| Author | Message | ||
| V.Z. (Ama328)
Junior Member Username: Ama328 Post Number: 202 Registered: 11-2002 |
Well, Lucas, since it's SATURDAY NITE, and i AIN'T GONNA GIT LUCKY tonite, i'll verbalage-a-lize, expand, expouse, and whatever incorrectly spelled adjective i can think of, on my earlier post, along with a suggestion or two... * ok, because of $$ interests owning the congress and the prez, there is basically a two tier tax system in this country(three, if you count low income people who don't make enuf to pay taxes, but hey, this is a FERRARI board, right?  ) * tier one is the working stiff, can't do a damn thing, cuz as J Haller mentioned, the mortgage deduction is about the only item left to cut your taxes, and for a single person, the first $400/month or so interest you pay on your mortgage just gets you up to the standard deduction, so even that's disappearing, due to indexing of the standard deduction. 'bout every penny you make as a grunt is gonna be taxed: up to $5394 for socsec($87,000 gross), 1.45% for medicare, then 10%-35% of 'adjusted' GROSS income(might as well stick it to you and tax you TWICE on the socsec/medicare part, right?) About the time you think you're gettin' ahead, here cometh the tax man, askin' you to BEND OVER. *** tier TWO, otoh, belongs to the BIG BOYS: - when biz money is spent, it gets to be subtracted from gross incoming $$, vs. when YOU(grunt) spend $$, it's AFTER TAX $$. - biz money can be legally spent on a very wide variety of goods and services to be deducted; grunt money can't. - BIGGIE: most, or almost all biz $$ is taxed at same or lower rates than grunt $$. - BIGGIE-ER: capital gains, which generally covers investment $$ brought in, is taxed MUCH lower, if it's "LONG TERM", which, only in America, is long term usually defined as 'more than 12 months'. With the Bush tax cuts, most(but not all), long term cap gains is taxed at a flat rate of 15%. NOTE that i did NOT say you go to higher cap gains brackets as you get into the big $$(wouldn't want that fat cat who contributes $$ to Bush campaign to pay progressively more taxes on zillion$, like the grunts do). NOTE that i said NOTHING about socsec/medicare(hey, the $$ establishment is not interested or concerned about little things like 'social interests', they've got more than enuf $$ to cover THEIR retirement, THEIR medical, THEIR vacation,(and, of course, THEIR FERRARI ) So, what it amounts to is that if you can shift $$ into biz interests, it goes on Schedule C of the old tax form and gives you BIG deduction possibilities, or if you can shift $$ into long term cap gains, it's taxed at a hell of a lot less than what grunts pay. First clue i had to any of this was several yrs ago, when i wuz watching a tv commercial about 'Get a Chevy truck for $300/month'. Sat down, figured that the $300/mo meant i had to earn $500/mo(BEFORE grunt taxes), not to mention i'd have to have comp/collision insurance, which ain't free. Hmmm, if i dumped that $500/mo into a mortage, I COULD GET A TAX DEDUCTION!...BETTER YET, i could spend maybe $600-700/mo into the mortgage and, after the deduction, be no worse off than the $500/mo i had to EARN to make a $300/mo TRUCK payment. Gets one to thinkin' a bit, no ?? Now, just to prove i ain't totally DUMB, i also figured out that if i had mortgage interest, that'd get me up over the standard deduction hurdle, which now meant i could start LOOKING FOR OTHER DEDUCTS TO PUT ON MY 1040 that i might have skipped in the past, cuz of the standard deduction. Well, i do a fair amount of music stuff on the side. Music doesn't pay worth sh!t, but sure can provide some tasty DEDUCTIONS, either right off the top(schedule C) if contract/self employed, or in the 'non-reimbursable biz expenses' if you're an employee(say, for my 'Symphony' work, where i'm classed as a general grunt). I do computer work, so can write off some(not all, but with a bit of knowledge, can come up with some legit stuff) expenses there, too. Note that this is $$ i'd spend ANYWAY, so might as well get a FATCAT/Fed discount, right? Now, the real biggie is to figure out ways to shift $$ income you'd normally receive from an employer, into either biz revenue, or cap gains buck$. Depending upon what your job is, this can be easy or very difficult. Difficult for me, but i'm working on alternatives. Why not find some other source of income and structure it in biz/capgains fashion? That's what the big boys do. I ain't no tax atty, so i ain't gonna go out a limb and suggest 'creative' ways for you to dodge taxes. I will say that in my personal situation, i've got some things i'm trying to work into that will be more self-sufficient(both job/money-wise and tax-wise), so i can reduce my risk of the 'corporation' finally disposing of me(hey, if you work for a bigcorp like i do, one of the biggest out there, you're NOT an 'asset' anymore, you're just a line item on somebody's expense report). Hope to get things set up more along the cap gains approach, with a little biz along the way, so we'll see... Oops, gotta go, knocking at my door, *maybe* i'z gonna 'git lucky' tonite, after all... | ||
| ctk (Ctk)
Junior Member Username: Ctk Post Number: 110 Registered: 7-2001 |
Rob, How about it? Will you consider a FerrariChat Investment Club category? The wealth of information and generosity of members shouldn't be wasted. The insights and approaches discussed are very helpful indeed. This is a serious thread where very little 'flaming' occurs. I for one am very grateful to you and all others that share their wealth and experience. CTK | ||
| RockStar (Remix)
Junior Member Username: Remix Post Number: 53 Registered: 3-2003 |
These are EXCELLENT threads. Thanks for all the info. REMIX | ||
| djmonk (Davem)
Member Username: Davem Post Number: 348 Registered: 1-2002 |
Cheapest money out there has to be a home equity line. You can get them easily for 1% under prime. | ||
| Lucas Taratus (Karmavore)
