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I have a dilemma I was hoping for some advice on. I bought a house in 2004 for about $50k. I did some remodeling on it and I've since been renting it. Rent wise, I've about broken even over the years once you take repairs and management fees into account. However, the neighborhood has transformed for the positive and it has appreciated a lot. I've been getting tired of the hassle, but with the way the housing market is acting, I think I want to sell it this summer. From looking at comps, I'm guessing I have about $X in equity in it. So, my question: Should I cash-out refinance the property before I sell in order to reduce the tax liability on it? The loan officer I've talked to says that I could cash out $X at a cost of about $X for the loan. That sounds high to me, but 10% is still less than the 20% capital gains. Any thoughts? oschesar fucked around with this message at 21:18 on May 3, 2021 |
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May 3, 2021 20:12
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Maybe I'm misunderstanding what you're saying but refinancing is not going to change your tax liability. Your gain is based on what you sell for less what you bought it for, plus any improvements, less any depreciation taken.
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May 3, 2021 20:22
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Oh. Ok, then I don't understand taxes! I'm glad I came to ask then. This is one of those rumor things I had heard before where someone refinanced and tax liability was offset by the mortgage amount. This makes more sense. Thanks
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May 3, 2021 20:29
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MadDogMike posted:Matching what the employer did will generally not get you into trouble honestly, those are the numbers the IRS and states are going by after all. I can adjust the NY part of the wages on the NJ return, so I guess the only actual problem is that if I enter both state entries, Turbotax adds the two "state wages" numbers together on my Massachusetts return resulting in a number that's twice my actual wages, and if I override that I can't efile for MA, but I'm more confident that everything else is correct that way (I'm not worried about MA because it's a clear cut situation where all my income is taxed, whereas I would be worried about potential issues with the NY information), so I guess just have to fight turbotax for my $25 efiling fee back. mystes fucked around with this message at 20:44 on May 3, 2021 |
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May 3, 2021 20:38
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Is there a calculator somewhere (or simple explainer) to help determine the tax liability, I believe capital gains, on the sale of a rental property? Family member bought near the top in 2008, and then had to move states. It's just recently back above the original purchase price, and they'd like to no longer be a landlord. So the sales price over purchase price won't be much of a gain, but my understanding is you have to add in the amount of depreciation of the years it was a business to the IRS (27.5 years split).
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May 3, 2021 21:38
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Untagged posted:Is there a calculator somewhere (or simple explainer) to help determine the tax liability, I believe capital gains, on the sale of a rental property? You recapture the depreciation and pay long term capital gains tax on it. (Assuming it causes a gain on the sale).
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May 4, 2021 00:47
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mystes posted:Thanks! This made it a lot more clear how I needed to enter everything. Hmm, can you adjust the MA income on the W-2 so that when added to the NY income it comes up to the correct total? Sorry I can't be much help, like I said I'm used to a system that lets me override stupid results like that (Pennsylvania tends to do that a bunch to me working, though that's compounded by the fact they have their own drat rules for what is taxable income and what isn't compared to every other state around here for the most part) and Turbotax has to be designed for someone who doesn't know nearly as much about what they're doing  .Elephanthead posted:You recapture the depreciation and pay long term capital gains tax on it. (Assuming it causes a gain on the sale). Important clarification; depreciation recapture is taxed as ordinary income. Best way I can describe the (extremely complicated) scenario: if, say, you had a home worth $80,000, you depreciated $20,000 from it renting or with a home office, then sold the home for $100,000, you would have $40,000 in taxable income for the sale. The $20,000 for the amount above the original $80,000 would be considered capital gains (and if long term gets taxed at a lower rate) while the $20,000 corresponding to the depreciated amount gets taxed as ordinarily income. You're "recapturing" the benefit of the depreciation on your taxable income for the prior years renting which affected your ordinary income, so it gets treated as ordinary income upon recapture. There are some other considerations; make sure you include any closing costs for the sale in the basis calculation for the home, if there was any furniture or similar rented with the home you need to recapture the depreciation on it if it's sold, and you'll probably need to do a final Schedule E, particularly if they had any passive losses carrying over from prior years. Depreciation recapture is complicated enough it might be worth having professional help to double-check if nothing else; make sure you get an experienced preparer too since it gets very complicated even at my level.
