As I was working through some initial tax returns this year, I noticed a couple of new things from some clients that I should probably point out to you guys:
1. Even if you file using the standard deduction, you can claim an additional standard deduction for real estate taxes, sales taxes paid on a new vehicle, and net disaster loss (not discussed below).
2. To claim these additions to the standard deduction, you are required to add on another form, the Schedule L.
This is important to note for a couple of reasons: (1) Your CPA might not ask you if you purchased a new vehicle this year, and (2) if you file our own taxes by hand, you’ll need to remember to include the extra schedule. Let’s look a little deeper into two of these additional standard deductions:
Additional Standard Deduction for Real Estate Taxes
Thanks to the extension of the Housing Assistance Tax Act for 2008, you are allowed to increase your standard deduction by what you paid in 2009 for state and local real estate taxes. This is up to $500 for a single filer, and $1,000 if married filing jointly.
The taxes you are deducting must be taxes you would have deducted had you itemized. Therefore, this excludes real estate taxes for business or foreign property.
Who This Helps? You might be saying, “PT, who the heck pays property taxes and doesn’t itemize?” Well, this additional deduction comes into play for people who owe just a little on their mortgage or who might own their home outright (little or no mortgage interest). It might also apply to people who’s home is their only itemize-able deduction. So if you are traditionally a taker of the standard deduction, but you still pay property taxes, keep an eye out for this additional deduction and make sure you get it.
Additional Standard Deduction for Sales Taxes on a New Vehicle
Thanks to the American Recovery and Reinvestment Act of 2009, you can increase your standard deduction by amounts you paid in state and local sales and excise taxes when you bought a new car, light truck, motor home, or motorcycle. The purchase must have been made after Feb. 16, 2009. And the amount you can include in the deduction is limited to the tax on the first $49,500 of the purchase price.
There is a phase out to this deduction at $125,000 for individual filers and $250,000 for joint filers.
Just like with the real estate deduction above, you can only deduct these taxes if they would have qualified for deduction had you itemized. Another way of saying “the same old rules apply.” No business vehicles can be included here.
If your state doesn’t have a sales tax, then double check to see if any other type of tax was applied to the purchase price of the vehicle. Those taxes might be deductible. Read more about the new car tax deduction.
Important Note: If someone else files you taxes for you, they might not think to ask you about a new car purchase. Make sure you provide this information to your tax preparer.
New Form: Schedule L
Lastly, make sure you complete and attach a Schedule L. Also be sure to check the box on line 40b of your 1040 (or 24b on the 1040A). See more about the new Schedule L.
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