Member Username: Karmavore Post Number: 322 Registered: 12-2002 |
What, exactly, are you recommending VZ? Luke. | ||
| J Haller (Jh355)
New member Username: Jh355 Post Number: 41 Registered: 6-2003 |
V.Z. Dead on!!! The tax code is very complex, not something a non professional could hope to comprehend completely (something like 65,000 pages in length). The Home interest deduction is the last big deduction an individual can take, the only way to compete with the big $$ guys is with a legitimate business. The Gov hands incentives to small businesses to spur economic growth and job creation, both good for the community. A flat tax would put thousands of high paid accounts and LLM lawyers out of work, that�s why it will never happen. JH | ||
| V.Z. (Ama328)
Junior Member Username: Ama328 Post Number: 193 Registered: 11-2002 |
yeah, is interesting to think of $$ in J Haller's terms...would be nifty to see if instead of working class people waiting around for congress to level the taxation playing field(flat tax? not gonna happen, folks), working folks should migrate over to the tax structure big $$ uses; that is, more biz orientation to take advantage of deductions, more capital gains vs. regular income, etc, etc. Poor working stiff pays 7.65 social security/medicare(plus, theoretically, is not being paid the employer's contribution, too), plus higher bracket taxes as one moves up the food chain. Cap gains dude, otoh, pays 15% on most stuff held 12 months or more, plus NO socsec crap. Quite a difference... Only way to get a level tax field is for everyone to play the game the same way...as the bigass boys do. | ||
| Taek-Ho Kwon (Stickanddice)
Intermediate Member Username: Stickanddice Post Number: 1720 Registered: 11-2002 |
I have a headache now. Cheers | ||
| Ben Cannon (Artherd)
Member Username: Artherd Post Number: 590 Registered: 6-2002 |
Any agressively optomised buisness or personal finance (which I like to run as a buisness, but a bit looser and more sentimentail.) will run at least in large part on credit. If it's not, it's not growing as fast as it could Here's an example. If you're shoping for a 308, just go ahead and get it in cash, it will make you feel great and you'll never have any kind of shadow over your head. Total cost of not financing: a grand or two at today's prices. If you're going to buy an F40, you should probally finance it, and use the proceeds to buy a 308 for 'free' I would not finance a "toy" that I couldn't cover more than 75% of in cash immediately. But I can sure choose to finance a F355 and take the $85k and do something ELSE with it (eg start a buisness, buy a house, invest it, etc.) Agree it depends very much on your own personal financial situation. If you're worth $500million, maybe the piece of mind of owning the toy outright is worth buying an F40 in cash. It's all relative. Best! Ben. | ||
| J Haller (Jh355)
New member Username: Jh355 Post Number: 36 Registered: 6-2003 |
Dom I�m not sure you need to take more risk. Just change or exchange the way you book income. If you are a practicing PhD, and book income from a professional company (PSC) you pay at least 36% of your income to Uncle Sam, with very little control over deductions. Ouch!!! When you gravitate to the higher income levels it�s not the size of your earnings that counts but how much you keep. Income (job) = taxes before you see paycheck. Investment income (business, stocks bonds ect�) = taxes on dividend dispersal. Portfolio income (property) = taxes only after deprecation, deductions, expenses, which usually mean very little income, but you enjoy the appreciating asset (loans, tax advantages ect). Taxes usually are only paid when the property is sold. Faisal Yes the bell curve is disastrous, but only to the inexperienced. People get hurt in the financial markets primarily because they do not understand what they are getting into. In 86 REIT�s were going bankrupt to the tune of hundreds of billions of dollars because the government changed the law concerning professional people (Dr, Lawyers ect.) writing off losses in one business against gains in another. The non real estate professionals didn�t see it coming. Professionals across the board were walking into their banks and turning in the keys to their investment property. It was a boon for knowledgeable real estate professionals; they purchased most of these properties for mere pennies, held the properties until they appreciated, turned them and made a profit. The same thing happened in 2000 and still happens today in the stock market. How did people continue to invest the day before the market crashed? They simple didn�t realize the danger because they were not educated in this area of study. People who had no business in the market in the first place, least they loose their investment. Unfortunately many people have been lured into tax deferred investment accounts (IRA�s, Sep�s, Keogh, ect) only to find their investments have lost a substantial amount of money, some even the principal. If you think an education is expensive try ignorance, seems fitting. The reason most people rely on others to manage their money is their lack of experience in handling their own financial affairs. I believe you can stay ahead of the bell curve, most on this chat line are professionals at some level, they spent years learning about their chosen profession, so learn how to be financially free? It�s a class, couple of books, talking to someone who has trucked down the road already, an experienced accountant, Lawyer and then a set of bigens to just jump in the water and not look back. My .02 JH | ||
| TC (Houston) (Tec)
Junior Member Username: Tec Post Number: 148 Registered: 2-2002 |
Dom, Did you get a referral on the financial planner? I will never meet with one again unless they come recommended from a trusted source. I've had two idiots waste a ton of my time putting together analysis that was a thinly veiled attempt to sell me these particular investment products. Ba$tards. I'm still really steamed about it. | ||
