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?
Question 1. What are the different tax consequences between paying down the mortgage (debt) and assuming a new mortgage (debt) for Federal income tax purposes?
Question 2. Does Jane have a business or hobby? Why is this distinction important?
Question 3. Would Jane realize better tax benefits if she had a separate business for her jewelry making activities?
Question 4. Can Jane depreciate her vehicle or jewelry making equipment? How?