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May 4, 2021 06:22
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MadDogMike posted:Hmm, can you adjust the MA income on the W-2 so that when added to the NY income it comes up to the correct total? Sorry I can't be much help, like I said I'm used to a system that lets me override stupid results like that (Pennsylvania tends to do that a bunch to me working, though that's compounded by the fact they have their own drat rules for what is taxable income and what isn't compared to every other state around here for the most part) and Turbotax has to be designed for someone who doesn't know nearly as much about what they're doing I don't know if leaving the massachusetts entry off would actually be problematic since it doesn't change the taxable income as far as either the federal tax return or the state tax returns are concerned and I could enter the MA withholding separately, but they are both listed on the W2, and I guess it seems safer to me to just include both entries as stated and then mail in the MA tax return barring any information to the contrary, if for no other reason than if someone looks at my tax returns and is confused it makes it clear that the issue is with the way the W2 is written and not me.
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May 4, 2021 15:24
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mystes posted:The state entries as written on the w2 add up to 2x my wages so I would have to make the massachusetts state wages entry on the w2 be zero (which turbotax won't allow) or leave it off to make it add up to the correct number. What I was saying was set the New York income to the amount actually earned in New York, and the MA income to whatever amount comes up to the correct total when added to the New York amount. So, if the total was $100,000 and $20,000 was actually earned in New York, put $20,000 for NY income and $80,000 for Massachusetts. Again, don't know if this somehow is a problem in Turbotax, I fairly routinely have to override that sort of thing because companies screw up W-2s particularly multi-state income ALL THE drat TIME  .Also given how crappy mail response has been this last year or so I'm very down on paper filing if it's at all possible to avoid.
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May 4, 2021 23:38
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MadDogMike posted:What I was saying was set the New York income to the amount actually earned in New York, and the MA income to whatever amount comes up to the correct total when added to the New York amount. So, if the total was $100,000 and $20,000 was actually earned in New York, put $20,000 for NY income and $80,000 for Massachusetts. Again, don't know if this somehow is a problem in Turbotax, I fairly routinely have to override that sort of thing because companies screw up W-2s particularly multi-state income ALL THE drat TIME
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May 4, 2021 23:46
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This is a very simple question that's also mildly embarrassing so I hope the thread enjoys this. Someone I met in a Discord server has expressed interest in commissioning me to write a romance story/potential erotica. We would be exchanging money through Venmo or Paypal, haven't decided which. I can't imagine this topping $50. I don't have any self employment experience and I have been unemployed since March 2020. (I haven't given up on looking for jobs.) Should I file this on my taxes next year, even if it's a one time thing? I tried looking it up online and the consensus appears to be that the threshold is $400 for reporting...however this appears to be for full fledged businesses and not for a hobby thing. I looked at reporting hobby income and the IRS appears to want you to file even if you only made $1. Is this the case? Is there a threshold for reporting random erotica commissions as income or do you just report it all and pray? Alternatively, if I continued with cheap romance/erotica commissions (yes the majority of them would be fanfiction) through out the year, am I in danger of accidentally becoming a business? This doesn't really fall under the purview of self/vanity publishing or writing for Amazon Kindle and I obviously wouldn't receive any tax documents from my client(s).
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May 5, 2021 06:14
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Hobby income is income, there’s no threshold. The question about hobby vs business income has to do with deducting expenses and losses.
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May 5, 2021 14:04
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In theory this income would count towards EITC right?
