Tax Tips

Cash For Clunkers

Liberty Tax — Mon, 27 Jul 2009 16:00:33 GMT

Current revision posted to Tax Tips by Liberty Tax on 7/27/2009 12:00:33 PM

“CASH FOR CLUNKERS” IS THE LATEST BREAK FOR NEW VEHICLE PURCHASES IN 2009

In the market for a new car, and ready to give up your “clunker?” New car buyers may qualify for a $3,500-$4,500 cash voucher for trading in their “clunkers” for more fuel-efficient models this year. Liberty Tax Service reminds you that this new CARS Car Allowance Rebate System” incentive is in effect until November 1, 2009, or until the funding is depleted. Participating car dealers will apply the credit to qualifying new car purchases at the time of the purchase. Here are some conditions that must be met in order to qualify:

The trade-in vehicle must be under 25 years old, working, and have an average gas mileage of 18 miles per gallon or less. It must be owned and insured by the same person for the past year.
To qualify for a $3,500 credit, the buyer must purchase either a new passenger car getting at least 4 more miles per gallon, a new small truck getting at least 2 more miles per gallon, or a new large truck weighing 6,000-8,500 pounds getting at least 1 more mile per gallon. The new passenger vehicle must have new mile per gallon requirement of 22 miles, a small truck 18 miles per gallon, and a large light-duty truck 15 miles per gallon.
To qualify for a $4,500 credit, the buyer must purchase either a new passenger car getting at least 10 more miles per gallon, a new small truck getting at least 5 more miles per gallon, or a new large truck weighing 6,000-8,500 pounds getting at least 2 more miles per gallon.

The CARS Act requires that the trade-in vehicle be crushed so that it will not be resold for use in the United States or elsewhere as an automobile. The credit amount is not considered as taxable income. Under the CARS Act, you may purchase a new vehicle or lease a new vehicle, provided the lease period for the new vehicle is at least five years.
Participating car dealers will apply the credit to qualifying new car purchases at the time of the purchase.

New car buyers may also benefit from deducting state and local sales taxes and excise taxes for new car purchases whether they itemize or not. There are additional benefits for buying some hybrid models.

A Sales Tax Deduction for Buying a Car

Car buyers will be able to deduct the state and local sales and excise taxes they pay on new cars, light trucks, recreational vehicles and motorcycles through 2009, but not the interest on their car loans.

Hybrid Vehicles Tax Break

The IRS still allows a tax credit for purchasing some hybrid cars. The allowable credit amount is subtracted from the amount of federal taxes owed. A full or partial credit amount may be available, depending on the number of hybrid vehicles sold by the manufacturer. A hybrid vehicle is one that combines an electric motor with a gasoline-powered engine. The vehicle must be purchased for your use, and you must be the original owner.

Day camp tax break

Liberty Tax — Mon, 29 Jun 2009 19:12:54 GMT

Current revision posted to Tax Tips by Liberty Tax on 6/29/2009 3:12:54 PM

Q: Can I deduct the cost of my child’s camp as child care expenses?

A tax break for day camp for children under 13 may be deductible as child care expenses. There’s no break for overnight camps where children are away from home. The credit is for up to 35% of qualified child and dependent care expenses paid. It’s available for taxpayers who pay childcare in order to go to work, or look for work. Qualified expenses may be allowed for up to $3,000 for one eligible individual ($6,000 for two or more). This applies for those parents claiming a qualified dependent, filing a Form 1040 or Form 1040A, and having earned income during the year. The camp would be considered the care provider and its name, address and taxpayer identification number must be identified on Form 2441.

Tax Break for New Car Purchases in Every State

Liberty Tax — Mon, 15 Jun 2009 15:46:53 GMT

Current revision posted to Tax Tips by Liberty Tax on 6/15/2009 11:46:53 AM

Car shopping this year? There are now tax breaks for new car purchases in every state, and taxpayers don’t have to itemize to take advantage. The economic stimulus package put into place by the American Recovery and Reinvestment Act of 2009 provided a deduction for state or local sales or excise taxes paid on a new car. Those taxpayers living in the states without a state sales tax were originally excluded from a tax break, but that has now changed.

The Internal Revenue Service and Treasury Department today announced that a tax break for the purchase of new motor vehicles is available in states that do not have a state sales tax. Under the American Recovery and Reinvestment Act of 2009, taxpayers who buy a new motor vehicle this year are entitled to deduct state or local sales or excise taxes paid on the purchase.

The IRS and Treasury have determined that purchases made in states without a sales tax – such as Alaska, Delaware, Hawaii, Montana, New Hampshire and Oregon – can also qualify for the deduction.

The IRS said today that taxpayers who purchase a new motor vehicle in states that do not have state sales taxes are entitled to deduct other fees or taxes imposed by the state or local government. The fees or taxes that qualify must be assessed on the purchase of the vehicle and must be based on the vehicle’s sales price or as a per unit fee. According to the IRS, Congress intended for these fees or taxes to qualify for this special tax deduction.

“This special tax break is available for people purchasing a new car this year, and that can include people in states without a sales tax,” said IRS Commissioner Doug Shulman. “This means that more people can take advantage of this deduction when they file their tax returns next year.”

