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Walter & Shuffain, P.C.

Certified Public Accountants & Business Advisors

Member of the Alliott Group

May 2009 Tax Tip:
Sales Tax and Depreciation Deductions For 2009 Vehicle Purchases

Taxpayers who purchase a new motor vehicle during 2009 may be eligible to deduct all or a portion of the sales tax on the vehicle. In addition to the sales tax deduction, if you use the vehicle in your business, you may be able to deduct up to $10,960 of first year depreciation expense on your 2009 tax return.

Here are seven things the IRS says you should know about this new deduction:

  1. State and local sales taxes paid on up to $49,500 of the purchase price of qualifying vehicles are deductible.
  2. Qualified motor vehicles generally include new (not used) cars, light trucks, motor homes and motorcycles.
  3. Purchases must occur after Feb. 16, 2009, and before Jan. 1, 2010.
  4. This is an above-the-line deduction and can be taken regardless of whether or not you itemize other deductions on your tax return.
  5. Taxpayers will claim this deduction when filing their 2009 federal income tax return next year.
  6. 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.
  7. The deduction may not be taken on 2008 tax returns.

Consumers who are considering buying a new car may find that this tax incentive means there has never have been a better time to buy.

Questions?

If you would like more detailed information, please do not hesitate to contact us.