Finance Tax Time

The Internal Revenue Service has certified the 2006 Toyota Highlander Hybrid as being eligible for the clean-burning fuel deduction. This certification means that taxpayers who purchase one of these hybrid vehicles new during calendar year 2005 may claim a tax deduction of up to $2000 on Form 1040.

Under Working Families Relief Act of 2004, which was signed into law in October of 2004, the clean-burning fuel deduction is limited to up to $2,000 for certified vehicles first put into service in 2005 and $500 for vehicles placed in service in 2006. No deduction will be allowed after 2006.

Federal Law allows individuals to claim a deduction for the incremental cost of buying a motor vehicle that is propelled by a clean-burning fuel. By combining an electric motor with a gasoline-powered engine, these hybrid vehicles obtain greater fuel efficiency and produce fewer emissions than similar vehicles powered solely by conventional gasoline-powered engines.

This one-time deduction must be taken in the year the vehicle is originally used. The taxpayer must be the original owner. Individuals do not have to itemize deductions on their tax return to claim this deduction. This benefit can be taken as an adjustment to income on the Form 1040.

The amount of the deduction for the Toyota Highlander Hybrid was set after the manufacturer, Toyota Motor Sales, U.S.A., Inc. documented for the IRS the incremental cost related to the vehicle’s electric motor and related equipment.

A $2,000 tax deduction? I’m off to my local Toyota dealer!

Richard A. Chapo is with http://www.businesstaxrecovery.com - recovery of business taxes through tax help and tax relief. Visit http://www.businesstaxrecovery.com/articles to read more business tax articles.

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There are two types of government tax sales used in the United States: one is tax deed sales and another is tax lien certificates. These certificates are issued against delinquent taxpayers who have not complied to pay their property taxes. A tax lien certificate has a face value of taxes owed along with administrative fees and interest.

At times, the government auctions tax lien certificates. All 50 states of US have different laws pertaining to this subject, and sometimes you may find that the procedures differ per county. Therefore, depending where the tax lien certificate is being auctioned, it can either be sold at that face value or it can be bidded upon. Some states also allow tax lien certificates to be bid on by interest rate. In this case, the person who agrees upon the lowest rate of interest on the tax lien certificate is announced as the winning bidder.

Once the tax lien certificate is sold, the delinquent taxpayer is required to pay back the amount of the lien plus interest accrued, typically 16-18%, back to the owner of the tax lien certificate. In case the delinquent taxpayers fails to repay within the required period of time as assigned by the court or the governing authority, the tax lien certificate holder is awarded a deed to the property.

To explain this in simple words, when you purchase tax lien certificates, you are guaranteed a fixed return on your investment. Depending on the state from where you purchase the certificate, the earnings may perhaps be as high as 50%. Even if you get paid less than 50%, your investment is protected with the actual property.

With tax lien certificates, the holder must make the required payment on the property tax payment for the property owner. And in turn, the property owner would pay the holder the agreed amount of taxes and the penalties so accrued. Thus, all you have to gain is a high yield percentage of interest or the possibility of a deed to that property.

Tax Liens provides detailed information about tax liens, government tax liens, tax lien auctions, and more. Tax Liens is affiliated with Tax Attorneys In California.

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Internal Revenue Service (IRS) allows the deduction of the discount points on your income tax return. Discount points which are one of the most important tax deductions to homebuyers are paid upfront to reduce the mortgage payment.

Calculate the Discount Points

Each point equals one percent of the principal. For example, a 2 discount points on $150,000 mortgage comes to $3,000 ($150,000 x 0.02). The Closing Statements shows how much is your discount points. If you do not see discount points, have no fear. Discount points are also called Loan Origination Fees, Maximum Loan Charges, or Loan Discount.

First Time Homebuyer Discount Points

For a first time buyer, IRS allows to claim the full amount of discount points on the year paid. For example, Joe bought his first home on 2005. In his closing statement, the discount points come to $3,000. Joe claims the full amount on Schedule A of his income tax return.

Discount Points on refinance without home improvement

The homeowners claim the full amount of discount points, when the homeowners refinance towards the improvement of the home. Without the home improvement, the homeowners claim the discount points over the life of the mortgage. For example, Joe refinances his home with a lower interest rate on a 25 year mortgage. The closing statement shows $3000 discount points. Joe claims $120 per year ($3,000 / 25 year mortgage).

Discount Points on refinance with home improvement

The discount points which are paid to improve the home is fully tax deductible on the year paid. The rest are claim over the life of the loan. For example, Joe refinances his home to add a swimming pool on a 25 year mortgage. He paid $20,000 to add a swimming pool. The total mortgage comes to $150,000. The closing statement states $3,000 discount points. Joe claims $400 ($20,000 swimming pool / $150,000 principal x $3,000) + $104 per year ([$3,000 discount points - $400 discount points of swimming pool] / 25 year mortgage).

If the homeowner has an outstanding discount points to claim, the homeowner claims the outstanding discount points on the year of refinance. For example, Joe has $2,000 discount points which are not claimed yet. Joe claims a total of $2,504 ($2,000 outstanding discount points + $400 swimming pool discount points + $104 per year discount points).

IRS yearly update

This article may or not contain the most current tax regulations, and laws. You may want to consider checking with your trusted Tax Advisor or IRS.

Dennis Estrada is a webmaster of mortgage calculators website which calculate the monthly payment, bi-weekly payment, affordability, refinance, annual percentage rate, discount points, and more.

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