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Former primary home, turned rental property.

Had a long term policy with no claims, good history, etc. When changing to rental property all my agent could offer me was a BOP policy. It was double the premium than my former owner-occupied, now a few years later it keeps going up and I question if its the best policy for us.

Some say, it can be an addendum to my home-owners? Any other possibilities?

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21 comments
Comment deleted4 months ago
Original Poster1 point · 4 months ago

renters policy is a condition of the lease so they do have renter's insurance. I will call my broker about a DP-3 policy.

I am going to be very unhappy if its available and its considerably cheaper than what I have been paying.

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0 points · 4 months ago

that is, until it's time to file a claim. DP policies have less comprehensive coverage with fewer endorsements.

not a deal breaker for this type of policy, but you should be aware of these facts.

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Original Poster1 point · 3 months ago

thanks for the extra info. I will check with my agent.

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We have a former primary residence home that we have been renting out - between interest paid, improvements, operating costs and depreciation we have been running a loss for 4 years that we have not been able to use due to income limits.

We have setup an LLC (to limit liability) to run the rental property; but we are unable to move the property under the LLC unless we refinance it.

Question: Can I sell the house to the LLC (assuming the LLC gets a mortgage), and will that trigger "gains" on the sale that can the be offset by the tax loss carryforward?

When calculating the gain on the sale, do i calculate it against the cost basis or against the cost basis minus the depreciation?

The thought here is that there has been substantial appreciation - in theory I could pull some of that equity out by selling it to the LLC, harvest the tax losses, and also move the property under the LLC - all in one neat swoop.

Any thoughts, help, comments, and advice are welcome

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10 comments

In that case, you need to retain a professional. Absent a valid non-tax reason for this “sale,” it’s likely to lack economic substance and therefore the losses will be disallowed. Typically, people don’t sell property to their wholly owned entity simply to transfer title to property. It’s unnecessary and can be done tax free. Here, you want a taxable sale just to take advantage of tax losses. The IRS doesn’t like that.

If you had only one member you would get the benefit of your losses btw. Your reasoning for having multiple members in this LLC is speculative, tenuous, and disregarding the liability limitation is highly fact specific. Single member LLCs are incredibly common and the legal liability shield more often than not respected, assuming proper procedures are followed.

Before you begin this process, I would talk to a tax attorney, tell them all of your goals, and then let them weigh the pros and cons of your options and you decide how to proceed. No offense intended, but it sounds like you researched LLCs online, learned a little bit about veil piercing, went with a multi member LLC solely because of it, and now you’re not able to achieve financial goals because of that not-fully-informed decision.

By the way: if your partner in the LLC is your spouse to whom you are married, this may be moot for tax purposes.

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Original Poster2 points · 4 months ago

really thank you for taking the time on a thorough reply.

Economic substance - good point, i didnt know it was required but makes sense. I would say there is an economic benefit to me in that I can unlock equity. Also, I am not allowed to transfer the property by the lienholder - so i have to sell it or refinance it.

As for the single vs multiple member - No offense taken at all, and you are partially right on my research driving the quest; but it was done on the recommendation of attorney after asking him. This would be a separate question and i wonder if it would have been an issue cause i would actually be stripping my spouse of her ownership claim on the property if i were to move it to a single member LLC, right? (or would spousal rights in a spousal state means that she would have claim to the single-member LLC as well?)

I am confused by your comment about a single member LLC benefiting from the losses. I dont understand why it makes a difference.

And yes, the partner in the LLC is my spouse, who is also on the title of the property and on the loan. Why is it moot?

Sorry for the follow up questions, but I appreciate the insight.

As I said in my initial post, SMLLCs are disregarded for tax purposes. The tax law deems them to not exist. In contrast, a MMLLC is regarded. MM = multi member and SM = single member. Hence if your LLC were SM then you’d simply claim the losses on your personal tax return.

I am on an iPad and can’t remember why you weren’t taking the losses in the first place. Do you have insufficient income to fully absorb them? If so, then the distinction probably doesn’t help. If there are other reasons, and if you live in a community property state, because you and your spouse are the only members of a MMLLC for state law purposes, then the IRS will let you choose to treat the LLC as MM or SM under Rev Proc 2002-69 and therefore you should already be taking the losses if your tax preparer is aware of this. I believe this flexibility is available now in separate property states, but you should speak to a qualified tax attorney about these issues. I believe it’s called a “joint election” or something like that. I think this what you’re getting at by “spousal state.”

