Finance Tax Time

With the recent push by President Bush for alternative fuel strategies, much confusion has arisen regarding tax incentives for hybrid vehicles. This article clarifies the issue for you.

Tax Deductions for Your 2005 Hybrid Automobile

People buy hybrid vehicles for different reason. They are good for the environment. They get much better mileage, which saves money. There are tax incentives for buying them. With the recent energy plan put in place by the federal government, there is a lot of confusion regarding the tax incentives.

Specifically, the question for most people is whether they can claim a tax deduction or a tax credit when they buy a hybrid. Here is the breakdown:

The Good - If you purchased a hybrid vehicle in 2005, you can claim a tax deduction.

The Bad - If you purchased a hybrid vehicle in 2005, you cannot claim a tax credit.

The Ugly - If you had waited till 2006, you could have claimed a tax credit.

Tax credits save you a lot more money than tax deductions. Tax deductions are applied to your gross income like any other deduction. This helps lower your tax bill, but tax credits are much more powerful. Tax credits are not taken out of your gross income. Instead, tax credits are taken out of the exact amount of tax you owe the government. If you owe the government $10,000 after filling out your tax return and can claim a $2,000 tax credit, your final tax bill is $8,000.

You are stuck with a tax deduction tax deduction if you purchased a hybrid in 2005, but at least it is a nice one. The deduction amount is $2,000 for vehicles certified by the IRS. They include:

Ford Escape Hybrid: Model Year 2006

Mercury Mariner Hybrid: Model Year 2006

Lexus RX 400h: Model Year 2006

Ford Escape Hybrid: Model Year 2005

Toyota Prius: Model Years 2001 through 2006

Toyota Highlander Hybrid: Model Year 2006

Honda Insight: Model Years 2000 through 2005

Honda Civic Hybrid: Model Years 2003 and 2005

Honda Accord Hybrid: Model Year 2005

To claim this deduction, you must have purchased a NEW hybrid. If the hybrid was used, you get nothing. Assuming it was new, the deduction is claimed on line 36 of the 1040 form. Make sure to write Clean Fuel in the space provided.

Richard A. Chapo is with BusinessTaxRecovery.com - providing information on tax and taxes. Visit us to read more tax articles and our new tax credits page.

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In modern America, it is rare to find a person or family living in the same place for thirty years. Most of us move five or ten times, which means taxes become an issue.

Moving To A New Location - Tax Information

I hate moving. Absolutely loathe it. I am sure you do as well. Nonetheless, you, me and everyone seem to move all the time. Whether we are buying and selling real estate or just getting a new start in a new location, there are lots of little things we have to get in order. While utilities and cable are first on the list of things to handle, most people fail to pay close attention to tax issues and miss out on some juicy deductions.

If you are moving, you are inevitably going to dish out some cash for movers, a truck, boxes, gas, hospital visits, aspirin, more aspirin and so on. Fortunately, these expenses may be deductible on your next tax return. There are three tests you have to meet.

Initially, you have to be starting work at a new job location. Many misunderstand this requirement to mean that you have to already have a job when you move and that is the reason for the move. This is incorrect. You must simply find a new job once you have moved.

The second requirement deals with timing issues. Assuming you are going to start a new job, you must actually start within a prescribed time. This time period is a year from the date of the move. This should be relatively easy to comply with as the lack of a new job within a year probably will mean you have returned to your old job and location.

The third test is known as the distance test. The IRS calls this the closely related in place test. Essentially, you have to be able to show the distance from your new residence to your new job is smaller than the distance from your previous residence to the new job. Your new job location must also be at least 50 miles from your old one. This should be pretty simple for most people to show. If you can’t meet this test, you can get around it by claiming the commute is easier and cheaper than your old one.

If you meet these tests, you can claim some nice deductions. They include travel expenses and all moving expenses reasonably related to the move including 30 days of storage. Sorry, but you don’t get to deduct hotel stays and food. Regardless, you can claim the deductions on form 3903. Just attach it to your 1040 when you file.

Richard A. Chapo is with BusinessTaxRecovery.com - providing information on taxes. Visit us to read more about tax deductions.

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One of the advantages of working for yourself is you can write off a lot of different expenses to lower your taxable earnings. One deduction that is very popular is business mileage. Any mileage you undertake for business purposes can be converted into a very healthy tax deduction.

The IRS changes the rate at which you can deduct business mileage each and every year. The change has almost always been fairly small. The last few years, however, have seen some sizeable increases. The gas shortages associated with Hurricane Katrina [damaged refineries] and subsequent high oil prices have both had a big impact. In fact, the rates have increased more in the last two years than they did in the previous eight years combined.

Starting January 1, 2007, the rate for calculating your business mileage deduction goes up to a healthy 48.5 cents. To figure your deduction, you simply multiple this figure by the total business miles you drive in 2007. For example, if you drive 2,000 miles on business in 2007, your deduction would be 2,000 multiplied by 48.5 cents for a total write off of $970. Might it be time to start visiting your clients more often?!

It is important to understand that this deduction is for the 2007 tax year. When you site down to prepare your taxes on April 14, 2007 [lol], you will not use this figure. Instead, you will have to wait until April 14, 2008 when you prepare your taxes for the 2007 year. By the way, the mileage rate for 2006 is 44.5 cents per mile.

As you know by now, the key to limiting the pain of your tax bill is to maximize your deduction. With the business mileage deduction, you can get a very health write off. Just make sure to document your miles in case you get audited.

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