| Dom Vitarella (Dom)
Member Username: Dom Post Number: 318 Registered: 11-2002 |
(I'm really sorry for the thread hijack) Faisal, Yep. I've read the millionaire next door, but not the rich dad poor dad book yet. In fact, I am currently starting to put together info for a financial planner at Vanguard.com (I have most of my mutual funds throught them) to help me map out my future. At this point in my life, I think a financial planner is the next move for me. | ||
| Faisal Khan (Tvrfreak)
Member Username: Tvrfreak Post Number: 655 Registered: 3-2003 |
Dom, yes. And you should buy a Ferrari you will lose the least with, or gain the most with, within the constraints of your budget. Read The Millionaire Next Door and some of the Rich Dad Poor Dad series. Don't take them as gospel, just extract the points that make sense to you. They give you good insight into consumer psychology and "traps" you can avoid. Also, do you have your goals and plans mapped out? Goals should be easy. And you sound like you have started on several. Plans take a lot more work, and involve some creative problem solving. Best, f | ||
| Dom Vitarella (Dom)
Member Username: Dom Post Number: 317 Registered: 11-2002 |
J Haller and Faisal, Good points. I guess what I am trying to do is to better myself. I consider myself somewhat successful, I have a ph.d., make good income, bought a starter ferrari (cash), fund my kids education, my 401k, etc. My only debt is my mortgage. If you read the financial books, I am doing everything right. Still, I feel like I could be earning more (or rather, my investments can earn more, while being taxed less). I think I need to take more risks, but not too much, as I do have the family to suppport, etc., etc. So anyway, back to the subject of this thread: I believe you should pay cash for your ferrari, unless you can take said cash and invest in something better. Dom | ||
| Faisal Khan (Tvrfreak)
Member Username: Tvrfreak Post Number: 652 Registered: 3-2003 |
J Haller, agree with the first part of your post. Being an entrepreneur can reap handsome rewards, especially in America. However, your last statement ignores a fundamental of life, the Bell curve. You will find this distribution if you map success versus all the players in a given field, whether it's for top-tier manamgement jobs or home-based businesses. Also, as more parties enter a given field, advantages level out, and economies of scale mean the big players stand a better chance. Niche markets requiring specialist skills are almost always easier to survive in. Most Americans would not be rich if they suddenly quit their jobs and decided to try their hand at something entrepreneurial. There would be the same distribution of failures, mediocre performance, and stellar success as in anything else. Most Americans are the way they are because that is the nature of the distribution of wealth in our capitalist system. Don't agree that most Americans are tired and have little to show, though. We enjoy a pretty good standard of living here. | ||
| J Haller (Jh355)
New member Username: Jh355 Post Number: 35 Registered: 6-2003 |
Dom Sure, it�s prudent to walk before you run, least you fall down and loose all your eggs. The Government hands out incentives to persuade us to act a certain way. It�s not something you can wake up one morning and decide �I want to be in the top 5%�, you have to work hard for many years with little to zero return, but the pay out in the end is really worth it. Most people can�t get beyond next weeks paycheck (usually less than 66% of what is earned) to see there is a better way. Calculate your own paycheck to see where you would be, you earn $50,000.00 your take home is probably only $2,750.00 per month or $165,000.00 after 5 years, very close to our 4 plex model. This is why most Americans feel tired at the end of the day and have little to show for their effort. JH | ||
| Dom Vitarella (Dom)
Member Username: Dom Post Number: 316 Registered: 11-2002 |
J Haller, I agree with you. But it is a risk. And it could be a reason why I'm not rich yet. But you also have to admit, it's not as easy as you make it sound. I could buy a 4-plex, but who would manage it? I work full time (so I can get the money to buy the 4-plex) so I can't. I'd have to hire a 3rd party to manage it. That cuts into my profit. I'm sure lots of other headaches. Etc, etc. I know, I know, nothing comes easy. My thought at one point (There is a thread on it on off-topic) was to find some mutual fund (I was thinking of a REIT that I own) that gave a good return, then get a low % home equity loan (let's say 5%). So, borrow 100k at 5%, take money and invest in fund returning 10% (I have some shares in a reit that are currently earning about 10%). Use money to pay back interest and principal. I'd still like to do it, but am somewhat risk averse. Perhaps if I start with a smaller amount (say 20k) to have less risk. But I know what you are saying- you need to take some risks to make money. Dom | ||
| Taek-Ho Kwon (Stickanddice)
Intermediate Member Username: Stickanddice Post Number: 1716 Registered: 11-2002 |
Martin, I still don't see how that would be offensive to me. I agree with all of your points. Anyway, have you seen that show (damn, I forget the channel) that has the repo guys go around collecting stuff? Coooool. Cheers | ||
| Martin - Cavallino Motors (Miami348ts)
Senior Member Username: Miami348ts Post Number: 5268 Registered: 5-2001 |
JHaller, your call in sign gives me the creaps! Don't know if I should suggest to change it. E-mail me if you need explanation: [email protected] | ||
| Martin - Cavallino Motors (Miami348ts)
Senior Member Username: Miami348ts Post Number: 5267 Registered: 5-2001 |