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May 5, 2021 14:23
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HIJK posted:This is a very simple question that's also mildly embarrassing so I hope the thread enjoys this. The IRS uses a nine-factor test to determine if something is a hobby or a business https://www.irs.gov/faqs/small-business-self-employed-other-business/income-expenses/income-expenses If this is the only time you'll get a commission for your writing, it is likely a hobby, and you can just list the total amount you got paid as "other income" on Schedule 1. If you keep doing these commissions, it is very possible that it becomes a business and you'll have to start listing it on Schedule c and tracking and deducting your expenses.
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May 5, 2021 14:35
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Hi guys I was told to repost here I fell into becoming the president of my condo's HOA because everyone else either quits or can't be trusted with it. I know absolutely nothing about running an HOA but I'm here because I'm the person the least amount of people have a problem with I guess We are in Los Angeles We have a gardener who is the father in law of one of the residents. We get a great rate from him, $180/month when most others quote us $250 My treasurer is refusing to pay him several months of invoices because he won't provide a W9. Maybe the gardener is undocumented, maybe he's avoiding taxes, I dunno and I kinda won't want to know. Is not providing a W9 a dealbreaker? Are paycheck stubs enough evidence that we paid him? Can we just fill out a 1099-MISC or 1099-NEC and say "REFUSED" where it asks for a tax ID or something? I want to settle this amicably for everyone. The treasurer refused to pay him for several months and let him keep cutting our grass which feels like acting in bad faith. What do you guys think?
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May 6, 2021 18:09
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Steve Yun posted:Hi guys I was told to repost here You and the treasurer should read up on Backup Withholding https://www.irs.gov/businesses/small-businesses-self-employed/backup-withholding. The basic idea is that if he refuses to give his ID number on the W-9 or otherwise, you withhold 24% of his payment and send it in to the IRS through the backup withholding program.
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May 6, 2021 19:23
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urnisme posted:You and the treasurer should read up on Backup Withholding https://www.irs.gov/businesses/small-businesses-self-employed/backup-withholding. The basic idea is that if he refuses to give his ID number on the W-9 or otherwise, you withhold 24% of his payment and send it in to the IRS through the backup withholding program. And don't be surprised if the bill suddenly jumps up to whatever you the competition is charging.
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May 6, 2021 21:04
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We usually have a family friend who is a registered agent do our taxes, but due to some family issues for her we are on our own this year. I've never done my own taxes, lol. Married, CA, no fancy poo poo other than student loans and I have a 401k. My wife is in private practice (W2) and made significantly less than I did last year. Is that enough complications to pay a preparer? If not: A) Are all "free"/low cost online filing services (like the H&R Block simple filing) created equal, or is there a goon recommended one. B) Does the pay gap between us ever come into play for the MFJ vs MFS calculation?
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May 11, 2021 19:51
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If a worksheet for a form works out that the credit is $0, should I still file that form or do I just skip it? E.G.: I have education expenses last year but the worksheet for form 8863 gives me $0 due to how my taxable income worked out. Do I still file form 8863?
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May 11, 2021 20:32
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Target Practice posted:We usually have a family friend who is a registered agent do our taxes, but due to some family issues for her we are on our own this year. I've never done my own taxes, lol. Your 401k is probably already reflected in your W2, and you just have two W2s? Make sure you don't have any 1099's from bank interest or anything like that. But, yeah, IMHO you could probably just use an online service, it's easy enough.
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May 11, 2021 20:57
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Target Practice posted:We usually have a family friend who is a registered agent do our taxes, but due to some family issues for her we are on our own this year. I've never done my own taxes, lol. I've been happy with freetaxusa.com, as have some other people in this thread. Yes it's a ridiculous name, but no issues for me after several years of use.
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May 11, 2021 23:03
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Ur Getting Fatter posted:If a worksheet for a form works out that the credit is $0, should I still file that form or do I just skip it?