If you are able to take the losses, depending on much work you do at the house the losses may be passive, and unless you have substantial investment income theyll again be suspended. A lot of these issues can be resolved it just depends on how much time you’re willing to pay for to obtain the losses.

Hope this helps. I’m going to get drunk for St Patty’s day.

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Original Poster1 point · 4 months ago

i cant take the passive losses because earnings are too high. thats why im looking to create an event that would allow me to take the losses

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Archived

I have never done this and need some guidance.

Long story short: got in accident with cab, insurance company wont pay fair amount to repair although they are at fault. Only option at hand is to file small claims

I need help figuring out 1) if I can file at my county of residence, which is different than the county where the accident happened, and 2) if I name the driver or the insurance company in the suit

Any guidance on what it takes to file a small claims in NY state would also be helpful

Thanks in advance

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24 comments

Be aware, first of all, that insurance companies are much better than you are at determining risk and payout. They literally do this for a living. And they try to avoid court. To a large extent, when an insurance company makes an offer it's a reasonable one. That's not always true but it's generally true. So you first have to accept the idea that the insurance company is banking on breaking even or coming out ahead, and they're probably going to.

You're making a classic mistake in risk management - and I'm not trying to sound like a dick there, because everyone makes the same mistake. You are comparing best case(100% fault at $2500) to your estimate of likely case(80% at their money). You're neglecting the worst case and you're over-estimating the likely case. You're doing this because, in your mind, your conclusion is reasonable and the best conclusion. And of course you think that, if you didn't think it was the best you wouldn't think that! But that doesn't translate to an objective assessment of the conclusion.

Your current value for this transaction is whatever your top-end offer is. $1200. Your best-case is 100% of your estimate, or $2500. Your worst-case is their estimate($1500) multiplied by some tinier percentage, say 20-30%. And I'll be blunt, I'm not even sure they have liability here at all. Let's say 20% fault - that gives you about $300.

Your overall risk involves figuring the chance of each outcome. You think a high chance that you'll do better than the insurance company offer - from an objective point of view I disagree strongly. Both you and the insurance company are currently ignoring the passenger liability, and the insurance company assuredly won't when you go to court. More, the existence of an offer for a percentage is not evidence that they actually believe themselves liable of that. So it's likely they'll argue even less than that in court. And again, they're better at this than you are.

I'm not telling you to take the offer. I am telling you that you're unlikely to see enough of a payout above the current offer to make this worth your while. There's a very good chance that, after the lawsuit is all said and done, you end up worse off than you would have if you had taken the settlement.

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Original Poster1 point · 1 year ago

I understand and I appreciate the feedback. Good to hear the other side from an objective standpoint. And I dont take it personally.

To your point about them being better at this and their experience, I wouldnt think that they would agree to any liability unless they assessed that they had some risk - so i would be very hesitant to consider that they dont have any liability at all. If they were more comfortable with it, they would have sat steadfastly at a lower fault rate.

Why would you think that they have not considered the passenger? If that was a viable option I am sure they would be hiding behind it right away, not wait until I sued.

Your point, of myself overestimating likelihood of a positive outcome, stands; and I'll consider it. I cant say I will or will not pursuit it further. I am still a little incredulous about someone just being able to illegally drive on a road, cause an accident, and an insurance company say that its a split fault. This is not exactly the same, but arguing that a driver illegally being on the road has no relevance, is akin to it.

Again, appreciate the time and info.

Why would you think that they have not considered the passenger? If that was a viable option I am sure they would be hiding behind it right away, not wait until I sued.

In the general case, they're interested in making the cheapest payout possible. Regardless of actual liability, they will likely settle for something to avoid court. They sat down and figured out what they believe their liability is, and what it would cost to go to court if they didn't make you happy, and made you an offer based on that. Even if they had zero liability, a lawsuit would still cost them. So they make a settlement offer based on that.

Once they are sued, however, they'll fight tooth and nail for every penny, and you can bet that they'll argue the passenger right in.

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Original Poster1 point · 1 year ago

That makes sense.

Would you give me a little more insight why cited violations, that would otherwise prevent someone from being there at the same time (the car wouldnt have been on the road), would be irrelevant?

Is there any violation that would be relevant? Would a car going against traffic be relevant?

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Hello, hoping to get some advice and/or tips. The story behind it is here

Summary: Simple traffic accident. Cab pulled to the side to drop off - passenger opened door to traffic and hit my car as I was passing by. I was in the travelling lane, driving below speed limit. Simple damage to door and mirror casing.