Taek, what I was saying was that the repo rate on a regular car like a Honda, Toyo or Mazda or any other for that matter is higher than the exotic car recovery rate! Theft and insurance fraud is higher as well on regular cars. The worst rate for repos go to the "buy-here-pay-here"-dealers. But then Repo is a good business alltogether. Frank makes money off it | ||
| Martin - Cavallino Motors (Miami348ts)
Senior Member Username: Miami348ts Post Number: 5266 Registered: 5-2001 |
Frank, sicne Banks and Leasing Cos usually research the market pretty well before they take a risk, that should be reflected in the down payment you make. As I said you should make a financial up-front committment. On my 348 in 2000 I bought the car for $56K, put $ 11K down and financed $45K over 3 years no residual. I was always ahead of the game and could have sold with profit at any time. Where is the harm in that? | ||
| Taek-Ho Kwon (Stickanddice)
Intermediate Member Username: Stickanddice Post Number: 1714 Registered: 11-2002 |
Bugatti Royale... Now there's a massive bling bling mobile if I've ever seen one! Has the 20+" rims too!! Had the pleasure of being in one when it was driven a very short distance. It looks like a statue. I would have never thought the thing would be able to move under it's own power. Really quite a car, although not for me. Cheers | ||
| J Haller (Jh355)
New member Username: Jh355 Post Number: 34 Registered: 6-2003 |
Crusing I don�t necessarily disagree with you in today�s market, but if this were 1983 and you were in the 1960�s Ferrari market most could be had for $20 to 40 k. After twelve years of ownership most were fetching north of 200k some 1MM plus (keeping in mind Enzo passed, and most F car prices were inflated) still not a bad return for a 20k investment if you were smart with your market timing and got out. Keep in mind that savings is just another way to spend your money, for most people it still isn�t working for you but working for the bank. Does it mater where you keep your money? Last time I checked the mattress didn�t pay either. JH | ||
| Faisal Khan (Tvrfreak)
Member Username: Tvrfreak Post Number: 645 Registered: 3-2003 |
Awesome example, but I think the discussion is about the relative merits of different financing models for a car purchase, once the decision has been made to acquire the car. It's a no-brainer to choose between a car and another investment, active or passive. Unless it's a Bugatti Royale or a Le Mans-winning 250 GTO. | ||
| J Haller (Jh355)
New member Username: Jh355 Post Number: 33 Registered: 6-2003 |
Dom The only safe place to put your money is in US treasuries (99.99%), currently paying less than 2%. Even 12 year olds investing $100.00 on a bicycle and using it to deliver papers beats this rate. The people who take the largest business risks usually loose everything or reap huge rewards. It�s this way to scare off the half hearted. Say you put a down payment of $10,000.00 on a $100,000.00 car, payment is $1,698.41 per month; invest $90 k on a 4 plex which costs $270,000.00 payment is $1079.19 per month for 30 years assuming 90 k down. With normal appreciation of 7% per year, your property will be worth $383,000.00 in 5 years when the car is paid for and used as a datum point for evaluation purposes. Say your car depreciated to $70k property is worth $383k; to skip a lot of complex cost of ownership calculations lets say you cleared $500.00 per month on the 4 plex or $30,000.00. At the end of 5 years you will have net $143,000.00 in your pocket NO TAX OWED except on the 30k of income. The government gives incentives for this kind of activity because they simply cannot provide homes for everyone who cannot afford one themselves, and helps keep order in the country. This is how leveraging other people money can benefit you. IMHO this is the most profitable way to earn money; unlike a job where taxes are taken out prior to you receiving a check (your Government doesn�t trust you to pay them so they employ your boss to be the tax man). Remember money is only a tool, like a wrench, it can be used to sit in the box and look good or used to make more money. My .02 JH | ||
| Taek-Ho Kwon (Stickanddice)
Intermediate Member Username: Stickanddice Post Number: 1712 Registered: 11-2002 |
>>Never finance a depreciating assest, and always finance an appreciating asset.<< In the world of business, this is not always true. Actually, sometimes the reverse is what suits the company best. It really is a deeper matter that this. One has to take all of the individual's finances into account to truly see if it's a good decision to finance or not. So, to skip through all the academia...if you like it, and you think it's worth it...buy it. Cheers | ||
| Crusing (Crusing)
Junior Member Username: Crusing Post Number: 99 Registered: 10-2002 |
People can argue both ways. What you have to weigh is the value of having an F-car today rather than saving. I can understand both sides. But if you hope to own more than one Ferrari in your life or to move up the ladder there is one rule to remember: Never finance a depreciating assest, and always finance an appreciating asset. A rule I am trying my hardest to follow--it is sometimes tough. | ||
| Faisal Khan (Tvrfreak)
Member Username: Tvrfreak Post Number: 640 Registered: 3-2003 |
TC, thanks. Yes, you're right. Anytime you realize less than you own, you have a balance to carry, refinance, pay off, or walk away from (with possibly negative consequences). So it's unavoidable, except if you time the refinancing and interest rate movements right, you can get "free money." | ||
| Faisal Khan (Tvrfreak)
Member Username: Tvrfreak Post Number: 639 Registered: 3-2003 |
