Tax Tips Blog

Steve writes: hello,i have a passive low income housing credit for a partnership I am in but could not take it last year because of income . I was wondering if you could tell me the parameters of the income level for these deductions and the carry over rules that are involved . It was on the form 3800 line d the credit was 9752. thank you

My reply:Hello, thanks for writing.

As you said the Low Income Housing Credit is part of the General Business Credit, which is reported on Form 3800. If you are not allowed to take this credit in a given year (2007 in your case) then the credit is carried BACK to the previous year (2006 in your case) and you should have received a refund from the previous year. If you were not able to use all the credit after carrying it back (to 2006) then the amount of the credit that remains is carried forward to 2008 (and thereafter up to 20 years).

The rules for the allowable credits in 2008 are the same as they were in 2007. In short the credit is limited each year by your regular and AMT tax liabilities.

My best advice would be for you to request the carryback and carryforward form from whomever prepared your tax return last year. Most CPAs use Form 1045 for this carryback, but some prepare an amended return instead (Form 1040X).

Best wishes,
Gina

The Recovery Rebate Credit for 2009 is an option if you didn’t receive your economic stimulus payment in 2008 or if something happened in 2008 that would cause your economic stimulus payment to be greater than you received, such as the birth of a child.

Just as there was with the economic stimulus payment there are restrictions and reductions, so it’s best to talk to your tax professional about the specific details.

The amount of this credit is reduced by the amount of the economic stimulus payment tha tyou received in 2008. The good news is that if your credit is less than the stimulus payment you received, you do not have to repay the difference.

Stuart writes:
I have a question about the alternative motor vehicle credit. The Ford dealer told me I can take the tax credit for my 2008 Hybrid Escape each year I have it. I’m hearing from others the credit is just for they year purchased. Which one of these is correct?

My reply:

Stuart,

Thanks so much for writing.  As of right now, the original purchaser of a new 2008 Ford Hybrid are allowed an alternative motor vehicle credit.  If you were to purchase a 2WD version you would be ELIGIBLE to take a credit up to $3,000 on your 2008 tax return.  If you were to purchase a 4WD version you would be ELIGIBLE to take a credit up to $2,200 on your 2008 tax return.

Just because you’re eligible to take the credit does not mean you’ll be able to use it.  This credit is not allowed to reduce your regular income tax liability below zero.  If you are eligible to take multiple tax credit, this tax credit is taken last after all other credits have been taken.  If your alternative vehicle credit exceeds your maximum dollar limit, the excess is NOT refundable, nor can you carry it forward to future years.  In addition, if you sell your car before the end of it’s useful life (as determined by the IRS), the amount of the credit that you were able to claim may have to be recaptured.

So the short answer is, the salesman was wrong.  The credit on this car is actually very good, but it’s a one year shot, which may come back to haunt you if you don’t like the car enough to hold onto it.

Best wishes,
Gina

P.S.  I wrote an article about this a couple of years ago, I used $3/gallon for gas and I’m paying almost $4/gallon now, so time is changing things, but the theory still holds.  You can read it here, if you like:
http://glgcpa.com/blog/2006/07/21/should-i-buy-a-hybrid/

Ben asks:My question is regarding my subscription to investment newsletters and paid subscriptions to investment websites. Can I deduct that when i do taxes, if so what documentation will i need. I also have a sharebuilder account and pay a monthly fee for that. What about any losses i have incurred? Also, how would i go about getting the standard 30 for the spanish american war? Ben

My reply:Hello Ben! The costs of your investment subscriptions are deductible as miscellaneous itemized expenses on Schedule A, provided that you itemize deductions and that the total of your miscellaneous itemized deductions exceeds 2% of your Adjusted Gross Income (AGI). You should retain your receipts to prove this deduction, if necessary.

The monthly fee in your sharebuilder account is either another miscellaneous itemized deduction or a commission charged for the purchase of shares. If the fee is linked to the specific transactions it is a commission and adds to the cost basis of the shares purchased. If it is a flat fee that is charged whether or not you have any transactions or regardless of the number of transactions, it is a deductible investment expense.

Capital gains and losses don’t affect your taxes until you sell the investment. At that point you report the sale on Schedule D and calculate your gain or loss.

The $30 refund of the Spanish American War tax, also referred to as the Telephone Tax Refund, has a special line in the “payments” section of Form 1040 or its variants.

If you’re a first time homebuyer in Texas and your maximum household income level is at 100% (for a family of 1-2 persons) or 115% (for a family of 3 or more persons) of the median family income for the area of Texas in which the home you wish to buy is located, then you may be eligible for a credit against your mortgage interest. The Texas Department of Housing and Community Affairs created a Mortgage Credit Certificate (MCC) Program for residents of the state of Texas. The amount of the annual tax credit is 35% of your annual mortgage interest up to $2,000 per year each year that you own your home and use it as your principal residence. Even though the credit cannot be larger than your Federal income tax liability, you can carry the excess forward up to 3 years. If you sell this house for a gain, within the first 9 years you own it and your income, at the time of the sale exceeds certain limits, you may have to recapture some of the benefit you previously received. If you believe you may be eligible for this credit or have to pay a recapture tax due to this credit, you should seek the help of a tax professional as this can get a bit complicated. To learn more about this program you can read the program information packet (PDF) or visit the Housing Administrator, Inc. website at http://housingadministrators.com/texasmcc/.