Vehicle tax breaks for 2009

Tax Tip of the Week
December 28, 2009

Did you contribute to the popularity of the "Cash for Clunkers" program or the recently announced profitability of a major car company? If so, keep the paperwork for your new vehicle handy. You might be eligible for deductions on your 2009 federal income tax return.

Here are some current year tax breaks.

• Sales tax deduction. New for 2009, this deduction is available on your personal income tax return whether you itemize or take the standard deduction.

  The deduction is for state and local sales and excise taxes paid on the first $49,500 of the purchase price. It applies to that new car, light truck, motorcycle, or motor home you bought between February 17 and December 31, 2009. Multiple vehicles can qualify.

  The deduction begins to phase out when your income reaches $250,000 on a joint return ($125,000 for singles).

• Increased depreciation deduction. Depending on the type of vehicle you purchase for your business, you could qualify for a Section 179 depreciation write-off of up to $250,000 for 2009. (SUVs are limited to $25,000.)

  A special depreciation deduction is also available. This "bonus" depreciation increases the amount of first-year depreciation on new passenger autos used in your business to as much as $10,960 ($11,060 for vans and light trucks).

• Business mileage deduction. Do you use your new vehicle to run business errands, make sales calls, or conduct other business? Update your log book for 2009 to reflect where you went and what you did, and you can deduct 55¢ for each business mile you drove.

Please contact our office for advice on these and other vehicle tax incentives, such as credits for electric and energy efficient vehicles.

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