Adjuster reviewed damage, but didnt hear from insurance company for several weeks/months. After 6 months of waiting, I had to get car repaired. I identified a body shop recommended by dealer and had work done. Through the next 6 months, after having to chase down the insurance company, they asked for several documents and I complied with all requests in a timely manner (within minutes). Insurance company never followed up and I always had to chase them down.

Finally got hold of them this week, they reviewed all docs and asked for copy of invoice and receipt paid. Came back saying they deny the amount and offered no other solutions other than to take their offer. Their offer consisted of taking 20% liability in the accident and the amount the calculated pre-repair - in all, this amounted to less than half of the amount paid to repair vehicle.

It appears my last recourse here is to file a small claims case to recover the amount paid for repairs. First question is do I file against the driver/company/insurance? In my mind, the best possible outcome is that they come back with a reasonable offer for settlement, or I win in court. Worst case is that the judge determines some kind of liability on my end or a lower payout, or both.

Hoping you can help me with tips or if you think there is a major flaw in my case and save me the trouble. I am also curious if my rationale that due to the driver's citations (in the original post - expired registration and no proof of insurance) would help in any way. The way I see it, driver should have never been on the road due to lack of valid registration - car not on the road, accident doesnt happen.

Yes I know I could file a claim with my insurance but I dont want to do that - the deductible is very high and I dont want my rates to go up. Out of principle, I also feel that the other driver is at fault and i should not be penalized for it. The amount is high enough to warrant this pursuit, but its also low enough that even if i lose I'll be fine.

Any thoughts?

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Archived

I am still dealing with this issue

tl;dr at the bottom

Basically, filed claim against other party's insurance. Adjuster was sent, took pictures. I didnt hear anything from them for several weeks/months. Accident was in September, by March I got sick of waiting and decided to repair vehicle. Finally got hold of insurance and they asked for body shop to contact them. Arranged that and didnt hear back for weeks. Then they asked for copies of estimate - sent those, didnt hear back for weeks. Got a hold of them today and asked for copy of invoice and receipt showing paid amount. They called back to say that it was denied. And that was it. I had to push back to understand what that meant - finally they said the amount was denied and my only option was to take the amount they offered (less than half the amount spent) and also they claimed that I had 20% liability in the accident.

  1. Since this is a no-fault state, not sure how to prove thats not true or how to fight it off.

  2. My only option cant be to just take whatever they want to give me - I clearly paid a specific amount and I should have the right to go to any body shop I prefer.

tl;dr Car was repaired out of pocket. Insurance company denying spent amount. Wants me to take whatever their adjuster wrote down and also take 20% culpability.

Anyone have any advice on what I should do next? Am I supposed to (forced to) only take whatever they deem is right? I have not been able to find anything about my rights in this state.

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18 comments

Sorry to tell you that you took a bad situation and managed to make it worse. At this point you're more or less at the mercy of the other carrier, and they know it.

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Original Poster1 point · 1 year ago

Thanks for the reply. Do you mind explaining how so? What did I do incorrectly or out of line? Truly curious as to what I did to make it worse.

EDIT: I suppose you mean I should have gone to my carrier - but other than that how did I make it worse?

Well, you should have immediately put your own carrier on-notice, though without actually opening a formal claim. Once the other carrier failed to respond in a timely manner (60-90 days) you should have simply opened the claim with your own carrier, and let them subrogate. Most importantly, you made the repairs without prior authorization, which is always a recipe for trouble, since the other carrier is now jerking your chain and you are stuck.

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Original Poster1 point · 1 year ago

I did tell my carrier immediately without opening a formal claim. They were aware of it.

I'll take responsibility for letting it sit for too long and then for moving ahead with repairs. I have never had this problem in the past with 3rd party insurance companies.

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2 points · 1 year ago

Do you have a job or earn income? You can only contribute from your income - hence you have to show income in order to do so.

I think its a great incentive to get started on saving money and I would be really grateful. You probably want to go with a ROTH since you would likely be in a very low tax bracket

1 point · 1 year ago

wow what a crook. run away as far as possible from said financial advisor.

You should definitely go for a ROTH now as you are taking advantage of a "low" tax bracket and paying your taxes upfront.

There is nothing wrong with letting that money sit for the next 40 years without contributing. it will still earn interest on its own.

1 point · 1 year ago

you can only file an extension to file your tax returns; you still have to make your payment by the original deadline.

