Tax time

[Magnumcharger]

I have a dumb question for my American friends:
I've heard tell that you can claim your mortgage interest on your annual taxes. Must be nice!
Here in Canada, we're not given that luxury. Too bad too, as the interest I pay makes up a big portion of my mortgage payment.

The other day, I heard tell that American citizens are also allowed to claim the taxes paid on a new car.
Is this true or false?

[runningman]

I think that is something that was being discussed with the new stimulus plan to help boost auto sales.

[jdiesel33]

That is true. For the last 3 or so years, we have been able to deduct sales taxes paid on purchased cars and even leased vehicles.

[runningman]

That is true. For the last 3 or so years, we have been able to deduct sales taxes paid on purchased cars and even leased vehicles.

Is this for a business?  State or Federal?

[Magnumcharger]

This is the thread I read it on:
http://board.moparts.org/ubbthreads/showflat.php?Cat=0&Board=Test&Number=5098905&Searchpage=1&Main=5095944&Words=+magnumcharger&topic=&Search=true#Post5098905

[jdiesel33]

These are deductions against federal taxes for individuals. I dont know the rules as they relate to businesses.

[jdiesel33]

There may be some new or additional benefits thru the stimulus, but I have not heard about those yet. I think the deductions I am speaking of dont just apply to vehicle purchases, but any large ticket item. I think, dont quote me on that. I know over the last 3 years, I have been able to deduct the taxes on 2 purchases and 2 leases.

[bull]

I have a dumb question for my American friends:
I've heard tell that you can claim your mortgage interest on your annual taxes. Must be nice!

It can be a double-edged sword to some but usually it's a pretty nice feature when you owe a lot on the mortgage. When people get dumb about it is when they start counting on the tax refund when it doesn't make sense to. I talked to an older friend of mine about it once and the way he was going about it was silly. He only owed $10k on his house and had something like a $500/mo. payment but didn't want to pay the house off because he wouldn't get the write-off (he was actually considering taking out a home equity loan in order to extend his mortgage debt ). When I explained to him that he was spending $6,000/year to get maybe 1/3 of that in annual tax write-offs he was a little shocked. Plus he had something like $30k in the bank just sitting there doing nothing. I told him if it were me I would write a check to pay off the house and start putting that $500/mo. payment into the bank and be about $4k ahead each year.

[dodgecharger-fan]

Magnum, there is a way to set things up so that you, in effect, can write off the interest against your taxes.

Any of the banks in Canada can set it up for you. For example, Scotia calls theirs The Total Equity Plan.

The idea is that you take whatever equity you have in your house and borrow against it - that sounds crazy at first, but the next step is where it starts to add up.

You take that equity loan and invest it. Put it in your RRSP for example and get a big return to help pay down the loan.
Now, since the loan is for investing, the interest is tax deductable.

If you already owned your house outright, when the loan is paid, you own your house again. But now you've got a big chunk of money invested and the government helped you pay for the costs of borrowing. As long as your investment return is bigger than the rest of the costs of borrowing, you're way ahead because you've got a chunk of money stashed away that you didn't have before.

That's a high level simplified explanation. Check with your bank for all the details.

[Green71R/T]

In Canada we do not get the mortgage interest deduction but we do not have to pay capital gains taxes on the principal residence.This encourages Canadians to pay down mortgages more quickly than Americans.Remember you are better off paying tax on $500 (approx $150) than giving a the bank $500 just so you can have a deduction.

[moparstuart]

In Canada we do not get the mortgage interest deduction but we do not have to pay capital gains taxes on the principal residence.This encourages Canadians to pay down mortgages more quickly than Americans.Remember you are better off paying tax on $500 (approx $150) than giving a the bank $500 just so you can have a deduction.

I have 15 year mortgages on both my houses ( 1 rental property)  they will both be paid off before i'm 50

[Silver R/T]

yep, deducted tax paid on house and truck.

[4cruzin]

In Canada we do not get the mortgage interest deduction but we do not have to pay capital gains taxes on the principal residence.This encourages Canadians to pay down mortgages more quickly than Americans.Remember you are better off paying tax on $500 (approx $150) than giving a the bank $500 just so you can have a deduction.

We don't have to pay capital gains tax on our principal residents anymore wither as long as its not more than 500K for a married couple of 250K for a single person and you haven't sold another principal in the last 2 years. 

[Green71R/T]

I stand corrected.

[Todd Wilson]

In order to deduct you have to itemize your return. If you dont have enough to go beyond the standard deduction then you cant do it.  This year if your property tax is 1000$ or below you get that back plus your other $$ you should get.  If you bought a high dollar house then you most likely can tax that stuff off your taxes.


Todd