Question

Your organization is opening a new branch 150 kilometres north of the head office location and is anxious to attract skilled employees from the head office location to the new facility. In an attempt to attract interest, employees willing to permanently transfer to the new location are being offered a home purchase loan to assist with the costs of the move. The General Manager has asked you to prepare a memo explaining the the taxable benefit that could arise when employee takes advantage of this offer.

Answer 1

To: All Company Employees

From: General Manager

Date:01/18/209

RE: Taxable benefit on Home purchase Loan

This is to inform that the organization is opening a new branch 150 kilometres north of the head office location. Employees willing to permanently transfer to the new location are being offered a home purchase loan to assist with the costs of the move.

The details of the taxable benefits that could arise on taking advantage of this offer is explained below.

On the Original balance for your mortgage, Taxpayers can deduct the interest paid on first and second mortgages up to $1,000,000 in mortgage debt (the limit is$500,000 if married and filing separately). Any interest paid on first or second mortgages over this amount is not tax deductible.

In case of two qualified homes the IRS limits the number of homes eligible for the deduction to your main home that you principally reside in plus one other home that you own. The tax law does not grant you discretion in choosing which residence to treat as the main home. This must always be the place where you ordinarily live for a majority of the year.

However, you can choose any second home to qualify for the deduction. Whichever second home you choose is only binding for the current tax year. Next year, you can deduct the mortgage interest on a different second home if it provides greater tax savings.

Reporting the deduction

Mortgage interest deductions are only available to taxpayers who itemize deductions on a Schedule A attachment to their Form 1040.

Steps the employee must take

The employees interested must complete and sign the documents which they will receive shortly in an email from the Human resource department.

The company values your contributions and will continue to monitor the options in an attempt to provide the most effective benefits package.