I know, its messed up - i have an accountant figure out how much i owe. I dont know otherwise how you are supposed to pay it if you cant file and dont know how much you may owe. But thats what they expect.

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Posting this for a relative:

Healthy 25M hurt his back while picking up equipment (not his primary task as Laser Machine Technician- but very small business so everyone wears many hats)

According to doctor he has 10% permanent damage to his back (if it matters I can get exact details of damage). Insurance communicated they were surprised by that and were going to talk to doctor to verify, they alluded that they may challenge that. Nothing has changed since that conversation so maybe this piece is irrelevant.

My understanding is that CT seems to allow only a fixed amount for this type of damage. They have issued a check for a partial amount but I have recommended that he doesnt cash it until we figure everything out as I assume that cashing it implicitly accepts some kind of agreement.

He worked for company for another 10 months since the accident, and then he quit to pursue a masters degree. I dont know if it matters.

My questions are:

  • Should he cash the check?
  • If yes, when should he expect the balance?
  • Can someone explains what cashing the check means in terms of acceptance of settlement, or limiting their liability?
  • We read something about getting a form filled by employer - they verbally agreed to but after talking to insurance they have refused to fill said form (sorry cant recall the exact form)
  • I feel that the permanent damage is a big deal for a young person that will never recover and will present major issues and affect quality of life in later years. What recourse do we have to cover financial expenses in his future?
  • Are we allowed to sue for an amount that will cover his expected medical costs for the rest of his life based on this permanent damage?

Any help or direction would be much appreciated

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6 comments

He can't sue for anything. Workers' Comp is his only recourse.

In most states, workers comp allows you to get medical care for an injury for as long as it takes. In my state it goes for the balance of the claimant's life.

You cannot get money for pain and suffering. The money that they are sending him is what is meant to compensate him for the lifelong injury. That's what a 10% permanent injury classification is for. It's not a bonanza, workers comp is never that way.

Speak with a workers compensation attorney in your state for more specific details.

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Original Poster2 points · 2 years ago

Not looking for a huge windfall 0 this is not a moneygrab. If there was guaranteed care for the rest of his life then I wouldnt care if he didnt get a penny.

But to say that $10k should cover a 25M with 10% permanent loss of function of his back through his later years is ridiculous.

I'm not a workers compensation attorney in your state, but according to some research I am finding, his medical care will remain open for life.

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Original Poster1 point · 2 years ago

Thanks for the help. Could you point me in the direction of some documentation so I can research it? Also, he is in NYC now, so how should he go about finding a CT WC lawyer?

My worry is that cashing the check = accepts settlement and file is closed. If there is an option to keep it open then thats better as he would be better off maintaining care.

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Why is a 20% or more downpayment on a car bad advice?

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I'm really curious as well.. Why would putting 20 down be a bad idea. But just my 2 sheqels.. IMO it all depends an the interest rate. If you get 0.9% but manage to get a stock paying out 4% percent I don't see a reason to put anything down.. Some risk involved and not for everyone.

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1 point · 2 years ago

Doesnt even have to be in the stock market - say its a 5 year loan; you can get a 60-month CD at over 2%. No risk.

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1 point · 2 years ago

If you refinance they would hire an independent appraiser to come up with the market value of the home - and based on that they will calculate your equity and your loan. So yes, if in fact your home has appraised considerably, you may now have over 20% equity, and if thats true, you dont need to pay PMI.

Hope it works out for you and good luck!

Someone needs to grieve their taxes. It would probably get reduced a good amount.

Mine went from 15 to 18k this year (Nassau County, NY) because we didn't file an grievance for property re-assessment.

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5 points · 2 years ago

This. I'm in Westchester County and every year the town tries to screw us by raising the assessment.

It is "easy" to fight because house was bought recently at a much lower market value, so just providing copies of bank appraisal is enough - but i imagine that in 2 years they will tell me that appraisal its outdated. And thats how they get you.

It seems they also try to get you to forget or be too lazy to fight it off - because they just raise the assessment without any leg work, they just say its worth 10% higher, just because. But to fight it, you have to do real work or pay an appraiser and real estate professional.

Nowdays it is easy to pull comps from Zillow on recently sold houses. If they try it again just search on recently completed sales in your neighborhood. Find houses similar to yours (similar sf, same #bdr and bath) and see what they sold. If they are trying to screw you it's pretty easy to show.

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3 points · 2 years ago

Let me put it this way, there is a very strong cottage industry in the area dedicated to help homeowners fight assessments because they are pretty tough to beat.