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May 12, 2021 00:14
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Peyote Panda posted:You can skip that form. You'd only file that if you were actually claiming a credit and since it's zero in this case you don't need to include it. That's just for the 8863. Generally speaking, regarding forms for credits you only need to include them if you are claiming an actual credit amount but there might be cases where you need to include a form even if the credit zeroes out (like an 8962 for ACA insurance). In those circumstances the instructions or tax software should advise you that including the specific form in question is required. Thanks! Edit: I'm guessing this doesn't apply for Schedule D? I have Qualified Dividends and using the worksheet brings it down to $0, but it seems like Schedule D is mandatory if you have investment income. dpkg chopra fucked around with this message at 14:30 on May 12, 2021 |
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May 12, 2021 14:02
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Ur Getting Fatter posted:Thanks! That's for capital gains, dividends is Schedule B. Though if you have something for Schedule D you have to include it even if it's zero because often you need to provide the info to let the IRS know it's zero.
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May 13, 2021 03:49
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MadDogMike posted:That's for capital gains, dividends is Schedule B. Though if you have something for Schedule D you have to include it even if it's zero because often you need to provide the info to let the IRS know it's zero. Schedule D, line 22 refers to the QD worksheet but now that I look at it again, it seems more like a reminder than something specific to Schedule D itself. In any case, thanks for the clarification!
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May 13, 2021 14:19
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I owed $11k this year thanks to some RSU underwithholding, whoops. Thankfully squeaked in under the penalty mark. Efile accepted weeks ago. IRS hasn't taken the money yet. My bank's website says they have a $5k ACH limit, but I called them and they said it doesn't apply to this -- it should go through fine. So when will they do the withdrawal? Is it the new tax deadline, May 17? And if they can't for some reason, will I get a letter?
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May 13, 2021 19:33
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I thought you gave them a date to make the payment when you filed the tax return.
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May 13, 2021 22:34
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Ur Getting Fatter posted:Schedule D, line 22 refers to the QD worksheet but now that I look at it again, it seems more like a reminder than something specific to Schedule D itself. Yeah, pretty much a reminder to bring the long term capital gains stuff over to the worksheet. smackfu posted:I thought you gave them a date to make the payment when you filed the tax return. Yeah, usually when you pay by direct debit when filing you set a date (there's basically a protocol at the IRS site to take the e-filed payment info for the account info and time of deduction along with the return). If it doesn't work for some reason you can go on the IRS website and hit the pay option, there's a way to make an instant direct debit for no charge there. But check your return filing, it should probably mention a date for payment.
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May 13, 2021 22:46
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My mom died last May and for all of 2020 I paid the mortgage on our house. Can I claim the mortgage interest deduction on my taxes?
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May 15, 2021 16:50
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GWBBQ posted:My mom died last May and for all of 2020 I paid the mortgage on our house. Can I claim the mortgage interest deduction on my taxes? Has her estate been probated? Who owns the house? The answer is 99% "no" and you need to be in touch with the probate attorney on your case. The estate would claim the interest on its return. If you are down to the wire do the calculations on yours without it and send an extension in. Who is doing the estates return?
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May 15, 2021 17:00
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Turns out mortgage interest is less than the standard deduction, anyway. The estate does not need to file a tax return as it generated no income, and my mom's income was 0 in 2020.
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May 15, 2021 18:04
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i saw that the automatic corrections for early filers who weren't able to account for changes to 2020 unemployment apparently started going out last week. does anyone know if there is general guidance on an expected timeline, and a way to check on the status of individual returns? i'm expecting to have my returns corrected early on (single filer with a w2 and two 1099s who elected to receive aca subsidies as a lump sum, so i'm assuming i fall into the "simple case" category), but i have no idea what how long i should wait before assuming there was some kind of problem with the auto correction on my return.
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May 18, 2021 19:44
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GhostofJohnMuir posted:i saw that the automatic corrections for early filers who weren't able to account for changes to 2020 unemployment apparently started going out last week. does anyone know if there is general guidance on an expected timeline, and a way to check on the status of individual returns? i'm expecting to have my returns corrected early on (single filer with a w2 and two 1099s who elected to receive aca subsidies as a lump sum, so i'm assuming i fall into the "simple case" category), but i have no idea what how long i should wait before assuming there was some kind of problem with the auto correction on my return. I don't think the Where's My Refund tool will be of much use. IIRC it doesn't update for subsequent refund issuances though I could be wrong.
