October « 2009 « MCA's Tax Talk

October 20, 2009

I bought a car, my state does not have sales tax! What now?

Filed under: Tax Tips and Tricks — Marc Adams @ 6:39 pm

This document is taken from the IRS website: It addresses the question above:

Special Tax Break on New Car Purchases Available in States With No Sales Tax

WASHINGTON —The Internal Revenue Service and Treasury Department today announced that a tax break for the purchase of new motor vehicles is available in states that do not have a state sales tax. Under the American Recovery and Reinvestment Act of 2009, taxpayers who buy a new motor vehicle this year are entitled to deduct state or local sales or excise taxes paid on the purchase.

The IRS and Treasury have determined that purchases made in states without a sales tax — such as Alaska, Delaware, Hawaii, Montana, New Hampshire and Oregon — can also qualify for the deduction.

The IRS said today that taxpayers who purchase a new motor vehicle in states that do not have state sales taxes are entitled to deduct other fees or taxes imposed by the state or local government. The fees or taxes that qualify must be assessed on the purchase of the vehicle and must be based on the vehicle’s sales price or as a per unit fee. According to the IRS, Congress intended for these fees or taxes to qualify for this special tax deduction.

“This special tax break is available for people purchasing a new car this year, and that can include people in states without a sales tax,” said IRS Commissioner Doug Shulman. “This means that more people can take advantage of this deduction when they file their tax returns next year.”

To qualify for this deduction, the vehicle must be purchased after Feb. 16, 2009, and before Jan. 1, 2010. Taxpayers can claim this special deduction only on their 2009 tax returns to be filed next year.

The deduction is limited to the fees or 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.

The special deduction is available regardless of whether taxpayers itemize deductions on their returns. Taxpayers who do not itemize will add this additional amount to the standard deduction on their 2009 tax return. The IRS reminded taxpayers the deduction may not be taken on 2008 returns.

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October 8, 2009

Sales Tax Deduction for Car Purchases

Filed under: Current Events, Tax Talk — Marc Adams @ 2:28 am

The American Recovery and Reinvestment Act of 2009 has made available a special Sales Tax deduction for New Car Purchases. This is not a new provision, as the ARRA has been in effect since around the beginning of the year.

The IRS is reminding individuals however that although Cash for Clunkers may not be in effect at this particular time, this special Sales Tax Deduction is!

See the IRS weblink for more details: http://www.irs.gov/irs/article/0,,id=214016,00.html

To qualify: You must purchase a new car before January 1, 2010 . Also included in this credit are light trucks, motor homes and/or motorcycles.

The deduction is limited to the sales and excise taxes (and similar fees) paid on upt to $49,500 of the price (purchase) of the new vehicle. Phaseouts do apply. So if you have an income higher than $135,000 you will not qualify.

This special deduction is available regardless of whether you itemize your deductions.

Happy car hunting!

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