I have credit cards that give me mileage. I like charging big ticket items like cars and bikes and paying them off the next month...you get enough miles for a free ticket. And they really are free since I pay the debt off before the finance charges kick in. The dealers try to make you pay the 2-3% fees, but it's amazing how amenable they become when you start getting up and walking away. Of course, this goes against the grain of my earlier post of managing debt wisely. Here's what I really do. I don't pay them off with cash. I have a home equity line of credit and write the check with that. I find a reasonalbe interest rate and figure my payments for 3 years and pay it off like that. This way I get a free ticket, no finance charges from the credit card company, and a home mortgage interest deduction for taxes Usually the interest deduction is a relatively small sum, so it's only a minor benefit. Since the economic downturn, I have become really debt-averse. I would like to move to an entirely cash and carry philosophy as soon as I can figure out all the pros and cons of that. | ||
| TC (Houston) (Tec)
Junior Member Username: Tec Post Number: 146 Registered: 2-2002 |
Faisal, I agree with you, that was part of the point I was trying to make. I don't understand why being upside down on a car loan is so bad. If you need to sell the car then you write the check to the bank. | ||
| Taek-Ho Kwon (Stickanddice)
Intermediate Member Username: Stickanddice Post Number: 1706 Registered: 11-2002 |
Faisal, You are absolutely right. Although the mathematics of how much you should be leveraged are quite complex, they certainly apply for both people and companies. Nevertheless, the ways to find both are quite different. Since I ruined my credit in college I buy almost everything with credit cards now. My record will be pretty amazing in about three years. Until then, I'll have to pay the higher interest rates as punishment for being irresponsible. Cheers | ||
| Faisal Khan (Tvrfreak)
Member Username: Tvrfreak Post Number: 635 Registered: 3-2003 |
TC, it's a bad thing because until you part with the money, it can work for you, earning you interest or other returns. Cash management wisdom holds that one should defray payments and incur debt. Of course, this holds only if you can service the debt. Another consideration is the amount of the potential gain. You don't finance a can of tuna because most people can do without the 0.000134 cents it might put in your pocket till the payment comes due. But if you can keep $100k in your pocket for 5 years and use it to earn more than the, say $6k per year, of financing charges that you incur, it could well mean a couple of free mortgage payments or a nice vacation. | ||
| Lucas Taratus (Karmavore)
Member Username: Karmavore Post Number: 291 Registered: 12-2002 |
Just consider the $13,227.20 to be yet another cost of Ferrai ownership. Luke. | ||
| Dom Vitarella (Dom)
Member Username: Dom Post Number: 315 Registered: 11-2002 |
J Haller, You make a good point. However, what you suggest is risky. If someone had done that in 2000, and invested heavily in tech stocks, they would be in a bad place now. My mutual funds are starting to get to the point where I am positive (and actually decent returns)for YTD, but still a loss over the last year or 2. I have debated doing what you suggest for some time now, but just don't have the balls to take that risk yet. Dom | ||
| gary green (Minuke)
Junior Member Username: Minuke Post Number: 58 Registered: 7-2003 |
NOW I'M REALLY CONFUSED! | ||
| TC (Houston) (Tec)
Junior Member Username: Tec Post Number: 145 Registered: 2-2002 |
"So, if you sell the car before the debt is paid in full you will likely owe additional money to boot. Not good." Frank, This is not really true. The car's depreciation may keep up or surpass the paydown on the principal for the first two or three years, but the car does not depreciate to zero. Even if you owe some money when you sell the car, why is that a bad thing? If you had paid cash for the car up front you've still lost the money. | ||
| J Haller (Jh355)
New member Username: Jh355 Post Number: 31 Registered: 6-2003 |
It simply doesn�t make sense to tie up assets (cash) to purchase a car. Interest rates are an all time low 5% to 6% for used car loans. The total amount paid over five years for a $100,000.00 car will be $113,227.20 or $1,887.12 per month assuming no money was use as a down payment. If you can�t earn more than 6% on your money it probably would be wise to save and pay cash. This is predicated on your asset to liabilities ratio and assuming you�re not already overleveraged. My .02 JH | ||
| Taek-Ho Kwon (Stickanddice)
Intermediate Member Username: Stickanddice Post Number: 1694 Registered: 11-2002 |
Martin, >>(No offense Taek)<<  None taken, I guess...what are you refering to? Cheers | ||
| Frank Parker (Parkerfe)
Advanced Member Username: Parkerfe Post Number: 2739 Registered: 9-2001 |
Martin, only if the collateral is worth more than the debt when you sell it., In the case of a house or real estate, that is usually the case. However, with a car, even a Ferrari, the car will likely depreciate faster than you pay down the loan . So, if you sell the car before the debt is paid in full you will likely owe additional money to boot. Not good. | ||
| Martin - Cavallino Motors (Miami348ts)
Senior Member Username: Miami348ts Post Number: 5263 Registered: 5-2001 |
I talked to guys that do leasing on high end cars and their repo rate is less than 3%. Go figure! Even those that do lease these cars pay thier bills, better than those that buy a Honda. (No offense Taek) If you can qualify for financing you can afford the car. Since you are buying a tangible assett you can resell your assett at any point to rid yourself of a financial burden.. I recommend to put money down. I want to see that on all assets you buy be that real estate or cars. Put money down and you can live easy. | ||
| Lucas Taratus (Karmavore)
Member Username: Karmavore Post Number: 289 Registered: 12-2002 |
Ok, so you can buy, at most, a $75K* Ferrari and deduct the interest, Gary. No 'free' Enzos for you! Luke. * $100K (limit) - $25K (Odessey) PS, Thanks TOM! | ||
| TomD (Tifosi)
Advanced Member Username: Tifosi Post Number: 4212 Registered: 9-2001 |
