tax lien help is not an easy job.” We also agree that it is unlikely that an innocent borrower would have been able to determine from the Notice of Federal Tax Lien, which did not set forth a date for assessment of the tax, that the notice related to the taxes due for the 1998 taxes. We conclude, therefore, that the notice itself did not provide sufficient notice.
Taxpayers need to understand how and why they can and cannot deduct the interest they pay on their loans.
The Internal Revenue Service requires you to keep careful records of all of your bank, mortgage, credit card and other types of loans.
You must provide those records to the IRS as part of your tax return, along with a schedule of other payments you made that year.
There are three types of deductible loans in the US: mortgage, home equity loan, and student loan. The deduction is applied to the interest expense portion of your income. For example, if you have a loan that carries a $1,000 monthly payment and a $100,000 loan balance, you can deduct $100 a month for your mortgage interests.
This deduction works in the same way for other types of loans as well. For example, if you have a home equity loan with a $5,000 balance, you can deduct the interest you paid. A student loan with a balance of $5,000 and monthly payments of $150 can also be deductible, even though you are not required to include that in your tax return.
Taxpayers with high household income can deduct a larger amount of interest because the IRS only requires taxpayers with household income greater than $250,000 to report interest payments and pay taxes on any interest earned.
If you are going to deduct the interest, then you must report it on your tax return. Failure to report can mean that you will have to pay back taxes on the interest and interest paid on the loan can be taxable.
Your home mortgage can be a major expense, which is why the IRS requires a detailed list of your mortgage payments.
Keep your loan paperwork and records
Once you have filed your taxes, make sure that your loan documents remain in your possession, as these will be needed for later year’s taxes.
For example, if you file taxes for the 2019 tax year, the interest paid on your home mortgage will be deductible in 2020, unless you change your filing status.
However, if you file for the 2020 tax year, the interest you paid in 2019 is deductible for the 2020 tax year. This is because the loan was in place in 2020 when you took the loan out.
If you have taken out more than one loan, such as a home and a personal loan, then you need to take careful note of how the loan balance and interest are allocated. The amounts on your mortgage statement need to correspond with the amounts on your tax returns.
Taxpayers must also keep track of changes to their tax situation, such as a marriage or a death. If you or your spouse changes your filing status, for example, you will need to note the new filing status when entering your mortgage payment on the mortgage statement.
As long as you keep good records of all your payments and your loan documents, your mortgage should have no problem with complying with your tax obligations.
If you are interested in more details about removing your tax liens, give a call at (888)489-4889 for a free consultation today!