Search found 322 matches

by Two Headed Mule
Wed Nov 28, 2018 4:56 pm
Forum: Personal Finance (Not Investing)
Topic: Any federal employees used FSAFEDS?
Replies: 4
Views: 532

Re: Any federal employees used FSAFEDS?

I've used it the past six years - and just signed up again. Happy to help if I can.

Mule
by Two Headed Mule
Wed Nov 28, 2018 4:36 pm
Forum: Investing - Help with Personal Investments
Topic: NII Tax on Tax-Exempt MM and Muni Funds?
Replies: 3
Views: 346

Re: NII Tax on Tax-Exempt MM and Muni Funds?

Items excluded from gross income are also excluded from the NII. So tax-exempt income is not subject to the NII.

Mule
by Two Headed Mule
Tue Sep 18, 2018 10:59 am
Forum: Personal Finance (Not Investing)
Topic: Question: New tax law on HELOC
Replies: 4
Views: 407

Re: Question: New tax law on HELOC

The first HELOC was acquisition indebtedness. Any refinance of acquisition indebtedness is still acquisition indebtedness (up to the current balance), and deductible.

Mule
by Two Headed Mule
Tue Aug 28, 2018 10:05 am
Forum: Personal Finance (Not Investing)
Topic: SALT: IRS issues proposed regs for State Tax Credit for Donation
Replies: 62
Views: 6199

Re: SALT: IRS issues proposed regs for State Tax Credit for Donation

Back to the SALT charity work around, New York State set up the charities, and you can still donate to them this coming Monday (8/27) and get the full federal deduction and 85% NYS tax credit (on your 2019 tax year NYS taxes for a 2018 donation), assuming the IRS will accept a postmark as determini...
by Two Headed Mule
Tue Aug 28, 2018 8:53 am
Forum: Personal Finance (Not Investing)
Topic: SALT: IRS issues proposed regs for State Tax Credit for Donation
Replies: 62
Views: 6199

Re: SALT: IRS issues proposed regs for State Tax Credit for Donation

Back to the SALT charity work around, New York State set up the charities, and you can still donate to them this coming Monday (8/27) and get the full federal deduction and 85% NYS tax credit (on your 2019 tax year NYS taxes for a 2018 donation), assuming the IRS will accept a postmark as determini...
by Two Headed Mule
Sat Aug 25, 2018 2:48 pm
Forum: Personal Finance (Not Investing)
Topic: SALT: IRS issues proposed regs for State Tax Credit for Donation
Replies: 62
Views: 6199

Re: SALT: IRS issues proposed regs for State Tax Credit for Donation

One very notable thing about ECEP is that it is arguably a bigger revenue threat than the charitable contribution tax credit issue (that began the discussion) because it allows even non-itemizers to effectively deduct their state income tax. Yes, a state could launder all salary, such that all empl...
by Two Headed Mule
Sat Aug 25, 2018 1:12 pm
Forum: Personal Finance (Not Investing)
Topic: SALT: IRS issues proposed regs for State Tax Credit for Donation
Replies: 62
Views: 6199

Re: SALT: IRS issues proposed regs for State Tax Credit for Donation

The expectation is that the employee's "pay" and therefore taxable income will drop by the amount of the "tax" (since it redounds to the employee's benefit as a state tax credit). The key here is that, despite first appearances, the state is not made worse off with ECEP because of the way that the ...
by Two Headed Mule
Sat Aug 25, 2018 11:54 am
Forum: Personal Finance (Not Investing)
Topic: SALT: IRS issues proposed regs for State Tax Credit for Donation
Replies: 62
Views: 6199

Re: SALT: IRS issues proposed regs for State Tax Credit for Donation

Correct however, that portion credited to the employee is tax free. With a very simplified example, suppose $100K in taxable income, $15K in state tax, then employee would pay federal tax on $85K under old rules. With the new cap of SALT, employee would pay federal tax on $90K (can only deduct $10K...
by Two Headed Mule
Fri Jun 29, 2018 12:20 pm
Forum: Personal Finance (Not Investing)
Topic: Mortgage deductibility on HELOC
Replies: 9
Views: 599

