Tax: pay down mortgage, sell jewelry, depreciate vehicle
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I think that the fees would be better used for paying off our house and buying a new, bigger house that I've had my eye on. Does it make better tax sense for us to pay off the mortgage, sell the house, and buy a new house, or should we just use the money to buy the new house after selling the old house?
Also, I sell handcrafted jewelry which earned me $20,000 last year. Do my business activities constitute a trade or business for federal income tax purposes? Or, is this just a hobby? Should I establish a separate trade or business to get tax benefits on these earnings? Does it make any difference that I use my car primarily for transporting my jewelry to different shops around town? Finally, I think I can earn more money if John were willing to invest $15,000 for new jewelry making equipment since my original equipment, which cost $10,000 five years ago, is almost obsolete. Does this make sense from a tax perspective?
1. What are the different tax consequences between paying down the mortgage (debt) and assuming a new mortgage (debt) for Federal income tax purposes?
2. Does Jane have a business or hobby? Why is this distinction important?
3. Would Jane realize better tax benefits if she had a separate business for her jewelry making activities?
4. Can Jane depreciate her vehicle or jewelry making equipment? How?
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1. Does it make better tax sense for us to pay off the mortgage, sell the house, and buy a new house, or should we just use the money to buy the new house after selling the old house? What are the different tax consequences between paying down the mortgage (debt) and assuming a new mortgage (debt) for Federal income tax purposes?
The fees, I presume, are the $300,000 that John earned in legal fees in the current year. To answer that planning question, one would have to ask John and Jane more questions such as:
1. How old are they?
2. Do they have a growing family?
3. When are they planning to retire?
4. Is it important for them to have a house that is paid for?
The answers to those questions would help to advise them about buying a new and larger home. There would be ...
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