- A review course on education tax credits
- Unclaimed property can be a business issue
- Watch out for special rules when making a Roth conversion
- Some business meals get a full deduction
- DB(k) retirement plans are new this year
- Pay yourself reasonable wages
- The kiddie tax: A basic review
- Follow IRA withdrawal rules
- Homebuyer tax credit extension
- Collectibles face special tax rules
- Rental property tax rules are complicated
- Payroll tax update
- Don't overlook the Roth five-year holding requirement
- Can you qualify for the small business health insurance credit?
- Military tax breaks are available
- Do you need to file an FBAR?
- Roth IRA conversion: Act now, pay later?
- Start your 2010 planning with your 2009 tax return
- Don't ignore employer penalty notices
- The HIRE Act offers tax breaks for hiring
- Direct deposit: Should you buy savings bonds?
- The Patient Protection and Affordable Care Act reforms health care
- Can you take a home office deduction?
- Deducting interest expense: What you need to know
- Did you receive Form 1099-C?
- Missing a W-2?
- Who has to file an income tax return?
- New law allows early deduction for Haiti relief donations
- The dependency exemption: What you need to know
- What's your status?
- Payroll - A 2010 employer update
- Review payroll reporting for 2009
- What to expect on your 2009 return
- Check these vehicle tax breaks for 2009
- Know the rules for backup withholding
- Tax issues come with gifting stock
- Hiring seasonal employees? What you need to know
- Don't get tripped up by a wash sale
- New law includes two important tax changes
- Two IRA tax breaks are scheduled to expire soon
- Take a tax deduction for worthless stock
- Withdrawals from your SIMPLE IRA may not be so simple
- Savings bonds can help pay for college
- Tax tips for first-time employers
- First-time homebuyer credit to expire November 30
- Closing your business has tax implications
- You need basis to deduct an S corporation loss
- Unemployed? Pay health premiums from your health savings account
- Some IRA terms you should know
- Employee or independent contractor? Don't misclassify workers
- Take a penalty-free IRA withdrawal for medical expenses
- Your business vehicle expenses are deductible
- Plan for the phase-out of tax breaks
- Your business could benefit from the extended net operating loss carryback
- When is income taxable, and when is it not
- IRS has a new procedure for correcting payroll returns
- Capture tax breaks when you refinance
- Prepare now for a possible disaster
- Tax law changes could affect your 529 plan
- Two reasons to review tax payments
- The COBRA credit: What employers must know
- Don't waste your tax refund
- A new vehicle could give you a new tax break
- Check out the "making work pay" credit
- Don't overlook a theft loss deduction
- Who owes self-employment tax?
- The Internal Revenue Service and Treasury Department Release Additional FBAR Guidance
- HIRE Act
- Health Care Updates
News
Deducting interest expense: What you need to know
March 23, 2010
Where does your interest lie? If interest you paid during 2009 rests in a tax-deductible category - or sprawls across several of them - you may be able to reduce your tax bill.
Interest expense can be sorted into five groups, each subject to different rules and restrictions.
- Business interest. Interest paid on borrowed funds used for your business can offset business income. In some cases, the deduction may be less than the total amount you paid, such as when you use loan proceeds to buy a vehicle you drive both personally and for business.
- Investment interest. The deduction for interest on loans you take out to purchase investment property is limited to "net investment income." That's the amount you earn from interest, dividends, and other investments, less costs incurred to produce the income.
- Passive activity interest. When your participation in a business venture is limited, or if you own rental property, the amount you can deduct as interest expense may be subject to the passive activity rules. These rules restrict your current-year deduction to income from passive activities. Nondeductible amounts can be carried forward to future years.
- Qualified residence interest. This category includes interest on debt secured by your main home and/or a second home. Mortgage interest is an itemized deduction and includes prepayment penalties, late payment charges, and prepaid interest.
- Personal interest. Personal interest generally offers no tax benefit. An exception: interest paid on student loans, which can be deducted even if you don't itemize. For 2009, the maximum student loan interest deduction is $2,500.
Please call to discuss the tax implications before you borrow money.
For more information, contact Ross Rizzo at 212-404-5528, rrizzo@sb-cpa.com.
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