Re: Mortgage deductibility on HELOC

The general rule is that interest expense is "traced" to the associated expenditure. If the loan proceeds are used for a personal use, the interest is not deductible; if used for business, deductible as business interest; if used for an investment, investment interest. Up until this year, there was ...
by Two Headed Mule
Fri Jun 22, 2018 7:43 am
Forum: Personal Finance (Not Investing)
Topic: Help me with this calculation? Pay off student loans or wait for PSLF? Plus any general finance advice is welcome!
Replies: 7
Views: 701

Re: Help me with this calculation? Pay off student loans or wait for PSLF? Plus any general finance advice is welcome!

Typically to analyze something like this you would calculate a break-even based on certain assumptions: If instead of paying off the loans in a lump sum (the option you are considering) you took the same $42K and invested it at a certain interest rate (assume 3%, since that was mentioned above), how...
by Two Headed Mule
Thu Jun 21, 2018 4:50 pm
Forum: Personal Finance (Not Investing)
Topic: Help me with this calculation? Pay off student loans or wait for PSLF? Plus any general finance advice is welcome!
Replies: 7
Views: 701

Re: Help me with this calculation? Pay off student loans or wait for PSLF? Plus any general finance advice is welcome!

I believe under repaye the spouses income is included anyway so there is no benefit to filing separately, as there is with ibr, paye.
by Two Headed Mule
Sun Jun 10, 2018 3:38 pm
Forum: Personal Finance (Not Investing)
Topic: selling home fractionally twice with TIC to use capital gains exemption twice?
Replies: 7
Views: 589

Re: selling home fractionally twice with TIC to use capital gains exemption twice?

It's a good thought, but doesn't work. Start with Reg. 1.121-4: (e)Sales or exchanges of partial interests - (1)Partial interests other than remainder interests - (i)In general. Except as provided in paragraph (e)(2) of this section (relating to sales or exchanges of remainder interests), a taxpayer...
by Two Headed Mule
Thu Mar 29, 2018 12:00 pm
Forum: Personal Finance (Not Investing)
Topic: TAXES - How to handle Rental Income Loss
Replies: 10
Views: 793

Re: TAXES - How to handle Rental Income Loss

(1) Yes (2) Sort of. On a fully taxable sale, any suspended losses are "released." Since the suspended losses are ordinary, and the gain on the sale will likely be capital (including some recapture, max rate 25%), the result may well be better (but almost certainly no worse) than a simple offset of...
by Two Headed Mule
Thu Mar 29, 2018 9:56 am
Forum: Personal Finance (Not Investing)
Topic: TAXES - How to handle Rental Income Loss
Replies: 10
Views: 793

Re: TAXES - How to handle Rental Income Loss

(1) Yes (2) Sort of. On a fully taxable sale, any suspended losses are "released." Since the suspended losses are ordinary, and the gain on the sale will likely be capital (including some recapture, max rate 25%), the result may well be better (but almost certainly no worse) than a simple offset of ...
by Two Headed Mule
Mon Mar 12, 2018 4:28 pm
Forum: Personal Finance (Not Investing)
Topic: Rental Property Sale - Tax Implications
Replies: 8
Views: 1026

Re: Rental Property Sale - Tax Implications

He is simply wrong about this, assuming you have calculated the numbers correctly. In the no gain/no loss situation there is no recapture. Specifically, the definition of Unrecaptured Section 1250 gain in section 1(h)(6) explicitly requires a taxable gain for the recapture provisions to apply: "The ...
by Two Headed Mule
Sat Feb 10, 2018 8:00 am
Forum: Personal Finance (Not Investing)
Topic: Rental Property Sale - Tax Implications
Replies: 8
Views: 1026

Re: Rental Property Sale - Tax Implications

My guess is that the part that is confusing you is the applicable basis issue. Because you converted to rental when the fmv of the property was less than the original purchase price, there are actually two different bases to keep track of. The 90k basis is only used to figure any loss from the sale ...
by Two Headed Mule
Sat Feb 03, 2018 2:55 pm
Forum: Personal Finance (Not Investing)
Topic: Help calculating 2018 kiddie tax
Replies: 33
Views: 3009