you aked for it, always consult your tax advisor for the latest rules and info - etc etc Home > Forms and Publications Forms and Publications Publication 936 Home Mortgage Interest Deduction For use in preparing 2002 Returns Part II. Limits on Home Mortgage Interest Deduction This part of the publication discusses the limits on deductible home mortgage interest. These limits apply to your home mortgage interest expense if you have a home mortgage that does not fit into any of the three categories listed at the beginning of Part I under Fully deductible interest. Your home mortgage interest deduction is limited to the interest on the part of your home mortgage debt that is not more than your qualified loan limit. This is the part of your home mortgage debt that is grandfathered debt or that is not more than the limits for home acquisition debt and home equity debt. Table 1 can help you figure your qualified loan limit and your deductible home mortgage interest. Home Acquisition Debt Home acquisition debt is a mortgage you took out after October 13, 1987, to buy, build, or substantially improve a qualified home (your main or second home). It also must be secured by that home. If the amount of your mortgage is more than the cost of the home plus the cost of any substantial improvements, only the debt that is not more than the cost of the home plus improvements qualifies as home acquisition debt. The additional debt may qualify as home equity debt (discussed later). Home acquisition debt limit. The total amount you can treat as home acquisition debt at any time on your main home and second home cannot be more than $1 million ($500,000 if married filing separately). This limit is reduced (but not below zero) by the amount of your grandfathered debt (discussed later). Debt over this limit may qualify as home equity debt (also discussed later). Refinanced home acquisition debt. Any secured debt you use to refinance home acquisition debt is treated as home acquisition debt. However, the new debt will qualify as home acquisition debt only up to the amount of the balance of the old mortgage principal just before the refinancing. Any additional debt is not home acquisition debt, but may qualify as home equity debt (discussed later). Mortgage that qualifies later. A mortgage that does not qualify as home acquisition debt because it does not meet all the requirements may qualify at a later time. For example, a debt that you use to buy your home may not qualify as home acquisition debt because it is not secured by the home. However, if the debt is later secured by the home, it may qualify as home acquisition debt after that time. Similarly, a debt that you use to buy property may not qualify because the property is not a qualified home. However, if the property later becomes a qualified home, the debt may qualify after that time. Mortgage treated as used to buy, build, or improve home. A mortgage secured by a qualified home may be treated as home acquisition debt, even if you do not actually use the proceeds to buy, build, or substantially improve the home. This applies in the following situations. You buy your home within 90 days before or after the date you take out the mortgage. The home acquisition debt is limited to the home's cost, plus the cost of any substantial improvements within the limit described below in (2) or (3). (See Example 1.) You build or improve your home and take out the mortgage before the work is completed. The home acquisition debt is limited to the amount of the expenses incurred within 24 months before the date of the mortgage. You build or improve your home and take out the mortgage within 90 days after the work is completed. The home acquisition debt is limited to the amount of the expenses incurred within the period beginning 24 months before the work is completed and ending on the date of the mortgage. (See Example 2.) Example 1. You bought your main home on June 3 for $175,000. You paid for the home with cash you got from the sale of your old home. On July 15, you took out a mortgage of $150,000 secured by your main home. You used the $150,000 to invest in stocks. You can treat the mortgage as taken out to buy your home because you bought the home within 90 days before you took out the mortgage. The entire mortgage qualifies as home acquisition debt because it was not more than the home's cost. Example 2. On January 31, John began building a home on the lot that he owned. He used $45,000 of his personal funds to build the home. The home was completed on October 31. On November 21, John took out a $36,000 mortgage that was secured by the home. The mortgage can be treated as used to build the home because it was taken out within 90 days after the home was completed. The entire mortgage qualifies as home acquisition debt because it was not more than the expenses incurred within the period beginning 24 months before the home was completed. This is illustrated by Figure C. Figure C. John's example Date of the mortgage. The date you take out your mortgage is the day the loan proceeds are disbursed. This is generally the closing date. You can treat the day you apply in writing for your mortgage as the date you take it out. However, this applies only if you receive the loan proceeds within a reasonable time (such as within 30 days) after your application is approved. If a timely application you make is rejected, a reasonable additional time will be allowed to make a new application. Cost of home or improvements. To determine your cost, include amounts paid to acquire any interest in a qualified home or to substantially improve the home. The cost of building or substantially improving a qualified home includes the costs to acquire real property and building materials, fees for architects and design plans, and required building permits. Substantial improvement. An improvement is substantial if it: Adds to the value of your home, Prolongs your home's useful life, or Adapts your home to new uses. Repairs