An old quote says real estate and arithmetic are acquired together. The two also go together when figuring the tax consequences of selling property. (more…)
Posts Tagged ‘loan’
Is Borrowing From Your 401(k) A Smart Financial Move?
In recent years, as banks have tightened credit requirements and home equity has dwindled, many people are contemplating the ready source of cash in their 401(k) retirement accounts. (more…)
Tax Tip Tuesday! Borrowing From Your 401(k) Can Be Taxing
Both a borrower and a lender be. With apologies to Shakespeare, when you borrow from your 401(k), you become both a borrower and a lender. Whether that’s a good idea depends on your personal financial situation – and in the process of making the decision about lending money to yourself, you may have questions regarding the tax consequences.
For instance, though you probably know the initial borrowing has no federal income tax effect, you might be wondering whether the interest you pay will be deductible. In general, the answer is no. That’s true even when you use 401(k) loan proceeds for your home.
Ordinary loan repayments are not taxable events, either. That is, you don’t have to pick up the interest you repay into your account as taxable income. And, though you’re increasing your 401(k) account with the principal portion of each payment, that amount is not considered a contribution. You can still make pre-tax contributions up to the annual limit ($16,500 for a traditional 401(k) during 2011, plus an additional $5,500 when you’re age 50 or older).
What if you default on the 401(k) loan? The balance of your loan is considered a distribution to you, and you’ll have to report it as ordinary income on your federal tax return. In addition, when you’re under age 59½, a 10% early-withdrawal penalty typically applies.
Being both a borrower and a lender can lead to results Shakespeare never imagined. Give us a call to make sure you have the whole story.
Tax Tip Tuesday! Add To Your Retirement Plan Vocabulary
The definition of retirement may be in flux, but the vocabulary describing your retirement plans remains the same. Here are three common terms. (more…)
Purchase Order Financing
One of the ironies in business is that if you want to increase revenue, sometimes you need to borrow money. The reason is simple: growth is expensive. Suppliers will almost always require payment before you have received money from sales. (more…)
How To Improve Your Credit Score
The days of easy credit, offered to anyone who can breathe, are history. In this sluggish economy, lenders want to know whether borrowers are likely to stay current on their loans, mortgages, and credit card accounts. Banks and other lending institutions are looking more closely at credit scores, the numbers that (in theory at least) predict the likelihood that a borrower will default on his or her outstanding debts. As a result, knowing your score and ensuring that it’s climbing toward the upper percentiles should be a part of your regular financial planning. (more…)
Being Smart About Loans
Most businesses operate to some extent on borrowed money, but borrowing too much means you’re paying more in interest than you need to. Borrowing too little means you’re under financed and won’t have enough capital to accomplish what you want to do. (more…)
