Sold my house and want to pay off business line of credit with proceeds. How would I show in account
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There was a profit on the sale of my house, so I thought I'd use it to pay off my business line of credit. I don't know how to show this properly in my accounting software. Is this 'owner's investment'? Will I have to pay income tax on it if I do this? Can I set it up as a loan to the company and then pay it back with payments?
Any help appreciated!
Sold my house and want to pay off business line of credit with proceeds. How would I show in accounting?Show this as an "owner loan". This is money that business borrows from its owner (you). Book this just like you would any other loan as a liability that the business pays back to you plus interest. (In essence you are replacing the bank).
There are no taxes to the business on the cash deposit/loan into the business. There is no tax deduction to you personally either when you make the deposit/loan.
The business pays off the principle over time (not deductble nor taxable) and the business pays interest (deductible to the company and taxable to you).
If you have a taxable gain on the sale of the house, make sure you pay the taxes due in your quarterly deposit. But you likely get to avoid taxes on $250 k of gain if single and $500 k if filing joint return. Make sure this is the case with your CPA.
Hope this helps,
Dana B.
www.thebarfieldgroup.com
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