Taxes - AMT Question

[Loc]

I am not a tax accountant and I do not play one of TV, but I was completing my taxes last night and came across a question. I think I know the answer, but thought I would ask the group to see if someone has encountered this. For AMT purposes, does the interest paid on the bus count as eligible mortage interest? This is a separate question from interest qualifying for deductions on your 1040. In reveiwing the instructions for pesky form 6251 (AMT) it would appear that an RV does not fall under the definition of a Qualified Dwelling (...mobile home not used on a transient basis) and therefore interest on the bus does not count as eligible mortgage interest making the AMT higher. I talked to a CPA friend who tended to agree, but said that he has not come across this with his clients.

[dalej]

We put our bus on the depreciables on the our schedule C, so all interest was deducted too, as I recall.

[Gary & Peggy Stevens]

Loc, I just picked up our Taxes for 07 from our accountant yesterday.

The good news is we have enough money coming back to pay for the diesel to at least get us to Sevierville.

I told him we just bought a motorhome, and what could I deduct next year on taxes? He told me all the interest in the note was deductable as a second home, but nothing else was deductable, unless I really wanted to take a chance. NOT GOING TO TAKE A CHANCE !


We are heading East out of Houston @ 1:00 today, Friday. First week in Panama City, then Sunday the 13 leave Atlanta heading North, to Tennessee.

Gary S.

[dalej]

Gary, we are going to have another auction in TN to go toward this poor boy from Huskerland to buy fuel. If you want in on it....take a number. :)

[Gary & Peggy Stevens]

Dale what have you got to auction off that would bring any money, except maybe Jan of course ? :eek: :D

Gary S.

[dale farley]

My accountant told me that my interest on the bus would be deductible.

[jonnie]

If you guys haven't had any experience with AMT your are not making enough money to get screwed by Uncle Sam. AMT is unamerican and whoever came up with the idea should be hung and all of his children castrated and sold into bondage. Or maybe a week with JDUB on the "Taco Tour" would be the worst punishment imaginable!

Have fun in TN.

[Loc]

Gary - if you register it in Texas be sure to save the receipt for the licensing where you pay for the sales tax. If Congress does what it has done for the last couple of years, the sales tax will also be deductible. It is not a given, but you want to be sure and ask your accountant. The deduction is in addition to the standard chart for state sales tax.

John - it is worse than un-American. A week with the Taco Tour would only start to be punishment. Perhaps full time dump boy status on the Taco Tour with one of those sewer hoses they used in the movie "RV" would start to approach the appropriate level of punishment.

This is not a question of deductibility for Schedule C - that is not in question as interest on the bus is deductible if it is your primary or secondary residence. This is an AMT deductibity question for interest expense on the bus. I see that I am going to have to call the team of tax / accounting / and really bad country boy expressions professionals that are part of JDUB's posse to get the real answer.

[Ray Davis]

If Congress does what it has done for the last couple of years, the sales tax will also be deductible.

Careful on this. I'm right in the middle of fighting an audit right now. In the tax section of Schedule A you can deduct the larger of state income tax, OR state sales tax, whichever is greater. For state sales tax, if you have major purchases, then you can declare those, which add to your sales tax.

So far, first pass in this audit "cr.p", they disallowed the sales tax I paid on my bus in 2005, however they did allow the sales tax paid on another used car I purchased out of state. Difference? One was from a dealer (the car), while the bus was through an individual. In the purchase from the dealer, the contract indicated "sales tax", while with the individual, when I registered with DMV, the 7.75% fee indicated "use tax". Not sure how it's different, it's the same fee.

Anyway, be careful if you try to deduct the sales tax.

Please let me know what you find out about the AMT issue? I'm still finishing this years taxes, and that was one of the sections I hurried through, and I left it so the interest added back into the AMT bottem line. If I can remove that, I'll be happy.

Ray

[Loc]

Ray,

Good point. In Texas, we are lucky that we have no state income tax. Of course they try to make up for it through real property taxes. I am going to talk to another CPA friend this weekend and see if I can get to the bottom of it. As I read it, because the RV is used on a "transient basis", it will not qualify as eligible interest for the AMT calculation. I will let you know if I find out anything.

Loc

[garyde]

I have deducted the interest on several RV's over the years. Never had a problem. I do not remember about the Sales tax. I've never heard anything about a use tax in California but I do know the IRS is very good a splitting hairs.

[Ray Davis]

Yeah, there is no question about deducting interest on a loan for an RV. That is definitely deductable. The question here is regarding AMT (Alternate Minimum Tax). When that is calculated (as I understand it, I"m not a tax guy), a lot of normal deductions are not authorized and added back in to your bottom line, to calculate a higher tax. The question here is whether or not the RV interest has to be added back to your bottom line or not for AMT.

And when I purchased my bus in 2005, there was 7.75% in there, itemized on the DMV receipt as "use tax", not sales tax, which is why I believe the IRS declined it. I don't know yet, as I haven't been able to talk to a real person that can tell me why it was declined.

I really hate the IRS now, after this mess.


Ray

[dalej]

AMT...M for Minimum, reads like your going to get soaked boy! Wow, I had never heard of it, but now after reading about it, I'll pass on it, thank you!

[Loc]

:mad: Well, the answer that I have been able to confirm is that interest on the bus does not qualify as eligible interest for AMT purposes. I have pasted some information from WebCPA with an example which follows the instructions for form 6251 from the IRS. Remember this is only for AMT purposes. Remember, I am not a tax attorney nor do I play one on TV. Please consult your own tax professional or JDUB for advice.

In computing the alternative minimum tax, qualified housing interest and not qualified residence interest is deductible. To be qualified housing interest, the interest must be qualified residence interest, and be paid or accrued on indebtedness incurred in acquiring, constructing or substantially improving any property that is either the taxpayer's principal residence at the time the interest accrues, or is a qualified dwelling.

To be a qualified dwelling, it must meet the definition of a qualified residence (see above), and must also be a house, apartment, condominium or mobile home not used on a transient basis (including all appurtenant structures or other property).

Thus, the following interest secured by a qualified residence that would be deductible for regular income tax purposes is not deductible for the AMT:

* Interest on home equity indebtedness, to the extent that the debt is not used to acquire, construct or substantially improve the principal residence or qualified dwelling.

* Interest on a second residence that is used on a transient basis, such as a boat. (This would include a bus or RV).


Example 2: Your clients buy a motor boat that has living quarters, including a bedroom and galley, that they plan to use for travel and as a second residence. They pay $300,000 for the boat, $200,000 of which is obtained through a mortgage secured by the boat. While the boat meets the definition of a second residence for regular income tax purposes, it is not a qualified dwelling for AMT purposes, since it is transient. Thus, while the interest on the mortgage loan is deductible for regular income tax purposes, it is not deductible for the AMT.

[jello_jeep]

I tell you, they always have ya under the gun, one way or the other!

[hhoppe]

Your Bus , boat, or condo qualifies as a second home as long as it has a GALLEY. Even if you can't get your wife to use the Galley.