Re: Help calculating 2018 kiddie tax

I think I could use the example similar to what was posted here but not sure if I would first Deduct the 12,000 standard deduction from 22,000 (earned plus unearned income) and then apply the estate tax rates for the $10k balance as you did with the estate tax rates. Yes. Because the son would not ...
by Two Headed Mule
Wed Jan 31, 2018 8:26 am
Forum: Personal Finance (Not Investing)
Topic: Rental Depreciation Recapture
Replies: 12
Views: 1304

Re: Rental Depreciation Recapture

Can depreciation ever be recaptured at less than 25% rate Yes -- in fact, this will become quite common in light of the new tax legislation, which lowered rates. The type of recapture being discussed is taxed at regular rates, up to a maximum of 25%. Thus, for MFJ, if the portion of taxable income ...
by Two Headed Mule
Thu Jan 25, 2018 8:33 pm
Forum: Personal Finance (Not Investing)
Topic: Rental Properties and Capital Gains
Replies: 10
Views: 1521

Re: Rental Properties and Capital Gains

Yes, the recapture amount is taxable income. Suppose the total gain from the sale is $70K, made up of recapture of10K, and the remaining gain of $60K. these amounts are "stacked" on top of your other ordinary income. Suppose taxable income otherwise is $5K (that is, work income is $50K, and the stan...
by Two Headed Mule
Thu Jan 25, 2018 8:32 am
Forum: Personal Finance (Not Investing)
Topic: Rental Properties and Capital Gains
Replies: 10
Views: 1521

Re: Rental Properties and Capital Gains

You are close. As noted above, the sale will likely result in two different types of capital gain. First is "recapture". Your inlaws were allowed to depreciate the properties over time on the assumption that they would lose value. Since they did not lose value, that tax benefit must be recaptured. T...
by Two Headed Mule
Thu Jan 04, 2018 9:44 am
Forum: Personal Finance (Not Investing)
Topic: Selling individual muni bonds- estate executor has question
Replies: 9
Views: 773

Re: Selling individual muni bonds- estate executor has question

Bond premium should have been amortized by decedent over the life of the bond (even leaving aside basis step up/step down). Doubt there is any significant (tax) loss in those bonds to be realized by estate/beneficiaries.
by Two Headed Mule
Sun Dec 31, 2017 8:31 am
Forum: Personal Finance (Not Investing)
Topic: Selling Rental Home
Replies: 3
Views: 485

Re: Selling Rental Home

This should qualify for the section 121 exclusion. You have to meet the "use" and "ownership" requirements to qualify for the exclusion, which means owning and using the townhouse as your principle residence for 2 of the past 5 years, but you don't have to satisfy each requirement concurrently. You ...
by Two Headed Mule
Sat Dec 23, 2017 8:52 am
Forum: Personal Finance (Not Investing)
Topic: [Pass-Thru Entities Questions Thread]
Replies: 141
Views: 12440

Re: Question about pass through income in new tax law

I don’t know the answer to that yet. I think that’s right but I haven’t seen it written anywhere yet. It's written here. :D It also works the other way. if you are otherwise subject to the taxable income limit, adding 50K of charitable contributions saves tax at the marginal rate, but also removes ...
by Two Headed Mule
Sat Dec 23, 2017 7:58 am
Forum: Personal Finance (Not Investing)
Topic: [Pass-Thru Entities Questions Thread]
Replies: 141
Views: 12440

Re: Question about pass through income in new tax law

BMTaco has done a very good job explaining how it works in various particulars. One important feature is that the deduction will, in many cases, also apply at the margins to non-business income. This is because the limit on the deduction is the lesser of (1) 20% of QBI, or (2) 20% of taxable income ...
by Two Headed Mule
Fri Dec 22, 2017 2:20 pm
Forum: Personal Finance (Not Investing)
Topic: Prepaying Business Expenses - Pass Through Deduction in 2018
Replies: 5
Views: 502

