The American Recovery and Reinvestment Act allows for a state and local sales tax deduction on the 2009 purchase of new vehicles, motor homes, and motorcycles, with a weight limit of up to 8500 pounds (excepting motor homes). It is available on purchases made from February 17, 2009 to December 31, 2009. In states where there is no sales tax, the law provides for a deduction of other taxes or fees.
The deduction is limited to taxes and fees paid on up to $49,500 of the purchase price of an eligible vehicle, and is reduced for joint filers with modified adjusted gross incomes between $250,000 and $260,000, and other taxpayers with MAGI between $125,000 and $135,000. Taxpayers with higher incomes cannot claim this deduction.
Taxpayers who file something other than a Schedule A can add the deduction to their standard deductions.
To estimate the deduction, see IRS Publication 919 “How Do I Adjust My Withholding?” Taxpayers can also use worksheet 10 in this publication, lines 10a to 10k, to show how to to figure deductions on purchases above the $49,500 limit.
According the the IRS’ Web-site, following are several more facts taxpayers should know about this new deduction:
- Deduct state/local sales taxes paid on up to $49,500 of the purchase price of qualifying vehicles;
- Qualified motor vehicles generally include new (not used) cars, light trucks, motor homes and motorcycles;
- This deduction can be taken regardless of whether or not you itemize;
- The amount of the deduction is phased out for taxpayers whose modified adjusted gross income is between $125,000 and $135,000 for individual filers and between $250,000 and $260,000 for joint filers; and
- The deduction may not be taken on 2008 tax returns.
For more info:
IR-2009-88, Special Sales Tax Deduction for Car Purchases Available through End of 2009
IR-2009-60, Special Tax Break on New Car Purchases Available in States With No Sales Tax
IR-2009-30, Special Tax Break Available for New Car Purchases This Year
The American Recovery and Reinvestment Act of 2009: Information Center
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