Video: The New 2009 Tax Deduction for Car Buyers
Note: The content of this article applies only to taxes prepared for 2009. It is included here for reference only.
Hi, I'm Michael Alban from TurboTax. If you bought a new car, motorcycle, RV or SUV this year, a new tax break could help you pay for your next tune-up.
If you purchased your new vehicle between February 17 and December 31, 2009, you could lower your 2009 federal tax bill by deducting state sales tax under the Auto Assistance Ownership Amendment.
Claim the deduction for any or all the vehicles you purchased. Each one is eligible, up to a $49,500 sticker price and 8,500 pounds. Married couples who earn up to $260,000 combined, and individuals who earn up to $135,000, can claim the credit, even if you don't itemize your deductions.
So what's your bottom line? That depends on the car price, the sales tax and your personal income tax rate. Say the new car cost $30,000, a little above the national new car average. If you live in West Virginia, you would have paid 6% sales tax or $1,800. Come April, you can deduct that $1,800 from your taxable income.
Middle-class taxpayers can expect to save somewhere between $250 and $375. Sure, that's a drop in the bucket compared to sticker prices these days, but with gas at an average price of $2.50 a gallon, a $300 tax break should keep you on the road for a few thousand extra miles.
For more information, visit TurboTax.com.