Stop dreaming about that new car, light truck, motorhome or motorcycle. This is the perfect time to shop for a new vehicle, especially with the added incentive of a deduction for state and local sales and excise taxes, thanks to the Auto Assistance Ownership tax credit.
As part of President Barack Obama’s American Recovery and Reinvestment Act of 2009 (commonly known as the “stimulus bill”), the program offers a tax break to new vehicle buyers on their federal income taxes, regardless of whether a taxpayer itemizes deductions on Schedule A.
“A lot of people have been wondering when the stimulus package was going to help them,” said Shaun Graham, general manager at Desert Lincoln, located at 5570 W. Sahara Ave. “We need to get the message out: Here’s that opportunity.”
The Auto Assistance Ownership program is a scaled back version of Maryland Sen. Barbara Mikulski’s original proposal, which included a deduction on the interest paid on new car loans. In its final rendering, the tax break provides a deduction for state and local sales and excise taxes paid on the purchase of new cars, light trucks, recreational vehicles and motorcycles between Feb. 17, 2009, and Dec. 31, 2009. Purchases made before Feb. 17, 2009, are not eligible for the deduction.
“There is no better time to buy,” Graham said. “The bottom line is there are good buys, great economical vehicles and now the tax incentive.”
The deduction is limited to the tax paid on up to $49,500 of the purchase price of any foreign or domestic car that weighs no more than 8,500 pounds, which means most SUVs and light trucks qualify. There is no restriction on the type of car and it does not have to be a hybrid. The deduction is phased out for joint filers with modified adjusted gross income between $250,000 and $260,000 and other taxpayers with modified adjusted gross incomes between $125,000 and $135,000.
“For those thinking about buying a new car this year, this deduction may give them a little more drive to make their purchase this year,” said IRS commissioner Doug Shulman on the department’s Web site, www.irs.gov. “This deduction enables taxpayers to buy now and get cash back later on their tax returns.”
“This amendment is a big deal to families because a car is the second-biggest purchase most families make,” said Sen. Mikulski. “It also helps the 20,000 dealerships nationwide who employ a million people. And, it helps states who rely on tax revenue from new car sales.”