Tax Discussion
United States — Equity Preservation Mortgage
Regulatory Environment
| Regulator | Consumer Financial Protection Bureau (CFPB) & State regulators |
|---|---|
| Tax Authority | Internal Revenue Service (IRS) |
| Currency | USD |
Tax Overview
| Income Tax | Federal progressive rates 10%–37% plus state income tax |
|---|---|
| Capital Gains | Long-term CGT at 0%/15%/20% (income dependent); NIIT 3.8% surcharge |
| No federal sales tax; state sales tax varies 0%–10.25% | No federal sales tax; state sales tax varies 0%–10.25% |
| Stamp Duty / Transfer Tax | Transfer taxes vary by state and county |
| Reporting Obligations | Annual federal (Form 1040) and state tax returns, 1098/1099 reporting |
Stakeholder Tax Treatment
Homeowner
The EPM annuity income received by the homeowner is structured as mortgage proceeds, not income. In United States, mortgage drawdowns are generally not considered assessable income. The homeowner's property remains in their name and any capital appreciation accrues to their estate. Interest deductibility depends on the use of funds and local tax rules.
Lender
The lender earns interest income on the mortgage, which is assessable income under United States tax law. The lender must comply with reporting obligations to Internal Revenue Service (IRS). Provisioning for credit losses follows applicable accounting standards (IFRS 9 / local GAAP).
Wholesale Funder
Wholesale funders providing capital to the lender earn returns through the funding margin. Income is assessable in their jurisdiction of incorporation. Withholding tax may apply to cross-border interest payments. Transfer pricing rules apply to related-party funding arrangements.
Investment Provider
The investment provider manages the pooled investment portfolio (approximately 70%% S&P 500 ETFs, 30%% fixed income). Investment returns (dividends, interest, capital gains) are subject to fund-level taxation per United States rules. Distribution to the EPM structure follows the payments waterfall. Franking credits (AU), imputation credits (NZ), or foreign tax credits may apply.
Broker / Referral Partner
Commission income earned by brokers is assessable income. Brokers must be licensed under Consumer Financial Protection Bureau (CFPB) & State regulators requirements. Trail commissions are recognised as income when received. GST/VAT treatment depends on the broker's registration status.
Disclaimer
This document is for general information purposes only and does not constitute tax, legal, or financial advice. Tax treatment depends on individual circumstances and may change. All stakeholders should seek independent professional tax advice specific to their situation. Futureproof Financial Group Limited accepts no liability for any reliance placed on this information.