Re: Prepaying Business Expenses - Pass Through Deduction in 2018

Probably. Marginal brackets for most people next year will be lower, and in addition, the pass-through deduction effectively serves as an additional reduction in your marginal tax rate. Both factors make accelerating business deductions to this year better, all things equal. So for example, a $10,00...
by Two Headed Mule
Wed Dec 06, 2017 2:00 pm
Forum: Personal Finance (Not Investing)
Topic: Help me calculate Depreciation Recapture & Cap Gains
Replies: 7
Views: 754

Re: Help me calculate Depreciation Recapture & Cap Gains

I thought depreciation recapture is usually taxed at a special rate (25%). It's not normal cap gains. .................................................. I thought it was ordinary income rates but capped at 25%. (1) The recapture being discussed is in fact a special type of capital gain -- thus capi...
by Two Headed Mule
Sat Nov 04, 2017 12:56 pm
Forum: Personal Finance (Not Investing)
Topic: Student Loans: Best to Pay Down or Wait for Forgiveness?
Replies: 33
Views: 3092

Re: Student Loans: Best to Pay Down or Wait for Forgiveness?

Likewise, if you took out a home-equity loan or did a cash-out refinance on your home to pay off the student loans, that would lower your rate, although only interest on the first $100,000 of extra debt would be deductible. (I believe this is correct; a home-equity loan used to refinance an otherwi...
by Two Headed Mule
Wed Oct 04, 2017 12:31 pm
Forum: Personal Finance (Not Investing)
Topic: Renting to parent vs. inheriting
Replies: 13
Views: 1473

Re: Renting to parent vs. inheriting

She isn't wasting her money by not paying you rent. She's out the money no matter who she rents from. And from your perspective, you can either buy a house and earn rent from her, or not buy the house and earn a market return from someone else on that same money (visualize investing in a separate RE...
by Two Headed Mule
Sun Oct 01, 2017 9:11 am
Forum: Investing - Help with Personal Investments
Topic: Whole Life question - when to stop making annual payments?
Replies: 16
Views: 2230

Re: Whole Life question - when to stop making annual payments?

I find it hard to believe a 20 year old whole life policy is yielding so little on the cash value. Are you sure those numbers are correct, particularly since you've indicated that the dividend can pay almost all of the premium at this point?
by Two Headed Mule
Sun Oct 01, 2017 6:53 am
Forum: Investing - Help with Personal Investments
Topic: Whole Life question - when to stop making annual payments?
Replies: 16
Views: 2230

Re: Whole Life question - when to stop making annual payments?

"Which of these three approaches makes the most sense for this policy?" is not the right question. The question is which approach makes sense given your FIL's goals, which are unclear. Each option can make sense depending on what is attempting to be accomplished. For example, (c) makes sense if he d...
by Two Headed Mule
Tue Sep 26, 2017 8:22 am
Forum: Personal Finance (Not Investing)
Topic: Double checking capital gains taxes due on home sale if a rental or not
Replies: 7
Views: 1133

Re: Double checking capital gains taxes due on home sale if a rental or not

This may help get you started. Depreciation will be fully recaptured in either of your two scenarios, so the question is how the remaining 50K of gain is treated. Scenario 1: depreciation recapture of $90,900, capital gain of 50K (most likely capital, see section 1231). As you say, this is the more ...
by Two Headed Mule
Fri Sep 22, 2017 8:19 pm
Forum: Investing - Help with Personal Investments
Topic: Question re passive income
Replies: 5
Views: 843

Re: Question re passive income

Generally, yes. Both of your rentals would be considered passive activities. Under section 469, Income and losses from passive activities are aggregated, so net losses from the "home" rental could offset net income from the other rental.

