here based on the information you have provided however, I would advice that you get in depth analysis of you situation.
Your accountant is right. You would have to pay taxes on the amount of cancellation of debt. Let me give you an example.
If your business borrowed $500,000 and you co-signed or was the guarantor. You used the $500,000 to purchase some assets say machinery with a life of 5 years. Your book value was $500,000 at the time of purchase. You depreciated the property using straight line method of depreciation. Two years down the line you had to file bankruptcy. At this point you had the balance of loan down to $400,000 (paid off $100,000 of loans out of $500,000). Lets say you sold the machinery which has a book value of $300,000 ($500,000 purchase price less $200,000 depreciation for 2 years) for $350,000. Here you will have a gain of $50,000 which you will have to recognize as Capital gain. Your business (S Corp) files bankruptcy, since you are guarantor you are personally liable to pay the loan off in case the corporation is unable to pay. There is no cancellation of debt here. But, if you are also relieved of the liability then you would have to disclose the relief of debt as Income from Cancellation of debt and you would pay taxes on the money depending upon your tax bracket.
I hope I answered your question. If you have anyspecific question then please eloborate your question in detail (you dont have to submit personal information, you can make up an example to resemble yours) and I will be glad to respond.
Good Luck.
Post a Comment