Deductible

WASHINGTON -The $789.5 billion economic stimulus package that President Barack Obama is expected to sign next week will contain a slimmed-down version of a new- car tax break proposed by Democratic Sen. Barbara A. Mikulski of Maryland. Under the stimulus deal that Congress is likely to approve over the next few days, buyers of new cars, light trucks, recreational vehicles and motorcycles will be able to deduct the state sales and excise taxes from the purchase on their federal returns next year.

Individuals who find themselves a victim of a layoff or find a new job that doesn't offer health insurance face a difficult task in deciding how to replace that insurance. While the options may be more expensive than a subsidized corporate plan, some do offer tax benefits an employer cannot. The first option is to continue your previous employer's insurance through COBRA. While this maintains your coverage, it's expensive, as you now must pay the full premium and employers usually tack on an extra 2 percent to cover administrative fees.

Many motorists believe that every little bit counts when it comes to gasoline prices. Recognizing the skyrocketing gas prices consumers are facing at the pumps, the Internal Revenue Service announced yesterday that it is raising the standard mileage deductible rate by 8 cents to 58.5 cents a mile, a rare midyear adjustment by the federal agency. The new optional rate goes into effect July 1 and is scheduled through the end of the year. Workers who use their vehicles for business can use the standard mileage rate or deduct their actual expenses on tax returns.

This is the time of year when taxpayers pull out the rule book that guides them in making last-minute moves before year-end to reduce their income tax bill. The summary: Do whatever you can to delay receiving income for the year, and hunt for whatever deductions you can find, so that when you prepare your tax return in a few months, the outcome is as painless as possible. In essence, you move income - like bonuses or pay you might receive from a business activity - into the new year if you can. And perhaps you pay coming expenses - like January's mortgage payment or property taxes - in 2007 so you can use the deduction this year, rather than next.

A computer glitch at the state's largest health insurer recently blew Sharon Nobles' life into disarray, leaving her family with overdue medical bills and, at times, vital prescriptions denied at the pharmacy. And she might not be the only one affected. CareFirst BlueCross BlueShield officials confirm that even as information technology specialists are working to resolve internal system problems, thousands of its members who participate in consumer-directed health plans (CDHP) could be affected, too. "I've spent months trying to fix this problem, but I've gotten nowhere," said Nobles, the mother of twin 11-year-old boys who were diagnosed three years ago with Asperger's syndrome, a neurobiological disorder that can produce autistic-like behavior.

Editor's note: This is the final installment of baltimoresun.com's weekly tax advice column featuring three experts from the Hunt Valley accounting firm SC&H Group. If you itemize, is it legal to deduct the taxes on a new car purchase? I believe it used to be, but is it now? - Tony, Baltimore Taxpayers who itemize must choose between deducting state income taxes paid or sales and use taxes paid during the tax year. The law allowing for the sales tax deduction expired but was reinstated late in 2006.

Editor's note: Every Tuesday through the end of tax season, The Sun will run an edited transcript of Baltimoresun .com's weekly tax advice column featuring three experts from the Hunt Valley accounting firm SC&H Group. A few years ago we bought a time share. We recently sold it, at a loss, to a company that buys up time shares and that said the loss could be written off. My reading of tax information and a call to the IRS indicate that a time share is personal use property and the loss cannot be taken on taxes.

Editors note: Every Tuesday through the end of tax season, The Sun will run an edited transcript of Baltimoresun.com's weekly tax-advice column featuring three experts from the Hunt Valley accounting firm SC&H Group. I'm a sports official and work as an independent contractor. When I leave my house to work a game, can I deduct the mileage from my house? Are there any other things I may be able to deduct, such as a uniform, shoes, etc.? - Bob, Baltimore Independent contractors are considered to be engaged in a trade or business, and are entitled to deduct all ordinary and necessary expenses paid or incurred in carrying on their trade or business.

Whether you are a consultant, piano teacher, contractor or sell makeup part time, you might be able to whittle away some of your taxes if you scour your return for deductions. Businesses operated out of the home have some avenues for cutting taxes that aren't available to individuals. And if you aren't set up to tap the benefits fully as you prepare this year's tax return, you can position yourself now so you will keep more of your money next year at tax time. Any expenses for your business in 2006 are deductible - pens and staples, educational expenses, legal fees, bad debts, and business entertainment and travel costs.

Goodwill Industries' drop-off site in Timonium is one of the nonprofit's busiest in the country. On a recent Tuesday, cars on average dropped off a donation every two or three minutes. And that was a slow day. Most donors grabbed a receipt for tax purposes. But many were unaware Congress now requires that donated clothes and household items be in good used condition to qualify for a tax deduction. That means donors can no longer take deductions for broken appliances, busted toys, used mattresses, well-worn shoes, electronics on their last legs or thread-bare underwear.