that maintain your home in good condition, such as repainting your home, are not substantial improvements. However, if you paint your home as part of a renovation that substantially improves your qualified home, you can include the painting costs in the cost of the improvements. Acquiring an interest in a home because of a divorce. If you incur debt to acquire the interest of a spouse or former spouse in a home, because of a divorce or legal separation, you can treat that debt as home acquisition debt. Part of home not a qualified home. To figure your home acquisition debt, you must divide the cost of your home and improvements between the part of your home that is a qualified home and any part that is not a qualified home. See Divided use of your home under Qualified Home in Part I. Home Equity Debt If you took out a loan for reasons other than to buy, build, or substantially improve your home, it may qualify as home equity debt. In addition, debt you incurred to buy, build, or substantially improve your home, to the extent it is more than the home acquisition debt limit (discussed earlier), may qualify as home equity debt. Home equity debt is a mortgage you took out after October 13, 1987, that: Does not qualify as home acquisition debt or as grandfathered debt, and Is secured by your qualified home. Example. You bought your home for cash 10 years ago. You did not have a mortgage on your home until last year, when you took out a $20,000 loan, secured by your home, to pay for your daughter's college tuition and your father's medical bills. This loan is home equity debt. Home equity debt limit. There is a limit on the amount of debt that can be treated as home equity debt. The total home equity debt on your main home and second home is limited to the smaller of: $100,000 ($50,000 if married filing separately), or The total of each home's fair market value (FMV) reduced (but not below zero) by the amount of its home acquisition debt and grandfathered debt. Determine the FMV and the outstanding home acquisition and grandfathered debt for each home on the date that the last debt was secured by the home. Example. You own one home that you bought in 1998. Its FMV now is $110,000, and the current balance on your original mortgage (home acquisition debt) is $95,000. Bank M offers you a home mortgage loan of 125% of the FMV of the home less any outstanding mortgages or other liens. To consolidate some of your other debts, you take out a $42,500 home mortgage loan [(125% � $110,000) - $95,000] with Bank M. Your home equity debt is limited to $15,000. This is the smaller of: $100,000, the maximum limit, or $15,000, the amount that the FMV of $110,000 exceeds the amount of home acquisition debt of $95,000. Debt higher than limit. Interest on amounts over the home equity debt limit (such as the interest on $27,500 [$42,500 - $15,000] in the preceding example) generally is treated as personal interest and is not deductible. But if the proceeds of the loan were used for investment, business, or other deductible purposes, the interest may be deductible. If it is, see the Table 1 Instructions for line 13 for an explanation of how to allocate the excess interest. Part of home not a qualified home. To figure the limit on your home equity debt, you must divide the FMV of your home between the part that is a qualified home and any part that is not a qualified home. See Divided use of your home under Qualified Home in Part I. Fair market value (FMV). This is the price at which the home would change hands between you and a buyer, neither having to sell or buy, and both having reasonable knowledge of all relevant facts. Sales of similar homes in your area, on about the same date your last debt was secured by the home, may be helpful in figuring the FMV. Grandfathered Debt If you took out a mortgage on your home before October 14, 1987, or you refinanced such a mortgage, it may qualify as grandfathered debt. To qualify, it must have been secured by your qualified home on October 13, 1987, and at all times after that date. How you used the proceeds does not matter. Grandfathered debt is not limited. All of the interest you paid on grandfathered debt is fully deductible home mortgage interest. However, the amount of your grandfathered debt reduces the $1 million limit for home acquisition debt and the limit based on your home's fair market value for home equity debt. Refinanced grandfathered debt. If you refinanced grandfathered debt after October 13, 1987, for an amount that was not more than the mortgage principal left on the debt, then you still treat it as grandfathered debt. To the extent the new debt is more than that mortgage principal, it is treated as home acquisition or home equity debt, and the mortgage is a mixed-use mortgage (discussed later under Average Mortgage Balance in the Table 1 Instructions). The debt must be secured by the qualified home. You treat grandfathered debt that was refinanced after October 13, 1987, as grandfathered debt only for the term left on the debt that was refinanced. After that, you treat it as home acquisition debt or home equity debt, depending on how you used the proceeds. Exception. If the debt before refinancing was like a balloon note (the principal on the debt was not amortized over the term of the debt), then you treat the refinanced debt as grandfathered debt for the term of the first refinancing. This term cannot be more than 30 years. Example. Chester took out a $200,000 first mortgage on his home in 1985. The mortgage was a five-year balloon note and the entire balance on the note was due in 1990. Chester refinanced the debt in 1990 with a new 20-year mortgage. The refinanced debt is treated as grandfathered debt for its entire term (20 years). Line-of-credit mortgage. If you had a line-of-credit mortgage on October 13, 1987, and borrowed additional amounts against it after that date, then the additional amounts are either home acquisition debt or home equity debt depending on how you used the proceeds. The balance on the mortgage before you borrowed the additional amounts is grandfathered debt. The newly borrowed amounts are not grandfathered debt because the funds were borrowed after October 13, 1987. See Mixed-use mortgages under Average Mortgage Balance in the Table 1 Instructions that follow. | ||
