PDA

View Full Version : Legal Income, Finance, Tax Question



Arizona Bay
05-06-2018, 10:29 AM
Hopefully a simple one.

99% er problems :D

K's x got her into huge income tax debt, and that fix is still playing out. She needed a car has, good income, but prolly, negative credit ;), at this point. So I got one financed in my name, while she makes all the payments, and now I need another car. The loan on the first one scews my debt/ income ratio to make financing pretty close.
How do I account for the money that I'm not actually paying on the first car, even though I have the debt for it? Is that income?

brad9798
05-06-2018, 10:37 AM
Tread lightly around this one ... as a dealership owner, I can tell you that how you purchased the vehicle is TECHNICALLY illegal ... it's know as a STRAW PURCHASE.

Do not let the bank/lender know about this ...

You can list the income for this as 'other' income on a credit application. If you have good/very good/great credit, you'll still get the loan ... but more than likely at a HIGHER interest rate.

That being said ... IF you have a STRONG relationship with your bank/credit union, then you should certainly be able to get done.

Arizona Bay
05-06-2018, 10:55 AM
That's not good! :D I do have some money in it at the down payment, and it started as us sharing the payments, so maybe it's fuzzy enough.

My credit union is good, but doesn't like older used cars, there is another I've worked with though.
Thanks, I'll add it as other income.
Living on the financial edge is a skill ;)

Todd D
05-06-2018, 02:30 PM
Don't forget to list it as income for your taxes. Also, since the car is likely in your name you will have to sell or gift it to her when it is paid off. Be careful about the value of the car if you gift it since too high a value will have tax implications for both of you.

Tom Wilkinson
05-06-2018, 02:36 PM
Don't forget to list it as income for your taxes. Also, since the car is likely in your name you will have to sell or gift it to her when it is paid off. Be careful about the value of the car if you gift it since too high a value will have tax implications for both of you.

Can't she gift him up to 14k a year in cash. Wouldn't that negate the need to claim it as income?

Norman Bernstein
05-06-2018, 02:41 PM
I'm certainly no lawyer... but I don't believe that you need to list the money as income. Presuming it's less that $15K per year, anyone can 'gift' up to that amount, to anyone else, free of tax implications... so there's no federal (and probably, no state) implications.

Of course, if you want to claim it as income in order to obtain yet another car loan (by listing it on a loan application), you do suffer some possible jeopardy.... as Brad pointed out, you have made a straw purchase, so any knowledge of that would surely wreck your credit. How would you explain, if asked, why you are receiving this income?

I certainly DO hope that the car she is driving is properly insured, and that the insurance lists her as a regular driver... you really don't need insurance fraud, on your record, as well.

Breakaway
05-06-2018, 02:46 PM
The catch is if it's not income,then a lender can't use it to help you get a loan.

If it IS income, than you have to pay taxes.

Its the conundrum anyone who has worked for cash will be familiar with.

Kevin


Sent from my iPhone using Tapatalk Pro

bluedog225
05-06-2018, 03:06 PM
I can't tell where you are. And I'm not your lawyer. And this is not legal advice.

Can she pay the payments directly to the lender? That may keep it off of your books. Then talk to a CPA about gift taxation. Because after all is said and done, you may gift the car to her. And you need a CPA anyway.

Phil Y
05-06-2018, 05:16 PM
Buy a cheap car for cash. Run it until the loan on her car is paid off. Or longer. Save the planet.

Too Little Time
05-06-2018, 05:23 PM
Hopefully a simple one.

99% er problems :D

K's x got her into huge income tax debt, and that fix is still playing out. She needed a car has, good income, but prolly, negative credit ;), at this point. So I got one financed in my name, while she makes all the payments, and now I need another car. The loan on the first one scews my debt/ income ratio to make financing pretty close.
How do I account for the money that I'm not actually paying on the first car, even though I have the debt for it? Is that income?
It does not appear you did anything wrong. The bank loaned you money to buy a car. You did so. You have some sort of agreement - a verbal contract, to sell the car to the a third party. That seems to be legal.

The money does not appear to be income. You loaned money to the car buyer. She pays you. You pay the bank. It is a wash. That characterization of the situation might make getting a loan for another easier.

Additional paperwork might make things easier but what do I know.

Arizona Bay
05-06-2018, 06:15 PM
It's just the way of things, nothing illegal intended, good insurance, proper rego and all that... she has the income I have the credit, we do the bills the same way, the one that can, does. These are relatively small amounts on what for most of y'all are cheap cars. At the edge, $300/mon income adjustment, makes a difference in loan rates.

Think I'm not going to add it in unless they say it matters.

Arizona Bay
05-06-2018, 06:24 PM
Buy a cheap car for cash. Run it until the loan on her car is paid off. Or longer. Save the planet.

I've got one of those, but there's an unexpected health concern that's come up, and driving a convertible to work across the desert in summer, isn't going to do it this time.
It may be time for a total change... retirement is coming :D