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Old 01-18-2010, 10:45 AM
 
Location: Las Vegas, NV
5,778 posts, read 13,210,955 times
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I'm 20 yrs old and this will be my 2nd time filing a tax return. Last year was relatively simple as I had virtually nothing to claim except the income I took in at my job. This year is different

I now own a car which is financed and am paying for. My payment is $190 a month at 6.5% interest, I have been paying it since April 2009

I also have 3 credit cards which carry a balance and am paying interest on those as well. One is 18% interest, another is 11.9% and another is 10.9%

I also recieved a letter from Bank of America stating that I earned $65.28 in interest income. Do I have to report that in spite of it being such a minuscule amount?

My father told me I can claim the interest Im paying on my car and credit cards and get more of a refund, is this true?
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Old 01-18-2010, 11:09 AM
 
1,954 posts, read 4,940,419 times
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Yes, you have to report interest as income.

No, you cannot claim interest on car and credit card payments unless they are business expenses, in which case you must have a Schedule C included in your tax return. If your business is not showing any revenue but only expenses, the IRS will likely view it very quickly as a hobby, which does not enjoy the same tax privileges.

The only interest that can be deducted on one's personal return is, I believe, mortgage interest.
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Old 01-18-2010, 11:23 AM
 
Location: Houston, TX
2,388 posts, read 5,600,486 times
Reputation: 6325
Personal Interest





Personal interest is not deductible. Personal interest is any interest that is not home mortgage interest, investment interest, business interest, or other deductible interest. It includes the following items.
  • Interest on car loans (unless you use the car for business).
  • Interest on federal, state, or local income tax.
  • Finance charges on credit cards, retail installment contracts, and revolving charge accounts incurred for personal expenses.
  • Late payment charges by a public utility.

You may be able to deduct interest you pay on a qualified student loan. For details, see Publication 970, Tax Benefits for Education.

from the irs website:
Publication 17 (2009), Your Federal Income Tax
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Old 01-18-2010, 11:33 AM
 
9,803 posts, read 14,391,881 times
Reputation: 8207
Quote:
Originally Posted by DavieJ89 View Post
I'm 20 yrs old and this will be my 2nd time filing a tax return. Last year was relatively simple as I had virtually nothing to claim except the income I took in at my job. This year is different

I now own a car which is financed and am paying for. My payment is $190 a month at 6.5% interest, I have been paying it since April 2009

I also have 3 credit cards which carry a balance and am paying interest on those as well. One is 18% interest, another is 11.9% and another is 10.9%

I also recieved a letter from Bank of America stating that I earned $65.28 in interest income. Do I have to report that in spite of it being such a minuscule amount?

My father told me I can claim the interest Im paying on my car and credit cards and get more of a refund, is this true?
I hope your father doesn't do his own taxes
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Old 01-18-2010, 09:22 PM
 
Location: Conejo Valley, CA
12,470 posts, read 18,231,555 times
Reputation: 4343
Quote:
Originally Posted by marmac View Post
I hope your father doesn't do his own taxes
Yeah, that is what I was thinking.

Anyhow, to the OP. Your tax situation is still rather simple. You will just need to include the interest income on your return, everything else should be the same.

PS. Pay off your credit cards.
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Old 01-18-2010, 09:28 PM
 
Location: Sacramento
2,568 posts, read 6,246,628 times
Reputation: 1924
Quote:
Originally Posted by DavieJ89 View Post
I also have 3 credit cards which carry a balance and am paying interest on those as well. One is 18% interest, another is 11.9% and another is 10.9%
Why do you carry balances? What was so important that your are willing to pay so much interest. Since you came to this forum I assume you want to make good financial decisions. Here is advice that will serve you for the rest of your life. Never ever carry a balance on a credit card. If you do not have the money to pay for it do not buy it.
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Old 01-18-2010, 09:38 PM
 
3,884 posts, read 10,201,609 times
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Tax Topics - Topic 505 Interest Expense

1. Your dad does not know what he is talking about.
2. See the topic above for basic info about interest expense.
3. Yes, your interest income must be included on your return. It is taxable unless in a tax deferred account like an IRA or some such.

It would be a good idea as a young person to take a tax class. The info you will learn will be invaluable in the future in helping you plan your finances. It will also show you how to research items and give you the "correct terminology" to use when talking and researching tax items.

31 years with the IRS and I understant the confusion. Let your Congressman know but dont hold your breath.
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Old 01-18-2010, 09:38 PM
 
Location: Sacramento
2,568 posts, read 6,246,628 times
Reputation: 1924
I just remember that I think there was something related to sales tax paid for the purchase of a vehicle in 2009. I can't find it right now but you can see if you find it. These is this software we use TaxACT Free Tax Software, Free Tax Return with Free Efile of Your Federal Income Tax Return
Just follow the Q&A. I wish it would have been that easy when I was 20.
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Old 01-19-2010, 08:56 AM
 
3,884 posts, read 10,201,609 times
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The question was NOT about sales tax directly and no one knows the date purchased. However, it does point out why learning about taxes is a good idea.
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