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May 19, 2021 20:25
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Peyote Panda posted:Unfortunately there's no more specific guidance on the timeframe at the moment other than what you stated. If you're able to set up an account on IRS.GOV you can check your 2020 account transcript for updates. Once the adjustment is completed you should see a Transaction Code 291 which reflects a reduction in tax. Subsequent to that you'll see a TC 846 for the refund being issued. thanks for the info! looks like nothing neither step has been taken yet, guess i'm settling in for a long wait
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May 21, 2021 18:16
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Asking "for a friend" - They were hired as a CO worker with a relo-package to move from CA in 2020. COVID never relented and they never moved to CO. They finally read a pay stub last night (I kid you not) and they realized they are paying both CO and CA state income taxes. They only got one W-2 though with CA's on it and filed their taxes as though they lived and worked from home 100% of the year in CA, which is true. How should this have worked out W-2 wise - should they have gotten two W-2's? Is the total state tax owed in aggregate whichever state has the highest rate? Which state "wins" here? Trying to suss out what they're being told by payroll. They are hoping to move to CO later this year now.
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May 21, 2021 18:51
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Not familiar with those two particular states, but most have some kind of system where when you file your taxes you allocate a percentage of your federal income to one state or the other. Remote work generally has specific rules. In 2020 I changed jobs to one in MO but worked it remotely without moving from OK. My paycheck withheld to MO. When I filed my taxes, based on MO and OK tax rules for remote work, 100% of my income was in OK and 0% was MO. As a result I got back everything withheld to MO, and had to pay a bit to OK.
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May 21, 2021 21:16
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Posting this in a couple different places, but I'm looking for a recommendation for a tax preparer in VA, specifically in the NoVA area. If anyone has recommendations please PM me if possible or just quote if you don't have PMs. It's not urgent or anything, just looking to get back to current from the pre-pandemic situation. Thanks!
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May 24, 2021 00:38
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Need to scrape up 50k more cash for a 1st-time housing purchase. My options are: 1) Sell some investments from my taxable accounts - this would add about 7% more in taxes. Do I need to pay the estimated payments in the same quarter, or can I get away with increasing my withholding / paying later in the year when I'll have more cash available? I don't mind paying some minor underpayment penalties, but I'm definitely in a situation where I don't want to wait until tax time next year to make payments. 2) Take a withdrawal from my IRA - This seems to be a bad idea, I can't think of any reason to do it. 3) Take a withdrawal from my Roth IRA - This would work, but it would take a big % of my Roth balance. 4) Get a 4.25% loan from my 401K - this is an intriguing option, and 50k wouldn't be a big chunk of the 401K. Am I really just playing with pretax money here, including my future repayments/interest? I'd probably repay it in the next couple of years - don't see my current job lasting that long, so chances are the full repayment wouldn't all be pretax. Does this affect the maximum 401K contribution per year? Or some combination of the above.
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May 24, 2021 03:44
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Baby Proof posted:Need to scrape up 50k more cash for a 1st-time housing purchase. I would do #1. If you're not currently required to pay quarterly taxes you can defer payment until April 15th, 2022. If you are then you have to pay the taxes, but no one is going to ding you for doing it regularly until Dec 31, 2021 so long as you hit the safe harbor amount. % of balance doesn't really matter, it's "retirement assets" vs "non-retirement assets". You never get the retirement space back which strikes out options 2 and 3. If you have a better option than #4 you should take it, leaving option 1.
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May 24, 2021 04:23
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The only reason I care about the % is that option 3 would be a big change in allocation of my retirement accounts between Roth & non-Roth. I still think I'm missing something about how 401k loans work- if I took a 50,000 loan out and paid it back in 2 years wouldn't that be a huge decrease in taxable income?
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May 24, 2021 04:40
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