Questions for the Tax Lady: August 10th, 2009

Check out the following new Questions for the Tax Lady answers and feel free to ask me questions through one of the links below. You can send me an e-mail, direct message or @ reply, and I will do my best to get an answer for you!

Question #1: Do you know if the government is planning to do any type of first time home buyer tax credit next year like they did this year?

This is a very tricky question to answer because no one really can predict exactly what changes Congress will make to the tax code. Currently to be eligible for the credit you must purchase a home before December 1^st, 2009 and there has not been any serious mention of extending. Additionally, as signs continue to roll in that the housing market crisis is leveling off, funding another huge tax credit tax credit for home buyers probably is not the Federal government’s top priority.

Question #2: If I sold my house in 2007 will I be eligible for the first time homebuyer’s credit?

No. Unfortunately, the credit is only available to taxpayers who did not own a home three years prior to the closing date on the new home. However, if you do buy a house you will be eligible to deduct some of your closing cost, points, fees, etc., and remember that you can also deduct your mortgage interest.

Question #3: How do I know if my car qualifies for the Cash for Clunkers rebate?

First of all in order to qualify for the Cash for Clunkers program you need to have a clear title, and have proof that you were both the registered owner and had insurance on the vehicle for one full year. The program also only applies to a specific list of cars. Click here to download a PDF from Cars.gov of the vehicles that qualify.

More People Qualify for Car-Tax Deduction

There is nothing better than realizing you can save more on taxes than you had originally thought! Well that is exactly what is happening to hundreds of American taxpayers who are beginning to realize that they will benefit from the IRS’ new rules regarding car tax deductions. Check out the following story courtesy of the Wall Street Journal.

Some people who thought they weren't eligible for a new tax break might qualify after all. A law enacted earlier this year allows many taxpayers who buy new cars and other types of motor vehicles during a certain time period this year to deduct the state or local sales taxes, or excise taxes, paid on the purchase. That may sound fairly simple, but it isn't.

For example, what about taxpayers who live in states that don't impose a state sales tax?

The Treasury Department and the Internal Revenue Service recently decided that "purchases made in states without a sales tax -- such as Alaska, Delaware, Hawaii, Montana, New Hampshire and Oregon -- can also qualify for the deduction."

How so? Taxpayers who buy a qualified new motor vehicle in states without sales taxes "are entitled to deduct other fees or taxes imposed by the state or local government," the IRS said. The fees or taxes that qualify "must be assessed on the purchase of the vehicle and must be based on the vehicle's sales price or as a per-unit fee."

Continue reading this story here.