If you took out a home-equity loan last year and injected the resulting cash into your pass-through business (sole proprietorship, S corps, partnership or LLC), you can typically deduct the related in-terest expense. But don’t report the interest as an itemized deduction on your Schedule A.
March 15 isn’t just the deadline for corporations to file 2003 calendar-year income tax returns. It’s also the deadline for calendar-year C corporations to switch to S corporation status for 2004.
If you receive a phone call from someone who asks for personal financial data and claims to be from a federal agency, such as the IRS, ask that person to put the request in writing.
If you and other co-owners operate your business as a multimember LLC, you may already know to file a partnership return on Form 1065. Each owner is treated as a partner for federal income tax purposes, so each receives a Schedule K-1 with his or her share of the LLC’s 2003 business income, deductions and credits. You report those figures on your 2003 personal return.
If you run your business as a husband/wife partnership, you’re forced to fill out a complicated Form 1065 (U.S. Return of Partnership Income) every year. But if you live in one of the nine "community property" states (see list at left), we have good news for you
Before you send off your 2003 tax return, make sure you didn’t overpay the required amount of FICA taxes. For 2003, the Social Security rate is 6.2 percent on the first $87,000 in wages. The 1.45 percent Medi-care tax rate applies to all your wages. Together, those make up the 7.65 FICA tax.
Q: My father died in 1998, and we decided to pay off the estate tax using the installment method. Now that estate tax is being repealed, will we still have to pay installments after 2009? R.V., Plymouth, Mass.
Q: I use my cell phone a lot for charitable activities. In fact, that’s the reason I bought it. Can I deduct the phone costs as a charitable donation? N.B., Kansas City, Mo.
Q: My husband and I have lived in our home for 32 years. We bought it for about $80,000, and now it’s worth more than $500,000. My husband died last year, and I’m planning to sell the home. I read about the $250,000 home-sale tax exclusion for single people and $500,000 for married people. Am I limited to $250,000? A.T., Rockaway, N.J.
Q: I’m wondering about the repercussions of the break in the relationship between gift and estate taxes. If I make a $1 million gift in 2004 and pay no gift tax by using up my gift-tax exemption, will I still have an unreduced estate-tax exemption of $2 million in 2008? L.S., New York, N.Y.