Everything you needed to know about tax code 179

Background: In the mid 1940s, Congress passed a law that would allow for tax deductions to farmers after World War II that would allow them to write off the cost of new equipment to encourage more people to work the land. Although many people took advantage of the law, it sat on the books for years without any changes to speak of. However, in 1996 the amount of money allowable to be written off started to grow for the sole purpose of encouraging business. Besides farm equipment, other things were added to the list such as vehicles.

To keep to the original spirit of the law, vehicles that have a gross vehicle weight of over 6000 pounds qualify for accelerated tax write-offs in the year they are bought up to a certain dollar amount. Until recently, that amount was $25000. In simple terms, if you qualify, you could write off up to $25000 of the amount of the vehicle in the same year you purchased it, plus the remainder of the price over the following four years.

GREAT NEWS: In May of this year, thanks to the 2003 Tax Act, the amount was raised to $100,000. That means that you can buy one or more eligible vehicles and write-off the entire amount up to $100,000 on your 2003 tax return! This is all documented in Section 179 of the tax code. Prior to this, you could take advantage of writing off depreciation, but it had to be done over five years.

EXAMPLE: So say you spend $40,000 to buy a new truck or SUV thats used 100% in your self-employed business activity (meaning you conduct your operation as a sole proprietor, LLC member, or partner). Provided you make the vehicle purchase before year-end and start using it for business before then, you can probably deduct the entire
$40,000 cost on this years business tax forms.

SO WHATS THE CATCH? Only that your newly acquired vehicle will need to be used more than 50% of the time for business purposes. Heres a little more background so youll understand how the Section 179 break works. Ill walk you through steps to complete this process and hopefully reduce your tax liability for THIS YEAR.

STEP ONE is to find a vehicle that qualifies for the deduction. Again, it has to have a gross vehicle weight rating of over 6000 pounds. At the end of this article, I will give you a list of new vehicles that is current AND that for sure qualify based on the weight. You can also usually look on the drivers door of any car, and there will be a sticker with pertinent information on it. GVWR is what you are looking for.

Next, be SURE to PURCHASE the vehicle. Leases do not qualify. However if you DO lease there are certain deductions you can take, but generally you can only take them as you make payments. Interest rates are a non-issue, but rebates will affect the amount you can write off because factory rebates lower the sales transaction price.

MILEAGE LIMITATIONS: As with most vehicle related deductions, you are going to have to document your mileage to protect yourself in the case of an audit. Remember, your vehicle must be used a minimum of 50% of the time for business purposes to even qualify for the deduction, but the AMOUNT of business use will also dictate what amount you can write off this year. For instance, lets say you buy a $50,000 Lincoln Navigator and you use it 100% for your business, then you can write off $50,000 this year. But lets take that same Navigator, and say you only use it for business 60% of the time.... then your write off for the year is $30,000 ($50,000 times 60%=$30,000).

To read the rest of this extensive tax code 179 visit http://www.prestigeok.com, your one stop shop to buy new or used cars, sell your vehicle, get an online insurance quote, buy spare parts, accessories and even an Extended Warranty. Original article written by Jerry Reynolds, GM of Prestige Ford in Texas.

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Congress is stingy on useful home tax breaks

There's always a little pain involved in wading through the U.S. tax code.
Yet you can ease the dull ache of dealing with Internal Revenue Service forms and language when you find provisions that will lower your bill.
There are plenty of plums and pits in this year's ever-changing version of tax write-offs. Some deductions are designed to pump up the flagging U.S. economy, while others are meant to discourage taxpayers from being dishonest.
None of the new tax provisions will make much of a difference to those facing the heaviest financial burdens. Congress could have been more generous to homeowners facing the loss of their properties when their adjustable-rate loans or other housing costs became unaffordable.
Instead, lawmakers threw a moldy crust of bread in the form of rebates. These checks won't forestall a recession or relieve the ever-worsening credit crisis.
The way the new economic stimulus law is written, the rebates are "advance payments" that are credits against your 2008 tax. That means, in the interpretation of Commerce Clearing House, a Riverwoods, Ill.-based tax-information publisher, "a taxpayer filing a 2007 return in 2008 cannot claim the rebate as an offset to his or her 2007 tax liability." The government check can't be applied to estimated taxes for 2008, either. Although the rebates range from $300 for an individual to $2,400 for a married couple with four children, there are income limits on who can receive them.
Rebate phaseout
Like many other tax deductions, the rebate is unavailable if you exceed a certain income level.
For married couples, a $1,200 giveback isn't paid to joint filers who make more than $174,000 in adjusted income. Singles get cut off from a $600 credit at $87,000.
Another example of Congress coming up short on a new break that could have benefited more taxpayers is the write-off on mortgage insurance premiums.
Under a new rule, you can deduct mortgage insurance premiums paid in 2007. So far so good, until you get to the income cut-offs.
If your adjusted gross income is more than $100,000 — $50,000 if your filing status is married filing separately — the amount of your mortgage insurance premiums that are otherwise deductible is reduced and may be eliminated, the IRS says.
Debt write-off
Only if you are in dire circumstances with your home will Congress cut you some slack. You don't have to pay tax on as much as $2 million in forgiven mortgage debt.
Previously, the law cruelly made you pay tax on what you owed — as if it were income. In order to reap this break, though, you would probably lose your home through foreclosure or the sale price would be less than the mortgage value.
There's more tough love when it comes to charity.
The IRS now needs proof of any cash contribution to charities, regardless of the amount. That means a canceled check, bank or credit-card statement. A letter from the charity also works.
"That $5 you dropped into the Salvation Army bucket — you can't take a deduction without a receipt," says Barry Kaplan, a fee-only financial planner with Cambridge Southern Financial Advisors in Atlanta and a native of Lakewood. "You'll need a receipt or canceled check for all charitable gifts."
Some plums
If you give more, you need to document more. Donations valued at more than $5,000 must be backed up by a qualified appraisal unless they are publicly traded securities.
While the IRS cracks down in some areas in an effort to stem tax cheating, lawmakers are still interested in boosting the U.S. economy.
Buy any new property for your business? You can completely write off or "expense" as much as $250,000 of the value of what you bought this year. The old limit was $128,000.
You don't have to be a corporation to qualify for this break. Home businesses also can reap this Section 179 provision. Computers, furniture and other office items qualify. The property must be used "more than 50 percent for business and must be newly purchased property."
Keep in mind that this write-off doesn't apply to real estate, which has mind-numbing rules of its own. Another caveat: For all other qualifying property, the increased limit only applies this year.
The agency will also provide some help if you are a whistleblower who exposes a tax cheat. If you get an award from the IRS, you may be able to "deduct attorney fees and court costs paid by you."
It's comforting to know that the tax code will bestow some relief upon citizens who try to enforce it. Now if Congress could transform tax preparation into a fair and simple task, that would be preferable.
For more information on how you can take advantage of the Code 179 tax laws complete the information below.

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