Tax break for car buyers in the American Recovery and Reinvestment Act of 2009 – April 14, 2009
THE FLORES LAW FIRM
Business & Tax Attorneys
Tax break for car buyers in the American Recovery and Reinvestment Act of 2009
Dear Clients and Friends,
In hopes of spurring the overall economy in general, and the automobile industry in particular, the recently enacted “American Recovery and Reinvestment Act of 2009” (the 2009 economic stimulus act) includes a new tax break for purchasers of new cars: a deduction for state and local sales and excise taxes paid on new vehicle purchases. Here are the details.
Sales tax is generally not a deductible item for individuals. A limited exception allows taxpayers who itemize their deductions to claim either state and local income taxes or state and local general sales taxes, which mainly benefits taxpayers with a state or local sales tax but no income tax. Under the new law, buyers can claim an income tax deduction for the sales or excise tax they pay on a vehicle purchase. Key details of this new tax incentive include:
The tax break applies to purchases of passenger cars, minivans, light trucks, motorcycles, and motor homes; but it only applies on $49,500 of the vehicle’s price and to new vehicles.
The tax break covers new vehicles purchased between the date of enactment of the 2009 economic stimulus legislation and the end of 2009.
You do not have to itemize your deductions to be able to claim the deduction. However, the deduction cannot be taken by a taxpayer who elects to deduct state and local sales taxes in lieu of state and local income taxes.
Only couples making less than $250,000 a year, or individuals making less than $125,000 annually, qualify for the full deduction.
This information is a presentation of the general rules and should not be used or relied upon for any particular investment or transaction. We recommend you consult your tax attorney or advisor for your specific situation. If you would like more information on these matters we would be glad to visit with you.
As required by United States Treasury Regulations, you should be aware that this communication is not intended or written by the sender to be used, and it cannot be used, by any recipient for the purpose of avoiding penalties that may be imposed on the recipient under United States federal tax laws.