Taxes - AMT Question

[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]

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.