Tax Tips for Year-End - Car Sales Tax Deduction

Tax Tips for Year-End  -  Car Sales Tax Deduction

Taxpayers who buy a new (not used) car, light truck, motor home or motorcycle this year may be entitled to a special tax deduction for the state and local sales and excise taxes when they file their 2009 federal tax returns next year. The tax break is part of the American Recovery and Reinvestment Act of 2009 (ARRA).

A qualified motor vehicle is a passenger automobile, light truck or motorcycle which has a gross vehicle weight rating of 8,500 pounds or less. A motor home is also considered a qualified motor vehicle. Purchases that occur after Feb. 16, 2009 and before Jan. 1, 2010, will qualify for this deduction. The deduction is limited to the sales and excise taxes and similar fees paid on up to $49,500 of the purchase price of a new vehicle. The deduction is reduced for joint filers with modified adjusted gross incomes (MAGI) between $250,000 and $260,000 and other taxpayers with MAGI between $125,000 and $135,000. Taxpayers with higher incomes do not qualify.

The special deduction is available regardless of whether taxpayers itemize deductions on their returns. Taxpayers who do not itemize will add this additional amount to the standard deduction on their 2009 tax return.

Leases and rentals do not qualify for this tax deduction. The law specifies that the deduction applies to the purchase of qualified new vehicles. A lease is not a purchase for the purpose of this deduction.

You can claim the deduction if you purchase one of last year’s models as long as you are the vehicle’s first owner. There is no limit on the number of cars for which you can claim the deduction, provided each car is a qualified vehicle under the law. You can take this deduction for any qualified vehicle; even those made by foreign car companies

If you have a specific question regarding this article, as a public service, and at no cost to you, I invite you to call me with your question. In addition, I am happy to give a second opinion on your previously prepared tax return done by a paid preparer at no charge.

Call me and I will be happy to explain my “CPA Quality Tax Preparation at H&R Block Rates”™, my many discounts including the Virtual Tax Office eMail-Order Tax Return Discount of $50 and how you can, in general, minimize your tax preparation fees regardless of who prepares your tax returns. To read previously published tax articles go to www.danghazel.com. You can contact me at info@danghazel.com or call me at 305-451-4224 or 540-825-2771.

This column is offered as a public service with the understanding that each person's tax situation is different; that you should consult your CPA before taking any action based upon comments made in this article. Thank you for your interest in reading my tax column.