Today will be a short post, but an important one. I get asked all the time in various forms about buying something for tax purposes, so let me give you a few examples of the questions I’m asked and my answer:
- Should I buy that hybrid so I can get the tax credit?
- Should I remodel my house? The government is offering tax incentives for ___.
- If I buy before ____, the government will give me a tax deduction for that new computer. Should I do it?
You get the idea. The root question is this: “should I buy __ to get the tax write-off?”
If you’re spending extra money just to get a tax write-off, that’s not a smart move. If you NEED a replacement vehicle, be smart and get the best deal. If you want a hybrid and your budget allows it, GREAT – the tax write-off will be a perk. But don’t let that be the reason you buy any type of vehicle. Buy a vehicle based on your family’s needs and your budget.
Same goes for a remodel or other home improvement project. If you NEED to take on a project and your budget allows, go for it. But don’t remodel your house just to get some tax deductions. The math doesn’t work in your favor.
Same also goes for computers, phones, etc., etc., etc. The government subsidizes (gives you a tax credit or deduction) because enough people aren’t doing what they want and so they incentivize (give you an incentive) to try to get you to follow their plans.
My last thought on this topic is this: if you are planning to take on a project or make a major purchase that just so happens to have some tax benefit, please be smart enough to take the full benefit of it. I don’t want you to misunderstand my advice and avoid anything that will get you a tax credit or deduction, I just don’t want you to do anything for that reason alone. Clear enough?