What is the credit?
Only available for those vehicles purchased from February 17, 2009, through December 31, 2009, the 2009 American Recovery and Reinvestment Act permits taxpayers to take a deduction for state and local sales and excise taxes paid on the purchase of new qualifying vehicles up to the maximum purchase price of $49,500.
What and who qualifies?
This incentive applies to new cars, light trucks, motor homes and motorcycles with a gross vehicle weight of 8,500 or less. There is no limit to the number of vehicles purchased, as long as the total price of all vehicles used in the calculation does not exceed $49,500 and the taxpayer taking the deduction is the first owner. In states that don’t have a sales tax, the law provides a deduction for other taxes or fees paid.
The deduction is reduced for joint filers with modified adjusted gross incomes (MAGI) over $250,000 and completely phased out for those taxpayers with MAGI over $260,000. For all other taxpayers, the deduction is phased out with MAGI between $125,000 and $135,000, respectively.
How does it work?
The deduction is available to taxpayers that itemize along with taxpayers that claim a standard deduction. For those claiming a standard deduction, Schedule L, a new form in 2009, must be completed and attached to the 2009 tax return. For those that itemize, there is a separate worksheet new in 2009, that is required to be completed and attached to Schedule A of form 1040. Go to www.irs.gov to get the forms.
NOTE: Those itemizers who elect to deduct state sales tax in lieu of state income taxes get no benefit from this change, since the auto sales tax is already included in the sales tax deduction.
This blog entry is not intended to qualify as tax advice. To determine if this stragety is appropriate for your individual situaion, please contact a qualified tax advisor.
This entry was posted on Monday, December 21st, 2009 at 11:40 am and is filed under Tax Planning. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.