Advertisement
Believe it or not, you actually can ring up tax savings as the result of buying things. Familiarize yourself with what is and what is not deductible when it comes to the things you own.
And be sure to check out our other taxopedias.
What's Deductible? -- A to Z
Aircraft. You can deduct either the state and local income taxes you paid in 2008 or the state and local sales taxes -- whichever gives you the biggest tax break. If you live in a state with no income tax, it’s a no brainer: deduct your sales taxes. But even if you live in a state with an income tax, if you bought an airplane during the year, the sales tax deduction might trump the income tax write-off. The IRS publishes tables to estimate how much sales tax you paid and you can add sales tax on the plane to the table amount. If the sales tax rate on the airplane is higher than the general sales tax rate, you can only deduct the amount of tax due at the general sales tax rate.
Appraisal fees for casualty and theft losses. Deduct appraisal fees paid to determine the amount of a casualty loss as a miscellaneous itemized deduction.
Boats. As with airplanes, if you bought a boat in 2008, you can add the sales tax paid to the IRS table amount in deciding whether to deduct income or sales taxes on your 2008 federal return. If the sales tax rate on the boat is higher than the general sales tax rate, you can only deduct the amount of tax due at the general sales tax rate.
Casualties and theft losses. You may be able to deduct uninsured losses due to theft or casualty -- a sudden, catastrophic event such as a hurricane, earthquake, fire or accident. First, for each loss event you have, you must reduce each loss by $100. The remaining amount is then deductible to the extent it exceeds 10% of your adjusted gross income. (Neither of these restrictions apply, however, to casualty losses inflicted by 2008’s Midwestern weather disasters.) If your 2008 loss is in a presidentially declared disaster area, you can elect to deduct it on your 2007 or 2008 return, whichever saves you the most tax.
Company cars. Employers are required to report as taxable income to you the value of personal use of company cars. Among the approved methods of setting the value for 2008 are $1.50 each way if the car is used to commute between home and work, for example, or, for cars that cost $15,400 or less, 50.5 cents per mile for the first half of 2008 and 58.5 cents per mile for use of the car in July through December. For personal use of more expensive cars, your employer is required to report higher taxable income.
Computer. It's difficult to qualify to deduct the cost of a computer unless it is used in your business. However, if you use your computer to track investments and do your tax return, you may be able to depreciate part of the cost as a miscellaneous itemized expense. Such costs are deductible to the extent they exceed 2% of your adjusted gross income.
Depreciating vehicles used for business. If you bought a vehicle for your business in 2008, you can deduct up to $10,960 of the cost as depreciation.
Diesel-car credit. Beginning in 2008, several clean-diesel automobiles qualify for a tax credit similar to the one available for gasoline/electric hybrids.
Donation of car to charity. Although Congress has cracked down on deducting the value of used cars given to charitable organizations, giving away a car can still cut your taxes. The deduction is usually limited to the amount the vehicle is sold for by the charity.
Driving for charity. You can deduct 14 cents per mile for each mile you drove while performing services for a charity in 2008. For charitable driving in connection with the Midwest flooding disasters, however, a higher rate applies. The standard mileage rate for flood-related charitable driving in 2008 is 36 cents per mile for driving done before July 1 and 41 cents per mile for driving done after June 30.
Driving to doctors. You can deduct 19 cents per mile for each mile you drove for medical-related travel in the first six months of 2008 as part of your medical expenses; qualified driving in July through December earns a deduction at 27 cents a mile. (For 2009 medical driving, the rate is 24 cents a mile.)
Expensing heavy SUVs and pickups. Although first-year depreciation deductions for business vehicles purchased in 2008 are generally limited to $10,960, the limit is higer for SUVs with loaded vehicle weights over 6,000 pounds. For such vehicles put into use in 2008, $25,000 of the cost can expensed, half of the remaining balance can be claimed as bonus deprecaiton, then 20% of what’s left can be taken as regular depreciation. On a $50,000 new heavy SUV, $40,000 can be written off in 2008, assuming 100% business use. And for pickup trucks with loaded weights over 6,000 pounds, the entire cost can be expensed if two requirements are met: Their truck beds must be at least six feet long and must be separate from the cab.
