Year End Tax Tips 2008 Q&A - Miscellaneous
Tax Tips Q&A
Read Kevin McCormally's answers to tax questions submitted by NBR's viewers.
Click on a tax topic to explore related questions and answers.
This feature is intended to provide general information and education and should not be considered as investment or tax advice. Each individual should consult his or her own tax, financial, or investment advisor.
Miscellaneous
QUESTION: Can Payments To Home Equity Loan Be Taken As Business Expense?
I have Home Equity Line of Credit. I have taken $100,000 in 2008 and given it to my son to carry his business thru these tough times. It requires that I only pay the interest on the loan each month. I pay the bank, his business pays me each month. Early in 2009 I will receive a 1099 INT form. How can my son use this as a deduction on his business income tax?
-- Patrick O'H., Estero, Florida
ANSWER:
Oh, my. Your son can't deduct the interest reported as paid by you. Only the person who is legally liable for repaying a debt can deduct the interest. That means you can deduct it, since it's home-equity interest.
You need to draw up some papers that show you have made
a loan to your son and that he is paying your interest. You need to report
that interest as earnings on your tax return. Then your son can deduct
the interest on the business debt he is paying you on his business tax
return. The more formally the deal is structured, the less likely you'll
get any hassle if the IRS audits one or both of the returns.
-- Kevin McCormally, Editorial Director, Kiplinger Washington Editors
QUESTION: Protesting Abortion Through Taxes
We are ardently against abortion and know that our tax
dollars are used to fund this evil. Can you tell us how we can deduct
that percentage of our taxes that is used for this legal killing? Station:
krmu-dt Name: City & State:
-- Linda J. Moore, Cortez, CO
ANSWER:
You can't. During the Vietnam war, a lot of protestors wanted to refuse to pay the part of their tax bill that went to support the prosecution of that war. It was not allowed. The ballot box, not the Form 1040, is the officially sanctioned form of protest.
-- Kevin McCormally, Editorial Director, Kiplinger Washington Editors
QUESTION: Claiming Full Business Expense vs Depreciating It
Kevin, I own a small business. I purchased a computer recently and beleive that I can write it off completely in 2008. Wasn't this a Bush tax incentive? Joel
-- Joel, Henderson, NV
ANSWER:
Yes, you can "expense" the full cost of the computer, rather than depreciating the cost gradually over several years. As part of the economic stimulus package, Congress increased to $250,000 (from $128,000) the amount that businesses can expense in 2008. This is known as the Section 179 deduction, and you'll claim it on Schedule C, where you report your business income. You'll also need Form 4562.
-- Kevin McCormally, Editorial Director, Kiplinger Washington Editors
