The song is long, but we're nearing the finale. Today's verse in The 12 Tax Tips of Christmas looks at the tax benefits connected to a new car purchase.
Don't get me wrong. I'm not saying go buy a car. I hate ads, stories, salespeople, etc. who imply, or flat out say, that you can save money by spending money. You save money by saving it. So if you don't need a new car, this 11th Tax Tip of Christmas is not for you.
But if your vehicle is on its last legs, then you might want to look into buying it by Dec. 31. If it's a new car, you can, in most cases, deduct the sales tax you pay on it when you file your 2009 tax return.
You saw that "in most cases" in the last sentence, right? As with every tax break, there are limits and requirements.
You must purchase, not lease, a new, not used car.
In addition to newly bought cars, the deduction applies to new trucks, motorcycles or motor homes.
The vehicle purchase must have been between Feb. 17 and Dec. 31.
The maximum purchase price upon which you can deduct sales tax is $49,500 per vehicle. If you bought/buy a higher-price auto, you can still deduct some of it, but you can't count the sales tax amount on the price in excess of $49,500.
The deduction phases out for higher income earners. It's reduced for married couples with adjusted gross income (AGI) over $250,000 and singles with AGI over $125,000. You can't claim it at all if you're a single filer with AGI of $135,000 or more or file jointly with your spouse and have AGI of at least $260,000.
You can claim the sales tax either as
an itemized deduction or as an addition to your standard deduction
amount. If you claim the standard deduction, you
have to file Schedule L. If you itemize, you'll detail your auto sales tax on the back
of the redesigned Schedule A.
Itemizers take note. If you live in a state without an income tax (they are Florida, Nevada, South Dakota, Tennessee, Texas, Washington and Wyoming) and
usually claim your state's sales tax as a deduction, things won't
change for you. You'll still get to add any vehicle purchase sales tax
to that amount, by either totaling all your sales tax receipts for the
year or adding the auto's cost when you fill out the standard sales tax
table worksheet.
So have you decided to buy yourself a new car for Christmas? If you and your auto meet the new vehicle sales tax deduction guidelines, then you'll also give yourself a deductible gift at tax filing time, too.
Related posts:
- The 12 Tax Tips of Christmas: #1 Sell Assets
- The 12 Tax Tips of Christmas: #2 Improve Your Home
- The 12 Tax Tips of Christmas: #3 Spend Your FSA
- The 12 Tax Tips of Christmas: #4 Be Charitable
- The 12 Tax Tips of Christmas: #5 Do a Mock Return
- The 12 Tax Tips of Christmas: #6 Watch Out for AMT Issues
- The 12 Tax Tips of Christmas: #7 Defer Income
- The 12 Tax Tips of Christmas: #8 Make House Payments Early
- The 12 Tax Tips of Christmas: #9 Bunch Your Expenses
- The 12 Tax Tips of Christmas: #10 Get Ready to Retire
- Road ending for auto deduction
- Breaking up Schedules A and B
- Schedule L, a new form for nonitemizers
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