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Sales Tax on New Vehicles is Deductible from your 2009 Taxes

Submitted by pcollett on Wed, 04/01/2009 - 14:56

The American Recovery & Reinvestment Act (ARRA)
Economic Stimulus 2009

Signed into law On Tuesday, Feb. 17, President Obama signed a $787 billion stimulus package to help the American People. Good news for those waiting to buy a new car as Sales tax on any new vehicle purchased after February 17, 2009 and before January 1, 2010 can be deducted from your 2009 taxes (1). You do not have to itemize your taxes to take the new vehicle sales tax deduction as it can be a standard deduction also (2). 

Eligibility for a new vehicle tax deduction:

1.       New vehicle is purchased after 2/17/2009 and before 1/1/2010.
2.       Can be deducted up to $135,000 for individuals (phaseout deduction after $125,000) and for couples filing jointly up to $260,000 (phaseout for couples after $250,000).
 
You will still pay the sales tax when you purchase the new vehicle, but you can deduct the sales tax amount from your 2009 taxes.
Sources:
 

Special Tax Break Available for New Car Purchases This Year
 
IR-2009-30, March 30, 2009
WASHINGTON — The Internal Revenue Service announced today that taxpayers who buy a new passenger vehicle this year may be entitled to deduct state and local sales and excise taxes paid on the purchase on their 2009 tax returns next year.
“For those thinking about buying a new car this year, this deduction may give them a little more drive to make their purchase this year,” said IRS Commissioner Doug Shulman. “This deduction enables taxpayers to buy now and get cash back later on their tax returns.”
The deduction is limited to the state and local sales and excise taxes paid on up to $49,500 of the purchase price of a qualified new car, light truck, motor home or motorcycle.
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.
IRS also alerted taxpayers that the vehicle must be purchased after Feb. 16, 2009, and before Jan. 1, 2010, to qualify for the deduction.
The special deduction is available regardless of whether a taxpayer itemizes deductions on their return. The IRS reminded taxpayers the deduction may not be taken on 2008 tax returns.

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