You May Qualify for a Special New Vehicle Tax Deduction for State and Local Sales and Excise Taxes

Posted on January 26, 2010
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As a result of steps taken to stimulate the economy, which included rebates and incentives to sell cars during 2009, many taxpayers purchased new vehicles. If you did purchase a new auto and vehicle purchase, you should be aware that purchasing a new car, light truck, motor home or motorcycle that has a gross vehicle weight rating of less than 8,500 pounds, may qualify you for a special deduction for the state and local sales and excise taxes on your 2009 income tax returns.

Explanation of How this Deduction Can Help You – This deduction can be utilized whether or not you are able to itemize other deductions on your tax return.

Vehicle purchases made from February 17,2009 to December 31, 2009, may qualify for this deduction under the American Recovery & Reinvestment Act of 2009 (ARRA). A qualified motor vehicle is a passenger automobile, motorcycle or light truck, whose original use begins with that purchaser and has a gross vehicle weight rating of 8,500 pounds or less.

This special deduction is limited to sales and excise taxes and similar fees paid for vehicle purchase limited to $49,500 of the purchase price of a new vehicle. The deduction is reduced for joint filers with modified adjusted gross incomes (MAGI) from $250,000 to $260,000 and other taxpayers with MAGI ranges from $125,000 to $135,000. Unfortunately, if you income is greater than what is reflected above, 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.

How to Report this Deduction on Your Tax Return?- If you cannot itemize, then add the sales tax paid to the special area next to the standard deduction on your 2009 tax return. If you ordinarily qualify to use From 1040EZ then you shouldTax Tip consider filing Form 1040 or Form 1040A instead of Form 1040EZ to get the benefit of this deduction.

This article is not intended to provide legal or accounting advice. Because the tax laws are complex, change constantly and each situation is unique, the reader is advised to do his or her own due diligence and consult with professionals in these areas.

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.

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