Mule
by Two Headed Mule
Mon Jul 31, 2017 7:11 am
Forum: Personal Finance (Not Investing)
Topic: Tax on profits from de-condoifying
Replies: 1
Views: 399

Re: Tax on profits from de-condoifying

Suspended passive losses from all passive activities are effectively in one pot. Passive income in a given year from any source will free these losses to the extent of passive income. So assuming these are all passive activities (almost guaranteed unless you are real estate pro) losses from the othe...
by Two Headed Mule
Wed Jun 28, 2017 1:47 pm
Forum: Personal Finance (Not Investing)
Topic: Tax Liability on Selling Former Residence (Now Rental)
Replies: 14
Views: 1337

Re: Tax Liability on Selling Former Residence (Now Rental)

I'm going to disagree with Mule on this one, but I also don't agree with the sources provided by jimb. There are two issues. One is the effect depreciation has on adjusted basis. The other is how much of the gain upon sale attributable to depreciation is "recaptured" in calculating tax. Reg. 1.1016...
by Two Headed Mule
Wed Jun 28, 2017 11:52 am
Forum: Personal Finance (Not Investing)
Topic: Tax Liability on Selling Former Residence (Now Rental)
Replies: 14
Views: 1337

Re: Tax Liability on Selling Former Residence (Now Rental)

There are also instructions in various IRS tax worksheets similar to this one in publication 523: "...Did you qualify for depreciation? If you used all or part of your home for business or rental between May 6, 1997 and the date of sale, total all the depreciation deductions you could have taken be...
by Two Headed Mule
Wed Jun 28, 2017 8:46 am
Forum: Personal Finance (Not Investing)
Topic: Tax Liability on Selling Former Residence (Now Rental)
Replies: 14
Views: 1337

Re: Tax Liability on Selling Former Residence (Now Rental)

In a lot of cases, depreciation will be "recaptured" as ordinary income not to exceed 25%, so that part of the "gain" is not eligible for cap gain rates. What happens if someone failed to take the depreciation deduction along the way? I seem to recall something about the recapture occurring anyway,...
by Two Headed Mule
Mon May 29, 2017 1:50 pm
Forum: Investing - Help with Personal Investments
Topic: Pay Down 401k Loan vs Mega Backdoor Roth
Replies: 13
Views: 1879

Re: Pay Down 401k Loan vs Mega Backdoor Roth

No Loan: 401k starting balance (bond portion) on 1/1/2016: $100,000 Bond fund yields 2%: $2,000 401k ending balance on 12/31/2016: $102,000 With Loan: 401k starting balance on 1/1/2016: $50,000 Loan balance on 1/1/2016: $50,000 Bond fund yields 2%: $1,000 Loan interest 4.25%: $2,125.00 Ally savings...
by Two Headed Mule
Sat May 27, 2017 1:35 pm
Forum: Investing - Help with Personal Investments
Topic: Pay Down 401k Loan vs Mega Backdoor Roth
Replies: 13
Views: 1879

Re: Pay Down 401k Loan vs Mega Backdoor Roth

Mathematically (and leaving aside other considerations like separation from employer, etc.), paying off the loan and making the mega roth contribution are quite similar. You "own" a certain fraction of your traditional 401(k) and the government "owns" the rest (equal to your withdrawal tax rate in r...
by Two Headed Mule
Fri May 12, 2017 8:27 am
Forum: Personal Finance (Not Investing)
Topic: My plan to use policy loans to fund first five years of retirement
Replies: 61
Views: 5248

Re: My plan to use policy loans to fund first five years of retirement

Just to give you all an idea of the hard numbers. One policy I've had for 26 years. If I die today, the amount of the death benefit would represent a 9% annualized increase, all tax free. Actually more than that if you subtract the term premiums that would have been in place in the absence of the p...
by Two Headed Mule
Wed Apr 19, 2017 1:53 pm
Forum: Personal Finance (Not Investing)
Topic: Does AMT erode value of suspended passive losses?
Replies: 5
Views: 962

Re: Does AMT erode value of suspended passive losses?

This strikes me as a pretty unusual result. It is essentially indicating that there is no passive loss carryover for AMT purposes, which would be unusual given that your activities are presumably rental real estate, which don't generally have much in the way of tax preference items. One would genera...
by Two Headed Mule
Sun Mar 19, 2017 9:49 am
Forum: Personal Finance (Not Investing)
Topic: Sale of home that was also rental - tax question
Replies: 8
Views: 1008

Re: Sale of home that was also rental - tax question

How was basis determined at time of conversion? Was this value higher or less than original purchase? Have you been using TT all along to track it? You might consider a CPA for this year. I can't remember off the top of my head but I believe it was either 2009 or 2007 that the rule changed so any g...
by Two Headed Mule
Sun Mar 05, 2017 8:22 pm
Forum: Personal Finance (Not Investing)
Topic: Real estate loss and Roth Conversion?
Replies: 2
Views: 381

Re: Real estate loss and Roth Conversion?

