Personal Finance 

University Pre-Tax Parking Deduction Benefit

The best kind of benefit is a fringe benefit, right?

As it turns out, the IRS has a guide for Federal, State, and Local Governments (FSLG) governing the tax rules of fringe benefits and the reporting of fringe benefits! We ran into this the other day as my lovely wife was signing up for a parking pass at her school. As a graduate student, she’s technically faculty and an employee. Since it’s a public university, the University of Maryland, that makes her a government employee.

So she’s signing up for this parking pass and one checkbox surprised her:

I understand and agree that by giving authorization to have automatic parking deductions taken out of my paycheck the deduction will be on pre-tax basis and will not be included in my Federal, State or FICA wage base.

That’s when she asked me if she was reading it right – “Does that mean I’m paying for my parking pass with pre-tax money?”

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 Personal Finance 

Five Biggest Legal Ripoffs Ever

Scam SchoolMy wife and I bought our house five years ago. I remember looking over the list of closing costs and seeing a line for title insurance. Title insurance, which costs in the neighborhood of a few thousand dollars, is something that boggles my mind even to this day. It’s an example of something that is a 100% legal and 99% rip off. There are some things in life that are obvious rip offs, like pay day loans, and then there are others that aren’t so obvious. Today, I wanted to point out a few of the biggest legal ripoffs in the financial world. Some of them are completely avoidable. Others, however, are not.

In this article, we take aim at bank fees, extended warranties, title insurance, college textbooks, and car rental insurance.
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New Car Sales & Excise Tax Deduction

Beater Used CarIf you bought a car between February 16, 2009 and January 1, 2010 (non-inclusive), and you paid a sales tax or excise tax, you may be able to deduct it from your income taxes. This was one of the provisions of the 2009 American Recovery and Reinvestment Act. The car, light truck, or motorcycle has to weigh less than 8,500 pounds and you must have purchased it new. You cannot take the deduction if you purchased a used car or if you leased it and this deduction is not related to the Cash for Clunkers program. You can deduct the sales or excise tax up to the first $49,500 of the purchase price. If you live in a state without a sales tax, like Delaware, you can deduct other fees and taxes as long as they’re collected by the government on sales. Fees collected by the dealer are not deductible.

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9 Year End Tax Moves to Make by Dec. 31st

1040 Bobblehead DudeAfter last week’s Thursday post on adjusting your tax withholding, I thought that we needed a full blown post on the best year end tax moves. So who better to turn to than prolific tax expert Kay Bell, author of The Truth About Paying Fewer Taxes? She was kind enough to list not one, not two, but nine tax moves you can make before the ball drops.

It’s time to make your year-end tax list and check it twice to ensure that you give yourself the gift of tax-savings. Here are 9 ways this month to help make your 2009 tax bill as small as possible.

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 Personal Finance 

Conduct a Financial Fire Drill

Station Fire over La Canada FlintridgeThink back to elementary school, can you remember how many times your school had a fire drill? They were never announced ahead of time, the bells just rang, everyone got up, lined up, and left the building in an orderly fashion. Everyone knew what they were supposed to do because it was scripted ahead of time. No one panicked because we always assumed it was a drill, even when it wasn’t. (which puzzles me why all of my employers pre-announced rare fire drills)

When was the last time you had a financial fire? Maybe the car broke down or you broke a window in your house. Maybe you were one of the many millions who lost your job last year. I bet, in most cases, you weren’t sure what to do afterwards.

That’s why I’m recommending that you conduct a financial fire drill.

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Toyota Recalls 3.8M Cars for Floormat Issue

Toyota TundraToyota announced yesterday that they would recall 3.8 million cars in the United States in what is the largest ever U.S. recall. The removable floor mats can cause the accelerator to stick and push vehicles to speeds in excess of 120 miles per hour. Toyota is working with the National Highway Traffic Safety Administration for a fix.

They advise that you remove the floor mat on the driver’s side immediately.

The following vehicles are affected:

  • 2007-2010 model year Toyota Camry
  • 2005-2010 Toyota Avalon
  • 2004-2009 Toyota Prius
  • 2005-2010 Tacoma
  • 2007-2010 Toyota Tundra
  • 2007-2010 Lexus ES350
  • 2006-2010 Lexus IS250 and IS350.

Their advice, if the car is accelerating out of control, is to step on the brake pedal with both feet, then try to put the car into neutral and switch the ignition to accessory power (where only the radio is on). Don’t turn off the power or the steering wheel will lock up. If you have a start/stop button, like in the Prius, you can hold the button down for three seconds to shut off the engine.

Toyota to recall 3.8M vehicles over floor mats [Associated Press]

(Photo: alexdixon )


Your Take: How Long Is Your Commute?

Miniature GridlockCNN Money played with the 2008 Census data released on Monday and discovered that the nationwide average commute is 25.5 minutes. If you work five days a week and fifty weeks a year, that’s 12,750 minutes spent in the car. For the math whizzes out there, that’s 212.5 hours or 8.85 days.

The average American spend over a week sitting in his or her car driving to or from work. It’s no wonder driving is more dangerous than flying, we spent over a week in the car just getting to and from work. This doesn’t count the time we spend on vacation, going out, whatever.

The longest commute belonged to citizens of East Stroudsburg, PA where many of the residents commute the 60 miles to work in NYC, spending 40.6 minutes a trip. The shortest belonged to folks of Grand Forks, ND where the average commute was a scant 14.3 minutes each way.

When I used to drive to work, mine was about 25 minutes to the home office each way. At one point I supported a client around the Washington DC area and my commute ranged anywhere from 45 minutes to several hours if the weather or traffic wasn’t cooperative. I passed the time listening to some audiobooks, sports talk radio, and/or NPR shows.

How long is your commute? And what do you use to kill the time?

(Photo: ethandb)


Cash for Clunkers Tax Rules

If you took advantage of the Cash for Clunkers program to buy yourself a brand new vehicle, you might be wondering about how you deal with the taxes involved in getting that $3,500 or $4,500 voucher. The IRS isn’t in the business of letting you get something for nothing!

Federal Taxes

You might be surprised to learn that there are no federal tax consequences. The IRS does not consider the voucher as income so you won’t need to pay any taxes on it. You can also take advantage of any State and Federal tax incentives for buying hybrid vehicles, the Cash for Clunkers voucher doesn’t cancel that out (something the dealer probably told you if you purchased a qualifying hybrid vehicle). For a full list of those vehicles, as well as how much of a credit you receive, visit’s Energy Tax Credits for Hybrids page.

State & Local Taxes

You may have to pay taxes to the state or local government on the tax voucher though. For example, in Maryland, you pay a 6% sales/excise tax on the price of a car when you register it. If you purchased a car with a voucher, you have to pay the 6% tax on the full purchase price of the vehicle including the voucher. So on a $3,500 voucher, Maryland residents pay $210. On the $4,500 voucher, Maryland residents pay $270. The voucher is not recognized as income in the state of Maryland, but you still pay taxes through sales tax.

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