How to Avoid Taxes From Borrowed Money

Toby Mathis and Jeff Webb of Anderson Advisors talk about how to avoid taxes from borrowed money and other tax-related questions. Submit your tax question to taxtuesday@andersonadvisors.

Highlights/Topics:

• Is the money I get from a line of credit or loan taxable? No, proceeds from or payments back on a loan are never taxable. What's the best way to avoid taxes on money borrowed toward investment? Utilize interest and repay your loan to avoid taxes.
• I am a co-owner of a property. I don't get proceeds from rent but want to invest in the renovations. Are there any tax advantages for me? You can get tax advantages/deductions for repairs, but renovations may depend on your income, operating agreement, and other factors.
• If I move my paid-off condo to a trust, will the trust pay taxes on it? Don’t put your condo into an irrevocable trust. If it's a living trust or land trust, neither are considered disregarded entities nor pay taxes. If I sell it one year after owning it then put it in trust before I sell it? Also, it is not recommended to change a title shortly before selling it.
• Should I put my college kid on my payroll for $24-to-30,000 a year rather than just pay their rent out of my pocket? Makes perfect sense to do this, but your child actually has to be doing something for your business that is worth $24-to-30,000 a year.

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Resources:

1031 Exchange

https://www.irs.gov/pub/irs-news/fs-08-18.pdf

Self-Employment Tax

https://www.irs.gov/businesses/small-businesses-self-employed/self-employment-tax-social-security-and-medicare-taxes

Schedule E

https://www.irs.gov/forms-pubs/about-schedule-e-form-1040

Section 179

https://www.section179.org/

121 Exclusion

https://www.irs.gov/taxtopics/tc701

Small Business Administration (SBA)

https://www.sba.gov/

Anderson Advisors

https://andersonadvisors.com/

Anderson Advisors on YouTube

https://www.youtube.com/channel/UCX5nh607M8hSBLiMB9MgbIQ

Anderson Advisors on Facebook

https://www.facebook.com/AndersonBusinessAdvisors/

Anderson Advisors Podcast

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