Fri Jul 30 2010
The Internal Revenue Service reminds individual taxpayers who bought a new car by Dec. 31, 2009, that there is a tax break available for them.
Taxpayers who bought a qualifying, new motor vehicle last year, after Feb. 16, may deduct the state or local sales, or excise taxes they paid on the first $49,500 of the purchase price. Qualifying motor vehicles include new passenger automobiles, light trucks, motorcycles, and motor homes.
Individuals who itemize, and those who take the standard deduction, can benefit from this tax break. In states without a sales tax, other taxes or fees can qualify, if they are assessed on the purchase of the vehicle and are based on the vehicle's sales price, or as a per-unit fee.
The deduction is reduced for joint filers with modified adjusted gross incomes or between $250,000 and $260,000 and other taxpayers with MAGI between $125,000 and $135,000. Taxpayers with higher incomes do not qualify.
Taxpayers who take the standard deduction, need to complete Schedule L and attach it to Form 1040 or Form 1040A to increase the standard deduction by the allowable amount of state or local sales or excise taxes paid on the purchase of the new vehicle. Also, check the box on line 40b on Form 1040 or line 24b on Form 1040A. Individuals who itemize should include the allowable amount of state or local sales or excise taxes from the purchase of the vehicle on Form 1040, Schedule A.
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