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1 point · 2 years ago

I dont typically suggest this, but why not use a credit card or a personal loan? I am not suggesting you get in debt and there are ways to do it with minimal cost - 0% intro apr credit card, or local credit union.

I suggest this because although your sister wouldnt mind, it doesnt mean its the right thing to do. Would you then change the beneficiary back to her? how much are is in the account? and how much will you use? When you pay it back, would you contribute directly to the 529? Give it to her in cash?

Finally, I am not sure how this works, but if you have a 529 in your name, you will probably have to disclose that in your next FAFSA and could potentially impact your financial aid and loans award.

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Looking to see if anyone has any ideas or past experience trying to minimize tax liability on rental property (Schedule E) income.

I thought it was possible to fund SEP or Solo 401K from this income but since its not on a Schedule C then thats not possible per IRS.

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4 comments

You can make improvements to the property, donations, or start a business.

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Original Poster1 point · 2 years ago

Thanks! Donations defeat the purpose for this specific case, and I already do that. I am just wondering if there are other ways to shelter the rental income.

Keep track of every expense for the property including mortgage interest, repairs, improvements, advertising, yard care, travel. If you buy a file cabinet and use it for records on the rental, property depreciation, insurance...everything. These are all subtracted from the rent paid to you.

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Original Poster1 point · 2 years ago

Thanks for the reply. All of these are already in place. I am not complaining but even after all of expenses are accounted for there is sizable taxable income - just looking for other ways to reduce that liability.

I'm a fan of yours, mine, and ours. Shared expenses go into a joint account. Includes rent, utilities, food, savings, etc. The rest stays separate and can be spent however. That way you don't have to worry about what she is spending her money on, just yours and the joint stuff.

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12 points · 2 years ago

THIS. This is what we do as well.

We have a house budget, that is constantly update to reflect actual values, but we average a monthly house spend. Then we look at net income and divide the house costs based on our income - so for us, she contributes 30% and I contribute 70% to our joint house account. Everything else stays in our own personal accounts to spend as needed.

This works really well for us. We add an emergency and rainy day savings to the joint account so that account is self sustaining in case of emergency. Both of us max our retirements, etc; and the only condition is that we cannot go into personal debt outside of our own cars.

It does create a different dynamic than combined income - for example, if its very lopsided, adding household costs are a lot easier for one partner because they only have to contribute 30% of that cost :) On the other hand, it does encourage partners to be financially responsible on their own and not co-depend on the other; yet knowing there is a support system.

3 points · 2 years ago

Just out of curiosity, how do things like vacations get handled?

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2 points · 2 years ago

We have added it to the budget as another item. That along with Emergency fund and rainy day savings means the joint account has a healthy balance over what we need every month.

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3 points · 2 years ago

Vanguard and Fidelity are great

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Looking to see if anyone has any ideas or past experience trying to minimize tax liability on rental property (passive) income.

I thought it was possible to fund SEP or Solo 401K but apparently thats not possible per IRS. Currently it is not in its own LLC, but will be in 2016.

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-4 points · 2 years ago · edited 2 years ago

Since he has a full time job, he doesn't need to bother with quarterly filings (unless he owed so much this year that the IRS explicitly demanded he do so). He just needs to have a bit extra withheld in each paycheck from his 9-to-5, and that will cover the difference.

OP, if you expect to make about the same in 1099 income next year, just divide your extra taxes by 52 (or 26, if paid biweekly), and put that down on your W4 as extra withholding, and it'll make the problem go away for next year without you needing to fuss with any extra paperwork to the IRS.

Edit: Sorry some people don't "like" this answer, but if you've made extra work for yourself by not understanding how withholding works, don't blame me for your own incompetence.

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2 points · 2 years ago

I am not an expert so I cant disagree, but based on my experience, 80% of my income is w-2 based, you may still be required to do quarterly payments. But I could certainly be wrong, and higher W-2 witholdings would make my life much easier.

0 points · 2 years ago

Nope, the IRS only cares that we have more-or-less the right amount of withholding throughout the year. Having it withheld weekly would more than satisfy that requirement.

If the OP got paid in a huge lump sum in the first quarter, yes, he technically should submit a quarterly payment. Otherwise, not an issue.

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1 point · 2 years ago

I see, maybe that is why in the past I had to do so as I would get a lump sum in the 1st quarter. But I'll check as that income gets normalized through the year, and doing extra witholdings from W2s would be easier.

