Tax Break: IRS Announces New Car Buyers Can Deduct Sales Tax
The IRS just announced that new car buyers can deduct the state and local sales and excise taxes on their 2009 tax returns next year, according to our furry little tax adviser.
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 vehicle must be purchased after Feb. 16, 2009, and before Jan. 1, 2010, and the deduction cannot be taken on your 2008 returns. For more information about how to qualify for this deduction, click here.
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Comments:
So I can by a Hyundai now. and I loose my job I can return it to the manufacturer and still deduct the sales tax even if it was refunded to me by the manufacturer.
Has this been thought out?
If I know that I am going to loose my job this is a great way to game the system
Motorcycles? Please! And what about loan interest?
@noone1569: How about Edit button?
Read Linked Article, motorcycles qualify, woot! XB12R mmmmm sunny day, want to go home . .
We would have bought a new car this year, anyway...but it's nice to know we'll have a $1k tax break awaiting us when we file next year. At least, we will if the MAGI calculation doesn't add SEP contributions back in. [crossing fingers]
I have to say, a tax deduction on the taxes for a new car is a rather spare bone to throw someone making less than $125,000 a year. Most folks (me, for example) don't have enough itemized deductions to justify not taking the standard deduction even with mortgage interest, etc. At 7 percent sales tax on a $12,000 car equaling $840 of deductions (deductions, not credit, note) that's hardly reason to go out and splurge. And what kind of person who needs a tax break is buying a $50,000 car (or RV) anyway?!
I got a car in Sept. 2008 and I don't qualify for anything under the stimulus...I guess people who bought cars before it really hit the fan don't matter.
I got a car in Nov 08..... sucks to that.
Hmm not too shabby...if you were buying a car for 15,000, that would be a $750 tax deduction in my state (5% sales tax). And it is an above the line deduction, so even if you don't itemize, you get it.
Well, the income ceiling and the AMT combine to make this meaningless to me, but thanks for trying IRS!
@pecan 3.14159265: Yes, the point of the stimulus isn't to get people to travel back in time and buy cars, it's to get them to buy cars now.
@B: The credit under the stimulus actually counts for people who got their cars in November of 2008, I believe. So I missed the gap by a few months, but I still have no idea why they chose November and not September.
@pecan 3.14159265: Or not...just saw adamczar's comment. December then? I don't know exactly, but I know it was really close to when I got mine.
@pecan 3.14159265: I bought a house in 2007, didn't get the "first time homebuyer's credit." That's the way the cookie crumbles.
WOOT! I just bought a white 2009 Scion xB just last Thursday! HURRAY FOR ME!
lame. i bought my car december 16th heh. this tax break should be for anyone who's bought a car since the beginning of 2008 imo right before things started going downhill.
@AgentWorm: You're pissed? We missed it by a WEEKEND. Yep, we picked up our new wheels on the Friday before this went into effect. Dammit!
@pecan 3.14159265: I got a used car with 3K miles in the right time frame for this but before the original hints of it coming. I feel your pain. This along with the lower interest rates on new cars would have been a real factor.
Nice, I just bought a new car....on January 6th!!!!!!!!!!!!!NOOOOOOOOOOOOOOOOO! So close but yet so far...
This does not surprise me in the slightest...I usually miss out on these things.
Between this news and the incentives dealers and pitching out there (0% interest??)
I'm thinking of just selling the 2008 Focus I bought last year and buying the newer 2009 model. Hilarious, really: Buying a new car would lower my car payments.
What about leased a new car? does this count?
My used car purchase helped the dealer out, too, ya know. Actually, I looked at the "savings" from taxes on buying a new Civic versus the savings from buy a year-old Civic, and I still came out on top with the used one.
Oh, c'mon! I bought a new car on Feb 2nd!!! WTF is up with not making it valid from Jan 1 forward? Why the random-as-hell Feb 18th cutoff??? Is Jan 1 any less part of "Tax year 2009" than Feb 18th?? /wrists
Aww, it's for new cars. I guess a used car wouldn't stimulate the economy enough.
I might have to start thinking about that Mustang...
@Saboth: Exactly! I wouldn't suppose it would matter what country the car came from as long as I have paid State and local taxes on the car.
@mzs: I think two weeks after I bought my car, Toyota introduced their craptastic Saved by Zero commercials. I didn't buy a Toyota, but I figured Nissan was going the same way - yep, three months later, Nissan's rolling out the 0% interest. Sigh.
@mobilehavoc: The definition of what is American these days is a little blurred, whether the Big 3 or Congress wants to admit it or not. Parts put in Chevys are coming from China and Mexico..so what makes it American? The Chevy hood ornament that was possibly made in Mexico?
@grettawallace: rtfa. "The special deduction is available regardless of whether a taxpayer itemizes deductions on their return."
@wallspray: i doubt it, since the leasing company really "owns" the car & you just make "rental" payments to them, but it's certainly worth shooting an email to irs for clarification.
@pecan 3.14159265: Again, EXACTLY! Really nothing mass produced anymore is made in America. Car parts, computer parts even the food on your table isnt necessarily "Made in America".
I personally dont care if my car was made in America, or Japan in this case. I just want quality in the brands I buy, not the cheapness that many brands now have.
Is this only valid for brand new cars? My fiance leased a new car 3 years ago, and we are going to be purchasing it next month. Will we be able to take advantage of this tax break on the sales tax we will be paying?
It's important to note that what makes this deduction special is that it will be an above the line item on the 1040.
I'm sure the state's are loving this. Yay, we already have a budget shortfall and now we don't get this revenue.
I'm also still pissy that if you did home improvements to increase energy efficiency in 2007 and 2009, you get a tax break, but not if you did them in 2008. I'm sure you know when I replaced all the windows in my house.
@mac-phisto: Whether the Mustang or the new Camaro is the better muscle car is up for debate.
Opinion wise though, gotta admit that new Camaro is damn sexy. Not as sexy as my 09 Scion xB, but a close second.
I'm actually thinking about getting a 2009 Volkswagen Jetta TDI. They qualify for a $1300 lean-burn tax credit. The above the line sales tax deduction just makes it even more enticing.
I'm a bit confused, though - I already get to deduct sales and other taxes paid. Granted, I am not a tax professional, but it seems like they are giving us something we already get? What am I missing?
The cap on a vehicle purchase is $49,500. Assuming a tax rate of 6% would generate a $2970 deduction. That is then multipled by the marginal tax rate. Let's assume that the average marginal tax rate is 25%, that's a total tax loss of about $743.
You have to remember too that the profit on vehicle sales is taxed. If you can generate more sales, then that is more tax generated. I think the government comes out ahead on this one.
Under current rules for the 1040A form, you can deduct the sales tax paid on a leased car. Unless they change the rules, you should be able to deduct again next year. Of course, the sales tax on a lease is a lot lower than the sales tax on a purchase, so the deduction is smaller.
The only thing that is different about this stimulus is that you don't need to itemize to claim it.
Wait, I thought we could do this already? A friend deducted the taxes on his new car a few years ago.
Aw, come on. I helped stimulate the economy back in 2006. I can't claim that?