Posts tagged as:

state income tax

Do Hybrid Cars Make Money-Sense?

September 1, 2009

in Personal Finance

There are many reasons why we should drive as little as possible. One of the most compelling for most drivers is that it is getting increasingly expensive. Gas prices have been fluctuating severely in recent years, but on the whole they have experienced an upward trend. This is one of the many reasons that hybrid vehicles have been receiving so much press.

Hybrids are designed to be much easier on gas than regular vehicles. This is accomplished by pairing an internal combustion engine with a rechargeable battery. The result is fuel efficiency that is currently, on average, in excess of 40 miles per gallon.

But this added fuel efficiency comes at a price. Hybrid vehicle prices run a few thousand dollars higher than their internal combustion-only counterparts. The Energy Policy Act of 2005 provided for tax credits to offset a portion of the added expense, but they have been largely phased out.

But there are certain other savings that you can realize by owning a hybrid. These include the following:

The need for less gas translates into saved money. The amount saved depends on the price of gas at any given point in time. But with hybrids getting an average of 50% more mileage out of the same amount of gas in a regular vehicle, it adds up to much more than pocket change.

In some states, you can get a state income tax credit for hybrids. This won’t be as much as the federal credit, but it’s certainly worth checking into. You can get more information from your state’s Department of Revenue.

Some states offer other incentives for those who buy hybrids. Some charge sales tax at a lower rate on hybrids, which can save you a significant amount of money up front. Some also offer lower registration fees.

Some cities, hotels and schools provide free or discounted parking for hybrids. Depending on the location, this could save you a great deal of money each month.

Even employers are jumping on the hybrid incentive bandwagon. Some, including Google and Bank of America, have offered cash back to employees who purchase a hybrid vehicle.

In some areas, hybrid owners are allowed to drive in the carpool lane even if there is only one person in the vehicle. Not only is this a nice added convenience, it can also save even more gas.

If you’re relying on increased gas mileage alone to offset the cost of your hybrid, you could possibly be disappointed. But with the other savings you might qualify for, owning a hybrid could be very cost-effective. And remember, cost isn’t the only factor when buying a hybrid. The lower impact you’ll have on the environment and its natural resources are priceless.

Related Blogs

Click to share this post with friends.

For more great content, remember to subscribe to my RSS feed. Subscribe

529 Plan and Tax Advantages

April 27, 2009

in Money Management

If you want to send your children to college, starting to save while they are young will leave you better prepared to handle the expense. We all know that it’s best to put money into something that will draw interest, but what about the tax implications? Wouldn’t it be great if we could invest in something similar to a 401K that would pay out tax-free when it was time for college?

Actually, we can. It’s called a 529 plan, and it offers the opportunity to save up for higher education without forfeiting a percentage of the interest earned to the government. Named from Section 529 of the Internal Revenue Code, 529 plans have only recently become well known. But their tax advantages have led to a boom in popularity, and they are currently one of the top methods of saving for college.

The 529 plan offers a number of tax advantages. These include the following:

* Contributions may be deducted from state income tax in many states. This can reduce one’s state tax liability each year.

* Interest accrued in a 529 plan is tax-deferred. Early distributions and withdrawals that are not used for education expenses may be subject to taxes and penalties. But if the funds are used strictly for the higher education of the beneficiary, they are exempt from both federal and state taxes.

* Most states have high maximums for contributions to a 529 plan. Some allow for contributions of as much as $300,000 per beneficiary. That allows for a significant amount of interest to accrue tax-free.

* A 529 plan can be useful in estate planning. The assets in the plan are not counted as part of the owner’s estate, yet they can be reclaimed at any time. Reclaiming the assets usually results in income tax and penalties, but the estate tax may be reduced without using the money for education in some cases.

* In the event that a 529 account loses value, the funds may be withdrawn and the losses deducted from taxes.

Other Advantages

In addition to tax advantages, 529 plans are advantageous in several other ways. These include:

* All investments are handled by the program manager. All the plan owner has to do is choose the type of investment he wants to pursue and make contributions. The rest is taken care of by knowledgeable investors.

* A 529 plan can be set up so that it does not affect eligibility for financial aid. Accounts owned by students and parents can hurt eligibility, but if the account is set up by a grandparent or other individual, the amount is not considered in figuring the family contribution.

* Prepaid tuition plans are often backed by the state. This means that they cannot lose value.

A 529 plan can be used to ensure that your child has the opportunity to go to college. And unlike many other investments, its interest is not subject to taxes. If you’re looking for a way to save for education without losing a portion of the interest gained, a 529 might be the plan for you.

Related Blogs

Click to share this post with friends.

For more great content, remember to subscribe to my RSS feed. Subscribe