Tax deductions on personal property?
Will some one please explain how this process works. For example: if I were to purchase a home for 0,000 @ 6.5%, what would my approx first year tax deduction look like, with 3 dependents, and income under 0,000?
Tags: dependents, tax deduction
#1 written by asdasda July 2nd, 2010 at 20:34
You deduct itemized deductions by listing on Form 1040, Schedule A all tax deductible amounts you paid during the tax year for certain items such as medical and dental expenses, state income tax, local income tax, real estate tax, state personal property tax, local personal property tax, home mortgage interest, and gifts to charity. These are called itemized deductions.
The standard deduction is a fixed dollar amount that reduces the amount of taxable income on which you pay tax. The amount of the basic standard deduction depends upon your filing status on your tax return. However, if you can be claimed as a dependent on someone else’s tax return, your standard deduction amount may be different. In some cases, the standard deduction can consist of two parts, the basic standard deduction, and an additional standard deduction amount for age, blindness, or both.
If a person is born or dies before the end of his or her tax year, the tax year is considered to cover a 12-month period
When you complete Form 1040, Schedule A you total the tax deductible amount spent on itemized deductions and compare the total with your standard deduction. The larger of the two tax deductions, standard deduction or itemized deduction, will be the tax deduction to choose on your tax return, since it will lower the amount of federal income tax you will owe or increase the amount of tax refund you will receive.
Itemized Deductions – Casualty and Theft losses
Usually you can only deduct on your tax return a casualty loss – one with a sudden, unexpected or unusual cause – in the tax year it occurs. And you’re allowed to claim only the amount of the loss that exceeds 10% of your AGI after subtracting $100 for each casualty on your tax return.
Itemized Deductions – Charitable Contributions
Normally, you can claim your full charitable contribution on Form 1040, Schedule A. If you got something back in exchange for your charitable contribution, however, you can deduct only the excess value of your gift on your tax return.
If you gave a charity appreciated stock last tax year, you get a double tax break. Not only do you avoid owing tax on the capital gain, you can generally deduct the current market value of the shares on your tax return.
A reminder: If you made a non cash charitable contribution last tax year of more than $5,000 – say, you donated a painting – you’ll need a written appraisal of its fair market value, and the appraiser must sign the Form 8283 that you attach to your Form 1040. You may be able to write off the appraiser’s fee as a miscellaneous itemized deduction on your tax return.
Itemized Deductions – Interest
Interest is an amount you pay for the use of borrowed money. To deduct interest you paid on a debt on your tax return you must be legally liable for the debt and you must be able to use itemized deductions.
Itemized Deductions – Medical and Dental Expense Expenses
The basic rule: You can deduct health costs on your tax return for yourself, your spouse and your dependents only when the unreimbursed expenses exceed 7.5% of your AGI. Among the items that the IRS permits: birth-control pills, Lamaze classes for the mother-to-be, and lead paint removal. For an unusual health write off on your tax return, get a note from your doctor stating that the expense was medically necessary. One caveat: If you claim a home improvement for medical reasons, you can deduct expenses on your tax return only to the extent that they exceed any increase in the value of your property caused by the renovations.
Itemized Deductions – Tax
Although you can deduct state personal property tax and local personal property tax, you can’t claim fees or charges for personal property. The difference? Personal property tax is levied purely on the value of an item. So if your state charges you a flat fee or a size or weight based amount to register your car, that’s not tax deductible on your tax return . But if you pay an amount based on your vehicle’s value, it is tax deductible on your tax return.
Itemized Deductions – Miscellaneous itemized deductions
There are many Miscellaneous itemized deductions.
#2 written by Clark Kent July 2nd, 2010 at 20:34
A home is not personal property. It is real property.
The interest would depend on your down payment. If you paid $ 100,000 down, you would only pay interest on $ 10,000
You could deduct real estate tax on your home, personal property taxes, if any, on your car, furniture or anything else taxed where you live. You could also deduct your choice of either sales tax or state income tax, contributions, medical expense in excess of 7.5% of your AGI.
You would need to amortize the loan, not the purchase price to calculate the interest portion of the deduction. Since the balance of the loan goes down monthly with each payment, you need to calculate .00541667 times the remaining balance after each payment, then add the total interest due for the year. .065 /12 = .00541667.
The IRS allows exemptions for dependents which are unrelated to your deductions.
Also, you are allowed to take a standard deduction if it is greater than the itemized deductions
#3 written by v b July 2nd, 2010 at 20:34
If you buy the house *now* in October, you probably won’t see anything different on your taxes.
The interest on $110K would be $1800 for 3 months, minimal property taxes, so you wouldn’t be able to itemize this year.
#4 written by StephenWeinstein July 2nd, 2010 at 20:34
If this is a personal property tax question:
Tax is computed by multiplying the tax rate by the assessed value of the property, which may be more or less than the purchase price. For example, if the house was assessed at $200,000, and you were able to buy it for only $110,000 because you bought it at a foreclosure sale/auction, then a 6.5% tax would be $13,000. On the other hand, if the house was assessed at $100,000 in 1990 and has not yet been re-assessed since then, the 6.5% tax would be only $6500.
If this is an income tax and tax deduction question:
The tax deduction related to the home is the amount of interest you pay plus the real estate taxes. Real estate taxes are set by the county, town, school district, etc. The interest is calculated by the bank or other lender based on the amount you owe. For example, if you buy a $110,000 home with a $10,000 downpayment, you are borrowing $100,000, so they initially charge (in your case of 6.5%) interest at a rate of $6500 per year. As you pay off the low (decrease the amount that you owe), this gradually drops.
Additionally, there is an exemption (not a deduction) of a few thousand dollars for each person claimed, including yourself, your dependents, and (if married filing jointly, but not if filing separately or as head of household) your spouse.