Dollars & Sense
TAX TIP: tax credits and expenses
Question: My family is expanding and home prices and mortgage interest rates are low. The special $8000 tax credit for buying a home is due to expire December 1, 2009. Is this a good time to buy?
Answer: We ARE NOT about to recommend to anyone to buy a house. That said we will list certain points for your consideration and we can help guide you.
If the home is for your residence and not for an investment, consider it. You should be planning to be in the home at least 5 to 10 years. Financing a home now MAY yield you the lowest rates we will see in our lifetime. After your down payment you should have enough cash on hand so that if you should lose your job you can sustain yourself 6 months to 3 years. If this is your first house or you did not own a primary residence in the past three years, you can receive up to an $8000 (10% of the purchase price with a maximum of $8000) credit on your tax returns (2008 or 2009) if you buy before December 1, 2009. (THIS MAY BE EXTENDED). Evaluate how much lower homes can go versus the potential value five to ten years from now. Once a bottom has been established do not expect a sudden increase in prices.
REMEMBER-we are not recommending you buy a home (that is not our business). We are attempting to put forth the tools you may need in making your own evaluation since so many of our clients have asked.
Question: I'm a company driver but I don't know what expenses are deductible?
Answer: While self-employed truckers can deduct most expenses incurred to earn their income, a company driver is limited to expenses necessary or required to perform his job. He or she can deduct per diem and motel, laundry and uniforms, gloves, logbooks, maps, cell phone, CB, tools or any expenses incurred that are necessary. You must reduce the expense deduction of the above items if you were reimbursed for any expenses claimed. You also have to be aware if any part of the reimbursement was included in your W-2 income. The above expenses are shown on your tax return as itemized deductions and cannot be claimed if you take the standard deduction. If questioned by the IRS they may request a letter from your employer stating you had to incur the expenses that you claimed.
Question: I am an over the road trucker. Do I need to save all my food receipts?
Answer: As an over the road trucker you may deduct your actual cost for meals with receipts or deduct the IRS per diem allowance using your logbooks as substantiation 80% percent of your total is deductible regardless of which method you choose. This is also true for company drivers. Corporate shareholders are not entitled to use per diem and must use actual costs.
You may have overpaid your taxes by failing to itemize!
A new study finds that as many as 2.2 million filers could have cut their tax bills by claiming itemized deductions (for items such as mortgage interest, property taxes, state and local taxes, and charitable contributions). But they, or their preparers, failed to do so and used the simpler standard deduction instead. Their overpayments may have totaled almost $1 billion.
If you didnâ€™t itemize on your return within the last three years, check to see if the total itemized deductions you could have claimed exceeded the standard deduction. If so, you can file an amended income tax return to take your extra deductions now â€“ and get a tax refund.
This article has been presented by PBS Tax & Bookkeeping Services, a company that has been providing income tax and bookkeeping services to the trucking industry for over a quarter century. If you would like further information, please contact us at 800-697-5153. See our website at www.pbstax.com.
Please remember everyoneâ€™s financial situation is different. This article does not give and is not intended to give specific accounting and/or tax advice. Please consult with your own tax or accounting professional.