During 2009, the government and car dealers took steps to stimulate the economy, with a focus on new vehicle sales. For those individuals that purchased new autos and vehicles, you should be aware that purchasing a new car, light truck, motor home or motorcycle that had a gross vehicle weight rating of less than 8,500 pounds, and paying state and local sales and excise taxes, may qualify you for a special deduction when filing your 2009 tax returns.
How Does this New Sales Tax Deduction Benefit You?- This tax deduction can be used whether or not you itemize other deductions on your tax return.
Purchases made from February 17,2009 through December 31, 2009 may qualify for this deduction under the American Recovery & Reinvestment Act of 2009 (ARRA). A qualified motor vehicle includes a passenger automobile, light truck, or motorcycle, the original use of which, begins with that purchaser, and has a gross vehicle weight rating of 8,500 pounds or less.
This deduction is restricted to sales and excise taxes and similar fees paid and cannot exceed $49,500 of the purchase price of a new vehicle. The deduction is reduced for joint filers with modified adjusted gross incomes (MAGI)that ranges from $250,000 to $260,000 and other taxpayers with MAGI that ranges from $125,000 to $135,000.If your income is more then these amounts then you will not qualify.
There is some good news, the deduction is available whether or not, you itemize deductions on your tax returns. In addition, to use this special deduction, your must file either Form 1040 or Form 1040A. It is unavailable to individuals who use Form 1040EZ.
Where is this Deduction Reflected in the 1040 Tax Return?- If you are unable to itemize your deductions, then add the sales tax paid for the vehicle to the standard deduction in the special area on your 2009 tax return. If you regularly use From 1040EZ then you should Tax Tip consider using and filing Form 1040 or Form 1040A instead of Form 1040EZ to obtain the benefit of this deduction.
Tax laws are complex, change constantly and each situation is unique. This article is not intended to provide legal or accounting advice. The reader should perform his or her own due diligence and consult competent professionals in this area.
Learn more about how to save taxes by getting a copy of my free EBook entitled 12 Tax Income Tax Credits and Incentives that Can Help You Reduce Taxes with Your 2009 Income Tax Return. Get your copy of the free EBook until March 15, 2010 when it goes on sale for $9.99. Sandor Lenner,CPA-MBA has provided accounting services for over 35 years. He is also a Certified QuickBooks ProAdvisor.
