Tax Deduction Questions

you can have your parents co sign. if you are financing, this is the better way to go seeing your parents have better credit than you.

answer to number three.. the same.. co sign. it will help build both credit.. not a hole lot, but it helps. a lone isn't exactly a credit card.. so once your loan is gone ( a long time till then ) that credit has run out. Either way.. it helps for now.

 

I had my grandfather co sign my car. it kept my interest somewhat down.. and kept my paymetns manageble.. well.. less than 600.. but i wouldn't qualify alone. He recently passed away.. so it all transfers to me. I guess i get even more credit now.. i just have to figure out how to do taxes.....

 

I'm not a CPA, but if you read the clean fuel regulations, you will find that only the primary owner qualifies for the federal deduction.

You will want to consult with a proper accountant, but my interpretation of the code is that if the loan/title is in your name (doesn't matter who cosigns), your parents may not legally take the deduction.

 

oops.. i mean.. i co signed.. be the co signer

 

Unless your parents bump up against the minium tax thing. I would get professional help. FWIW

 

The Federal tax deduction for 2005 is $2000. I was surprised the dealer delivering our Prius did not know about the deduction. The actual savings will depend on your tax bracket. The deduction is only for the orginal purchaser

One thing that may solve all of your issues is to let your parents buy the car and get the deduction. Let them finance it but have you co-sign. Your parents probably do not need a co-signer (hopefully) but there is nothing preventing you from being one. This will get the loan payments on your credit report and allow you to build credit.

You could also consider being joint owners, but there is a possiblity of extended liability for your parents. In California parents up until the kid is 18 are limited in liability for thier kids up to $25K. After 18 there is no paranetal liability. But as joint owners I am sure some enterprising lawyer could make a case for seeking your parent deep pockets in case of an accident.

If you live in a state where there is a sales tax and your parents buy the car then later want to transfer it to you may be liable for paying the sales tax a second time. The extra sales tax could cancel out any tax deduction savings.

With joint ownership you could argue to the IRS - if it is ever questioned - that at the time of purcahse you only own 0% of the car and your parents own 100%. As payments are made your percentage of ownership increases proportionally.

Remember this advice is worth exactly what you are paying for it and as such you should consult with the proper professionals.

Good luck

 

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Just to make sure you understand what this deduction is . . .

From the IRS: “The one-time deduction must be taken in the year the vehicle is originally used. The taxpayer must be the original owner. Individuals take this benefit as an adjustment to income on Form 1040. They do not have to itemize deductions on their tax returns to claim it..â€
http://www.irs.gov/newsroom/article/0,,id=...=130146,00.html

You need to figure out if subtracting $2,000 off your “college student†income is going to make any real difference in your personal tax situation. After taking your standard deduction, your tax may be zero or very little anyway, so why waste the deduction on your taxes if that is the case.

On the other hand, the $2,000 tax deduction just may put your parents into a lower tax bracket and save them gobs of money.

Since you have not purchased the Prius yet, we are talking about the 2005 tax year, not the 2004 tax year for which the April 15th filing deadline is looming.

 

i believe if you want your parents to get the deduction then simply have them register the car in their name. that is all that would be necessary.

and sufferin is correct, the tax year that is applicable is the year you actually take delivery of the car. so if you didnt drive the car for at least a day in 2004, you cant claim the deduction until 2005.