It depends on the reason the lot was purchased. If it was bought and held for personal reasons (e.g., to build a house/residence that never materialized), the loss would be nondeductible. If held for investment purposes (e.g., speculation on land prices), the loss is capital, and thus would not offs...
by Two Headed Mule
Sun Feb 26, 2017 9:15 pm
Forum: Personal Finance (Not Investing)
Topic: Selling rental at a loss
Replies: 4
Views: 650

Re: Selling rental at a loss

Help me understand the tax implications. 2010: $167k condo purchase 2013: started renting to tennant 2017: $132 left on mortgage If I sold this year for $147k ($20k below what I paid) how would it impact my tax return? Depends. Assuming value was equal to or greater than 167K when converted to rent...
by Two Headed Mule
Sun Feb 26, 2017 8:44 am
Forum: Personal Finance (Not Investing)
Topic: Invest or pay down rental property mortgage
Replies: 16
Views: 1476

Re: Invest or pay down rental property mortgage

Mortgage rate: 4% (ARM, so could go up) I'm in California, my income is greater than $200K, so my combined interest and dividends tax rate, I believe, is 33%. So I would have to earn at least a 5.97% yield. Factoring in overall return is a litle more complicated because of capital gains rates (or n...
by Two Headed Mule
Mon Feb 20, 2017 8:33 am
Forum: Personal Finance (Not Investing)
Topic: Rental property sale (conversion) - loss question
Replies: 8
Views: 875

Re: Rental property sale (conversion) - loss question

The calculations are correct as far as they go. The questionable part is the assumption that the value of the property at the time of conversion was equal to its original purchase price, since the property was ultimately sold at a substantial loss. This assumption is also driving the (tax loss) resu...
by Two Headed Mule
Fri Feb 10, 2017 10:12 am
Forum: Personal Finance (Not Investing)
Topic: Life estate at death
Replies: 20
Views: 3395

Re: Life estate at death

The house was owned as joint tenants by mom and dad, yes? Rev Rul 69-577: Where property held in tenancy by the entirety is transferred to a trust under which each spouse reserves a joint and survivor life estate, only one-half of the value of the trust property is includible in each cotenant's gros...
by Two Headed Mule
Thu Feb 09, 2017 4:22 pm
Forum: Personal Finance (Not Investing)
Topic: tax problem on once partially rented primary home
Replies: 4
Views: 599

Re: tax problem on once partially rented primary home

You should be eligible for the section 121 exclusion, subject only to depreciation recapture. Do not simply net the depreciation recapture with the suspended passive losses since they have different tax attributes. Depreciation recapture is subject to a maximum 25% rate and can be offset with other ...
by Two Headed Mule
Thu Feb 09, 2017 9:19 am
Forum: Personal Finance (Not Investing)
Topic: Life estate at death
Replies: 20
Views: 3395

Re: Life estate at death

The part that I'm slightly confused by is that there was a life interest for both mom and dad and how the two interests are divided. If mom (surviving spouse) had no power of appointment, then your original characterization would appear to be accurate. See Rev Rul 69-577. If the surviving spouse re...
by Two Headed Mule
Sun Jan 29, 2017 9:36 pm
Forum: Personal Finance (Not Investing)
Topic: How to Fill Out Nanny W-2 When Paying Her Portion of FICA
Replies: 16
Views: 1650

Re: How to Fill Out Nanny W-2 When Paying Her Portion of FICA

TomatoTomahto wrote:
In your experience, for a household worker, how often are wages grossed up?
Compliance in this area generally is so poor that there is no number that would surprise me. Payroll services and experienced CPAs are probably the only things keeping this number mildly north of 0%.

Mule