Home building materials. You can deduct either the state and local income taxes you paid in 2008 or the state and local sales taxes – whichever gives you the biggest tax break. If you live in a state with no income tax, it’s a no brainer: deduct your sales taxes. But even if you live in a state with an income tax, if you purchased materials to build a home or for a home improvement during the year, the sales tax deduction might trump the income tax write-off. The IRS publishes tables to estimate how much sales tax you paid and you can add sales tax on the building materials to the table amount. If the sales tax rate on the building materials is higher than the general sales tax rate, you can only deduct the amount of tax due at the general sales tax rate.
Hybrid vehicle credit. You can claim a tax credit in 2008 for buying a hybrid vehicle that runs on a combination of gasoline and electric power.
Job-related move. See Moving expense.
Luxury car rule. A crackdown limits annual depreciation deductions for cars and other vehicles used in business. See Depreciating vehicles for first-year limits and Expensing SUVs and pickups for exceptions.
Mobile home. As with building materials, if you bought a mobile home in 2008, you are allowed to add the sales tax you paid on it to the amount in the IRS sales tax table. If the state sales rate on the purchase is higher than the general sales tax rate, you can only deduct the amount of tax due at the general sales tax rate.
Moving expenses. If a move is connected with taking a new job that is at least 50 miles farther from your old home than your old job was, you can deduct travel and lodging expenses for you and your family and the cost of moving your household goods. If you moved to take your first job, the 50-mile test applies to the distance between your old home and your new job. The deduction is allowed even if you do not itemize deductions. If you drive your own car, you can deduct 19 cents a mile for 2008 moves during the first six months of the year and 27 cents a mile for moves in July through December. (For 2009, the standard mileage rate for moving is 24 cents a mile.)
Personal property tax. You can deduct state and local taxes that are based on the value of personal property you own, such as an annual county tax on the value of your car.
Safety deposit box fees. You can deduct such fees if you use the box to store taxable income-producing stocks, bonds, or investment-related papers and documents. You cannot deduct the rent if you use the box only for jewelry, other personal items or tax-exempt securities.
Sales taxes. For 2008, you can choose to deduct either city and state income taxes you pay or state and local sales taxes. This is a no-brainer for those who live in a state that does not impose an income tax ... claim the sales tax deduction. You don't need to keep all your receipts, either. The IRS has a handy-dandy table with estimates based on your income, family size and where you live. Then you can add sales taxes paid on cars, boats, aircraft and other big ticket items. Purchase of such items could lead some taxpayers in income-tax states to pay more sales tax than income tax.
Sales tax paid on leased vehicle. If you lease a vehicle in 2008, you are allowed to add any sales tax you paid on the transaction to the amount in the IRS sales tax table -- if you choose to deduct sales taxes instead of income taxes on your federal return. If the state sales tax rate on the purchase is higher than the general sales tax rate, you can only deduct the amount of tax due at the general sales tax rate.
Sales tax paid on vehicle you bought. If you bought a vehicle in 2008, you are allowed to add the sales tax you paid on it to the amount in the IRS sales tax table -- if you choose to deduct sales taxes instead of income taxes on your federal return. If the state sales rate on the purchase is higher than the general sales tax rate, you can only deduct the amount of tax due at the general sales tax rate.
Standard mileage rate for business driving. You can deduct 50.5 cents per mile for each mile you drove on business in the first half of 2008 and 58.5 cents a mile for qualifying mileage in July through December, plus parking and tolls. If your employer did not reimburse you the full 50.5 or 58.5 cents a mile for using your vehicle for your job, claim the difference as an employee business expense. (For 2009, the rate is 55 cents a mile.)
Vacation home. Mortgage interest on a second home is deductible, just as it is for your principal residence. Property taxes can be deducted on any number of homes. If you rent the place for 14 or fewer days during the year, the rental income is tax-free to you. If you rent it for more than 14 days a year, you must report the income but also may claim deductions for rental expenses.
Vehicle registration fees. Any fee you pay to register your vehicle is deductible on Schedule A as a personal property tax if the fee is based on a percentage of the vehicle's value.
See our other taxopedias.