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1 point · 2 years ago

You should be checking with a estate planner. In the US there are a couple of potential ways, like setting trusts, that would allow you to live in it and eventually "own" it, without actually transferring it, and so no taxable event. But I dont know about Canada

1 point · 2 years ago

A key question here is who is the legal/registered owner of the car. That is the person responsible, and whose insurance would have to cover the cost.

In short, you may get lucky and its your parents insurance. Or you are in a tough spot if its in your name and no insurance.

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3 points · 2 years ago

Only one of them had rid himself of some loans by lumping it in with a new mortgage.

That's a really stupid idea. You're going to pay way more in interest, extend a 10 year loan to a 30 year note, and you lose all protections associated with federal loans while increasing the risk to your home.

You're no longer a high risk borrower

I fundamentally disagree with the notion that graduation means you're no longer a high risk borrower. What dealings do you really have with these loan service companies? If you're on auto-pay, I'm not clear how you're that inconvenienced.

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2 points · 2 years ago

You make a valid point but there is also the mortgage interest tax credit that provides an extra benefit on top of the lower rate.

And there is a case to be made for a graduate being a lower risk - if you bail without graduating, the 3.5 years of education are worth nothing at all. After graduating, in theory, at least you have a title/diploma that is more likely to get you a job than if you dropped out.

I am not saying this is true in practice, but risk assessment is all done in theory anyway.

Original Poster1 point · 2 years ago

you have another option, the SEP IRA, which you can still open and fund for 2015.

Great, this is the kind of option I was looking for.

You dont have to be in an LLC to deduct your self-employment taxes - that can be done directly in Form 1040. See here: https://turbotax.intuit.com/tax-tools/tax-tips/Self-Employment-Taxes/The-Self-Employment-Tax/INF12023.html[1]

I forgot this was an option, thanks! I was actually referring to self-incorporating and paying myself a smaller salary as an employee of my own LLC (Elected as an S-Corp?) in order to reduce the amount of self-employment tax that I would need to pay in the first place. (See /u/spargurtax's comment)

Thank you for your help!

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2 points · 2 years ago

It doesnt really eliminate the tax - does it?

  • The S-Corp would have to pay you via W2s in which they will withhold the employee share of the social security tax and medicare
  • The S-Corp is also required to cover their half of social security and medicare. Yes, the S-Corp can then deduct this as a business expense, but so can you directly.
  • And yes the S-Corp can also create an employer sponsored retirement plan. But his all sounds very complicated for 35k/yr in income.

So where are the savings? I would say there is more downside unless it becomes a very big profitable company. Otherwise you are adding documentation burden, cost (file the S-Corp taxes), complexity, and also you are preventing yourself from taking advantage of some self-employed retirement benefits.

Original Poster1 point · 2 years ago

It doesnt really eliminate the tax - does it?

It probably won't be useful until my income increases. It is just so painful to have them take a 5k bite out for Social Security/Medicare. I've budgeted for it, but I guess I'll have to accept it for now.

I would say there is more downside unless it becomes a very big profitable company.

I didn't explain in my original post, but it's not a company; basically I work for another company as a consultant (paid as an independent contractor) and the incorporation is for tax considerations only.

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1 point · 2 years ago

It is just so painful to have them take a 5k bite out for Social Security/Medicare.

You get to deduct half of it. And then you could open a SEP and contribute to your retirement up to 20% of that income pre-tax, also reducing your tax liability.

I didn't explain in my original post, but it's not a company;

I understand. Also you should know that even if you did go with it and file as S-Corp, and you paid yourself wages (W-2), you could not pay yourself "little" as the IRS will crack down on it for exactly the same reason you would want to do it. So they collect self-employment taxes. You are supposed to pay yourself the same that it would take someone else to do the job, whatever that job is.

Options:

1) Move all to your current 401k. You gain simplicity and allow yourself to do the backdoor Roth.
2) Keep them where they are. You gain better options and allow yourself to do the backdoor Roth.
3) Move them into an IRA. You get better options but you can't do the backdoor Roth.
4) If you have side income, you can open a solo401k this year (for next year) and rollover the old 401ks into the solo401k. Better options and allow for the backdoor Roth.

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1 point · 2 years ago

These are your options - they are all bad; just pick one.

If its me I try to secure a self-employed gig with little income, just to open a solo 401K, and then I roll them all into that one. Make sure that wherever you open the solo 401k allows roll-ins, some/most dont.

I wish i had figured this out a couple of years ago when i had a similar situation; instead i rolled into current employer with bad funds. Sucks, but i can still do backdoor ROTH

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