New Vehicle Sales and Excise Tax Deductions
Q: I purchased a new car in 2009. Can I deduct the sales tax on 2009 tax return?
A: The IRS wants you to know the followings.
| Price limit of the car | $49,500 |
| Qualified vehicles | New cars, light trucks, motor homes, and motorcycles |
| Weight limit | 8,500 pounds or less; motor homes are not subject to the weight limit |
| Date of purchase | Feb. 17, 2009 through Dec. 31, 2009 |
| Tax return | 2009 return; this deduction can be taken whichever the buyers choose itemize deductions or the standard deduction |
| Income phase-out | $125,000 - $135,000 (single) $250,000 - $260,000 (joint) |
American Opportunity Credit
Q: I heard that Hope Credit is now called American Opportunity Credit. What changed, except the name?
A: This credit is the enhanced version of Hope Credit for 2009 and 2010 as shown below.
| Credit amount | 100% of the first $2,000 spent and 25% of the next $2,000 spent per student; Full credit is $2,500 |
| Income limit for full credit | $80,000 (single) $160,000 (joint) |
| Refundable portion | 40% of credit is refundable |
| College years | Any of the first 4 years |
| Qualified expense | Tuition, related fees, books, and other required course materials |
Used Car Donation
Q: I donated my car to a qualified charity. What the rule of tax deduction?
A: What you need for deduction depends on the amount of deduction you claim. Please see below.
| Deduction amount | Up to $500 |
| Document needed | Acknowledgment from charity |
| Information includes | Name of charity; Date and location of contribution; Description of vehicle donated; Whether any goods or services rendered by the charity and those value if any |
| Deduction amount | More than $500 |
| Document needed | Acknowledgment from charity |
| Information includes | Form 1098-C from the charity; This form shows all the required information the charity to complete |
A Newborn Baby's Social Security Number
Q: My daughter was born at the end of the year. We are still waiting for a social security number. Can I file my tax return and later supply the social security number for her?
A: If you file your return claiming your daughter as a dependent and do not provide her social security number on the return, the dependency exemption will be disallowed. You have two options. You could file your income tax return without claiming your daughter as a dependent. After you receive her social security number, you could then amend your return. You have three years from the later of the due date of the return or from the date the return was filed to amend the return.
The other way is to file an extension to file your tax return. This would give you an additional six months to file your return; by then you should have your daughter's social security number.
Paying Tax by Extension Due Date
Q: Do I still have to send in any money at filing for an extension, or can I pay taxes by the extension due date?
A: If you need an extension of time to file your tax return, you need to estimate how much tax you'll owe, and include that payment with your Form 4868 (Application for Automatic Extension of Time to File for U.S. Individual Income Tax Returns). The extension does not give you more time to pay the tax you owe; it is only an extension of time to file your return. If you owe an additional amount of tax when you file your return, you will be charged interest on the unpaid balance from the original due date of the return. You will also be charged a late payment penalty if the amount you owe is more than 10% of your actual tax liability.e homowners buying a replacement pricipal residence.
Home Office and Its Depreciation
Q: Can I deduct Home Office Expenses without deducting depreciation so that when I sell my house, the basis won't be affected?
A: If you have qualified business use of your home, you are required to reduce your basis in the home by the amount of depreciation allowed or allowable. Therefore, you should take depreciation deduction.
Computer Cost for Online Day Trading
Q: I purchased a computer last year to do online day trading from home for additional income. Can I deduct or depreciate the cost of the computer or Internet connection from my investment income?
A: You may deduct investment expenses (other than interest expenses) as miscellaneous itemized deductions on Form 1040, Schedule A. This would included depreciation on the portion of your computer used for investment purposes, and the portion of your Internet access charges used for investment purposes. However, you cannot claim Section 179 expensing of the computer since it is not a business asset.
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