If you think taxes are confusing then join the IRS
On many tax issues they are just as confused as the
rest of us.
Take Mortgage Interest rules
Under the rules, homeowners may deduct
the interest they pay on loans secured by
qualified homes — their main residence and
a second property. The loans include first or
second mortgages as well as home-equity
loans and lines of credit.
Sound Simple??
Then wait till you hear the rest of the Story
There are only two kinds of qualifying debt
acquisition debt and home-equity debt.
Acquisition debt is incurred when buying,
building or substantially improving a qualified
home, as long as it is secured by that property.
Since Oct. 13, 1987, the limit on acquisition debt
interest deductions has been $1 million annually.
Home-equity debt is any non-acquisition debt
secured by the home, as long as it is not used
to buy, build or improve the home.
Equity debt interest deductions — not to be confused
with a home-equity loan, which can be either acquisition
debt or home-equity debt, depending on how the proceeds
are used — are capped at $100,000 a year for tax purposes.
The IRS problem is this
Since 1913 tax payers have been deducting mortgage
interests. And is the third most expensive tax break
for the government. Even though in 1987 caps where
implemented to limit the amount of interest consumers
can write off Uncle Sam is expected to give up close to
80 billion in revenues
This is a lot of Money
Tracking mortgage interest has been a huge problem
for the IRS and during an examination the IRS has
to rely on the mortgage industry but most servicers
don’t uniformly maintain records as to whether the
loan was either an acquisition or a refinancing
So the solution?
We one of several is to make some changes on IRS
form 1098 (one of the many information forms
that the IRS requires so they can spy on us) to
to include the address of the mortgaged property,
the outstanding mortgage-debt balances, an indicator
of whether the interest is on a loan refinanced during
the year and an indicator of whether the interest was
on an acquisition loan or a home-equity loan.
In this way not only will the IRS and the consumer
both will have clearer understanding of what qualifies
as deductable mortgage interest and what does not.
GVO estimates that such a change could eliminate up
to 14% of that 80 billion dollars in tax revenues that
Congress needs to spend to keep there various pet
projects alive
But More importantly the IRS could now make
mortgage compliance a part of their automated
processes that will allow them to quickly determine
whether the interest claimed corresponded to a
qualified residence and was eligible for the write-off.
Now with this new reporting in a routine examination
the IRS can obtain information about taxpayers from
private firms simplifying there ability to squeeze more
money from the public.
So if you refinance or obtain financing on your personal
residence be prepared. If you are not in compliance you
could end up owing a huge tax debt to the IRS
Bryan L. Kinney
http://TheTaxMasters.com
http://EliminateMLMfailure.biz