Other Conditions:

Eligible Dates: This offer is only good for vehicles after Feb. 16, 2009, and before Jan. 1, 2010.

Limited Price Deduction: The deduction is limited to the fees or taxes paid on up to $49,500 of the purchase price of a qualified new car, light truck, motor home or motorcycle.

Phase-out Income Qualifying Levels: Between $125,000 and $135,000 for individual filers, and between $250,000 and $260,000 for joint filers.

For Itemizers and Nonitemizers: Taxpayers who do not itemize can add this additional amount to their standard deduction.

Are you cheating yourself out of valuable deductible charitable contributions?

Liberty Tax — Wed, 27 May 2009 19:39:48 GMT

Current revision posted to Tax Tips by Liberty Tax on 5/27/2009 3:39:48 PM

Are you cheating yourself out of valuable deductible charitable contributions? Maybe you are underestimating the value of items you give away, or not hanging onto those receipts.
Even some mileage to and from charitable events may be deductible.
Here are a few things to keep in mind for declaring charitable deductions:

Keep better records: The charitable contribution will be disallowed for any monetary contributions unless the donor maintains a record of the contribution. This now applies to any contribution of money, regardless of the amount. Be sure that you have bank records, cancelled checks or written acknowledgements for all cash contributions that show the name of the charitable organization, the date and the amount of the contribution. For monetary donations or items over $250 in a single donation, the IRS requires an additional written acknowledgement from the organization. Taxpayers claiming over $500 for all contributed property must complete and file Form 8283, Noncash Charitable Contributions.

Hold onto your pledge cards: Taxpayers who have had charitable contributions deducted from their paychecks are required to hold onto their pledge cards from the charity, pay stubs, and their Form W-2 or other employer information that states the total amount of donation. Be sure that you have bank records, cancelled checks or written acknowledgements for all cash contributions that show the name of the charitable organization, the date and the amount of the contribution.

How to figure out what donated items are worth: When declaring the value of donated clothing or items for tax purposes, determine the fair market value. This can be the price the item might sell for at a garage sale or thrift store. IRS Publication 561 Determining the Value of Donated Property is a good source to use.

Be sure the charity is recognized as legitimate by the IRS: Check that your donations are made to a charity or non-profit organization that the IRS considers legitimate. Approved non-profits include those whose focus is religious, charitable, educational, literacy, preventing cruelty to children and animals, or serving military veterans. IRS Publication 78 lists all approved organizations. You cannot deduct the value of your time, but if you’re a volunteer, you can deduct your out-of-pocket expenses and volunteer mileage.

Charitable mileage: Charitable mileage is deductible at 14 cents per mile. If you volunteer for a charitable or non-profit organization, your mileage is deductible to and from meetings and functions.

Driving That’s Tax Deductible: Keep Track of Your Mileage

Liberty Tax — Wed, 27 May 2009 19:26:22 GMT

Current revision posted to Tax Tips by Liberty Tax on 5/27/2009 3:26:22 PM

Driving That’s Tax Deductible: Keep Track of Your Mileage

Filed under: mileage tax deductible, business mileage, medical or moving mileage, charitable mileage

With gas prices headed up again, it makes even more sense to be sure you’re taking advantage of all tax deductible mileage advantages. The miles you drive for some business, medical, charitable, moving, and educational purposes are deductible. Good recordkeeping practices are required to document your deductible mileage, and separate it from commuting and personal mileage. Be sure to document this mileage by keeping a log or other written record. The IRS has released these mileage deductions for 2009: <o:p></o:p>

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Business mileage: 55 cents per mile. Students who are taking courses that are required by their employer, or are work-related, may also deduct this mileage at the business mileage rate.

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Medical or moving mileage: 24 cents per mile. The deductible amount for mileage during a move and for medical mileage is 24 cents per mile. Medical miles can be claimed for miles driven to and from the doctor or dentist, and to and from a pharmacy to pick up a prescription.

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Charitable mileage: stays at 14 cents per mile: If you volunteer for a charitable or non-profit organization, your mileage is deductible to and from meetings and functions.

Driving That’s Tax Deductible: Keep Track of Your Mileage

Liberty Tax — Wed, 27 May 2009 19:25:26 GMT
Revision 1 posted to Tax Tips by Liberty Tax on 5/27/2009 3:25:26 PM

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With gas prices headed up again, it makes even more sense to be sure you’re taking advantage of all tax deductible mileage advantages. The miles you drive for some business, medical, charitable, moving, and educational purposes are deductible. Good recordkeeping practices are required to document your deductible mileage, and separate it from commuting and personal mileage. Be sure to document this mileage by keeping a log or other written record. The IRS has released these mileage deductions for 2009: <o:p></o:p>

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Business mileage: 55 cents per mile. Students who are taking courses that are required by their employer, or are work-related, may also deduct this mileage at the business mileage rate.

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Medical or moving mileage: 24 cents per mile. The deductible amount for mileage during a move and for medical mileage is 24 cents per mile. Medical miles can be claimed for miles driven to and from the doctor or dentist, and to and from a pharmacy to pick up a prescription.

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Charitable mileage: stays at 14 cents per mile: If you volunteer for a charitable or non-profit organization, your mileage is deductible to and from meetings and functions.