A new vehicle could give you
a new tax break

Tax Tip of the Week
April 20, 2009

Are you in the market for a new vehicle? As you head to the car lot, keep this in mind: The American Recovery and Reinvestment Act of 2009 includes a tax break that may benefit you.

The incentive.

When you file your 2009 income tax return, you'll be able to take a deduction for the state and local sales or excise taxes that you pay on your new vehicle.

The mechanics.

If you itemize, you can claim the vehicle sales or excise tax in addition to your state and local income tax deduction.

Alternatively, the new provision allows you to claim an extra amount with your 2009 standard deduction, meaning you can reduce your adjusted gross income even if you don't itemize.

The rules apply to any qualified new vehicle - cars, light trucks, or motorcycles weighing less than 8,500 pounds and motor homes - that you buy on or after February 17, 2009, and before January 1, 2010.

The limits.

The maximum deduction is limited to the tax you pay on the first $49,500 of the vehicle's purchase price, and the benefit begins to phase out when your modified adjusted gross income is greater than $125,000 for singles or $250,000 for joint returns.

Your new vehicle may also be eligible for other federal and state income tax deductions and credits, including breaks for certain hybrids. Please call if you want more information or tax assistance.

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