January 30, 2004: 2:42
PM EST
By Jeanne Sahadi, CNN/Money senior staff
writer
NEW YORK (CNN/Money) – In case you had any
doubts, let's be clear: The U.S. tax code isn't a myth. Byzantine
maybe, but not mythic.
Nevertheless, there are certain myths about tax
breaks held dear by some taxpayers that are worth debunking before
anyone tackles their 1040 this year.
Have a gander at these untrue notions:
Uncle Sam will help you buy that SUV.
That may be what a dealer told you, but since when is a car dealer
your go-to source for tax information?
Some consumers, apparently, have come to believe
they can get a tax credit just for buying an SUV, according to the
National Association of Tax Professionals. Not so.
There was legislation being kicked around in
Washington at one point that would have offered a tax credit to buyers
of hybrid SUVs, but it didn't become law. (There is, however, a
clean fuel tax deduction up to $2,000 offered to owners of some
hybrid vehicles, including some Honda models and the Toyota Prius.)
There is a tax break for SUV buyers who are small
business owners. In a controversial move, the U.S. government decided
to allow taxpayers to write off up to $100,000 for the purchase of a
new SUV in the year it is purchased so long as the vehicle is used for
business purposes and weighs more than 6,000 pounds.
Related
Articles:
SUV Tax Deduction - SUV Tax Break
SUV Tax Break
SUV Tax Controversy
There is not, however, any tax break if you buy an
SUV to tote around your brood.
Hey, honey, guess what? We can write off the
house. For some who run home-based
businesses, "the myth is you can write off 100 percent of your home,"
said enrolled agent David Mellem of Ashwaubenon Tax Professionals. The
truth is you can only write off the portion of your home that is
dedicated to your business.
Among some part-time telecommuters, there is also an
assumption that you'll automatically qualify for a home office
deduction of some sort. But as with so much in the tax code, the
answer "it depends" usually applies.
"The home office deduction is more nuanced than
people think," said Jackie Perlman, a senior tax analyst for H&R
Block.
For instance, she said, if you work at home
occasionally because you prefer it to your cubicle, you may not be
able to deduct any home-office expenses since your employer has
already provided a space for you at work and has not required that you
work at home.
Have medical receipts; will deduct away.
Medical expenses may be deductible if -- and it's a huge "if" -- they
exceed 7.5 percent of your adjusted gross income (AGI).
That's a higher threshold than you may think and the
payoff once you reach it may not be huge. That's because if you do
manage to spend 7.5 percent of your AGI in out-of-pocket medical
expenses, you'll only be able to deduct the amount above that 7.5
percent.
Remember, "out-of-pocket" means expenses that are
not eligible for reimbursement from your health insurer or from your
flexible spending plan. "You can't double dip on that," Perlman said.
Say, for example, your AGI is $80,000. To qualify
for a medical expense deduction, you'd need to spend more than $6,000
out of pocket. So if you spent $6,010, you'd only get to deduct $10.
And that $10 deduction would only reduce your tax liability by $2.50
if you're in the 25 percent tax bracket ($10 X 0.25).
What if you were lazy and didn't submit expenses
from reimbursement to your insurer? It's not like you got money for
them, so you figure you can include that in your 7.5 percent floor,
right? Nice try. If expenses are reimbursable, they are not
deductible, Perlman said.
I've dieted, now I'm ready to deduct.
That weight-reduction program has done wonders for your waistline, but
it probably won't shrink your tax bill.
A weight-loss program may qualify as a deductible
medical expense, but only if it meets certain requirements. You can't
deduct it unless it your physician prescribed it and it was intended
to treat a particular disease.
Obesity is considered a disease, so if you are
legitimately obese, that would count. Or if you're not obese but are
told to lose weight to, say, lower your blood pressure, that also
might make the program a deductible expense.
