New Car Buyers
New car buyers may be able to benefit from any purchase of a new car in 2009. They may be able to deduct state and local sales taxes and excise taxes for new car purchases whether they itemize or not. If itemizing deduct it on the general sales tax line of the Schedule-A;if not, add it to the standard deduction amount and deduct the whole amount from the AGI on the appropriate line of the 1040. There are additional benefits for buying some hybrid models.
The IRS still allows a tax credit for purchasing some hybrid cars. The allowable credit amount is subtracted from the amount of federal taxes owed. A full or partial credit amount may be available, depending on the number of hybrid vehicles sold by the manufacturer. A hybrid vehicle is one that combines an electric motor with a gasoline-powered engine. The vehicle must be purchased for your use, and you must be the original owner.
There are Now Tax Breaks for New Car Purchases in Every State
Car shoppers can reap the benefits of deducting some eligible fees paid for a new car in 2009, even if they purchase the car in a state with no sales tax. Best of all, taxpayers can take advantage of this tax break in 2009 regardless of whether they itemize deductions or not. The deductible fees can be added to the standard deduction.
The American Recovery and Reinvestment Act of 2009 activated a new deduction for state or local sales or excise taxes paid on a new car. Those taxpayers living in the states without a state sales tax, such as Alaska, Delaware, Hawaii, Montana, New Hampshire and Oregon were originally excluded from a tax break.
Now those purchasing a new car in those states without a sales tax will have a break too by deducting other state fees or taxes that are based on the vehicle’s sales price, or as a per unit fee.
Date purchased: This offer is only good for vehicles purchased after Feb. 16, 2009, and before Jan. 1, 2010.
Deduction Limit on Price : 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.
Income Phase-out Levels: Between $125,000 and $135,000 for individual filers, and between $250,000 and $260,000 for joint filers.
“Cash for Clunkers” in 2009
New car buyers may qualify for a $3,500-$4,500 cash voucher for trading in their “clunkers” for more fuel-efficient models this year. Liberty Tax Service reminds you that this new CARS "Car Allowance Rebate System" incentive takes effect August 1st. Here are some conditions that must be met in order to qualify:
The trade-in vehicle must be under 25 years old, working, and have an average gas mileage of 18 miles per gallon or less. It must be owned and insured by the same person for the past year.
To qualify for a $3,500 credit, the buyer must purchase either a new passenger car getting at least 4 more miles per gallon, a new small truck getting at least 2 more miles per gallon, or a new large truck weighing 6,000-8,500 pounds getting at least 1 more mile per gallon. The new passenger vehicle must have the new mile per gallon requirement of 22 miles, a small truck 18 miles per gallon, and a large light-duty truck 15 miles per gallon.
To qualify for a $4,500 credit, the buyer must purchase either a new passenger car getting at least 10 more miles per gallon, a new small truck getting at least 5 more miles per gallon, or a new large truck weighing 6,000-8,500 pounds getting at least 2 more miles per gallon.
The CARS Act requires that the trade-in vehicle be crushed or shredded so that it will not be resold for use in the United States or elsewhere as an automobile.
Under the CARS Act, you may purchase a new vehicle or lease a new vehicle, provided the lease period for the new vehicle is at least five years.
Participating car dealers will apply the credit to qualifying new car purchases at the time of the purchase. The program will operate on a first-come, first serve basis until the billion dollars of funding is exhausted, or until November 1, 2009.