| Ken (Allyn)
Intermediate Member Username: Allyn Post Number: 1065 Registered: 10-2001 |
Odyssey not withstanding, a new (or fine pre-owned) Ferrari parked out front will enhance the value of any house!!! If that's not an improvement over a Ford or Chevy, then what is?? | ||
| Lucas Taratus (Karmavore)
Member Username: Karmavore Post Number: 287 Registered: 12-2002 |
pub 936? Can you post an excerpt? Luke. | ||
| TomD (Tifosi)
Advanced Member Username: Tifosi Post Number: 4211 Registered: 9-2001 |
sorry, check out pub 936 - there are limits and for those making more the 130k, your deductions are limited anyway. | ||
| Taek-Ho Kwon (Stickanddice)
Intermediate Member Username: Stickanddice Post Number: 1688 Registered: 11-2002 |
Geez Tom, You had me sweating bullets for a second there... Cheers | ||
| TomD (Tifosi)
Advanced Member Username: Tifosi Post Number: 4210 Registered: 9-2001 |
I just double check and it appears they have allowed some room to pay for other things with home equity debt and still deduct it. there are limits and of course you cannot take dedcut debt greater than the FMV of your home. sorry for the bad info FWIW, YMMV | ||
| TomD (Tifosi)
Advanced Member Username: Tifosi Post Number: 4209 Registered: 9-2001 |
technically the money should be used for improvments to the house in order for it to be tax deductible, others may disagree with this interpretation but the spirit of the home interest tax dedecution is to make owning a home more affordable and stimulate home buying etc etc. Not to allow tax deductions on financing a car. Otherwise, why are normal auto loans not tax deductible?? that said, this is a strict interpretation and people use it for other things every day and take the deduction - its too hard to trace | ||
| Taek-Ho Kwon (Stickanddice)
Intermediate Member Username: Stickanddice Post Number: 1685 Registered: 11-2002 |
Ken, Good for you. That's exactly the way to do it! I refi'd my other home and got a good amount back. Used it to get another house and to pad the bank account, so to speak. Don't see what's illegal about it either... Cheers | ||
| Ken (Allyn)
Intermediate Member Username: Allyn Post Number: 1063 Registered: 10-2001 |
What's not legal? I refinanced at 5.125 and got $25k cash back. I paid off my Odyssey, but could have done whatever I wanted with that money. | ||
| TomD (Tifosi)
Advanced Member Username: Tifosi Post Number: 4208 Registered: 9-2001 |
I think the strict interpretation is that it could be challenged by the IRS but in reality if you have sufficent equity in your house there is no real chance they will come after you FWIW, YMMV | ||
| Lucas Taratus (Karmavore)
Member Username: Karmavore Post Number: 286 Registered: 12-2002 |
"Hey guys, I can borrow at 5.125% off my house and dduct the interest. How could I not do that rather than pay cash?? I just paid off my Honda that way" ..because no one seems to know for sure if its legal? (I'd love a straight answer on this, btw) Luke. | ||
| BobD (Bobd)
Intermediate Member Username: Bobd Post Number: 1378 Registered: 3-2001 |
Frank, I think you're going to be very busy in your new job. | ||
| Ken (Allyn)
Intermediate Member Username: Allyn Post Number: 1061 Registered: 10-2001 |
Hey guys, I can borrow at 5.125% off my house and dduct the interest. How could I not do that rather than pay cash?? I just paid off my Honda that way. | ||
| TomD (Tifosi)
Advanced Member Username: Tifosi Post Number: 4207 Registered: 9-2001 |
Frank, you are too funny | ||
| Frank Parker (Parkerfe)
Advanced Member Username: Parkerfe Post Number: 2737 Registered: 9-2001 |
I'm back. While I would normally recommend against financing a toy such as a Ferrari, I have recently changed my opinion . The reason for the change is because I want to buy a used 550 in the next year or so. I figure the more people that finance their Ferraris, the more that will be repossessed or sold at a low price by buyers who really couldn't afford them . That will hopefully depress the market and enable me to buy for less. Who said I wasn't flexable ? By the way, I have been hired by lease companies to collect on defaults for repossessed Ferraris due to job loses or other financial problems. | ||
| Michael C. James (Mjames)
New member Username: Mjames Post Number: 42 Registered: 6-2003 |
Yea, I brought this up once and nearly started a war....the general consensus was that if I couldn't pay cash upfront for one, I couldn't afford it. | ||
| Tillman Strahan (Tillman)
Member Username: Tillman Post Number: 805 Registered: 11-2001 |
I used peoplefirst, which is now capital one. Easy transaction. Oh, and don't worry about Frank's eventual response to this thread. Do what makes you happy, you're not here forever. | ||
| Lucas Taratus (Karmavore)
Member Username: Karmavore Post Number: 285 Registered: 12-2002 |
30 minutes have gone by and the thread is holding together.. still no financing jeers... ...can't possibly hang on much longer... Luke. | ||
| Martin - Cavallino Motors (Miami348ts)
Senior Member Username: Miami348ts Post Number: 5254 Registered: 5-2001 |
contact Kim Pemberton at Putnum: 239-649-0018 tell him I sent you, he will take good care of you and make it happen! Old or new! Martin from Cavallino in Miami. | ||
| Barney Guzzo (Trinacria)
Member Username: Trinacria Post Number: 317 Registered: 8-2002 |
You could try: http://www.peoplefirst.com/pff/default_2.cfm?d=1 | ||
| gary green (Minuke)
Junior Member Username: Minuke Post Number: 53 Registered: 7-2003 |
Do you know of any financing company's that will give a loan on a older F-car. |