I thought I had finished writing about my car crash and replacement, but I forgot to mention one important item. Until the end of the year, the government will allow a deduction for the sales tax paid on the purchase of a new car. There are only two weeks left on the offer, so if you’re in the market for a new car, get going now.
The fine print
Uncle Sam allows you to deduct the sales and excise tax paid on up to $49,500 of a new car. It does not apply to used cars. They can be prior year model cars (e.g. a 2009 Subaru), but you must be the first owner.
The deduction is phased out for higher income people. Phase outs start at $125k and end at $135k for individuals. The limits are $250k-260k for joint filers.
The car must be purchased after Feb. 16, 2009 and before Jan. 1, 2010.
What if you don’t itemize?
You’ll be able take the standard deduction plus a special deduction for the sales and excise tax.
The IRS put together a good list of FAQ’s regarding this special deduction.
What does it mean here in Massachusetts?
This year, the Massachusetts sales tax was raised from 5.00% to 6.25%. Not without coincidence, Gov. Deval Patrick’s approval ratings have plumbed the depths of George W. Bush’s darkest days.
6.25% means that I paid about $1,250 on my $20,000 VW Golf . Nice to have a deduction, but it would be nicer yet, of course, if it was a tax credit or rebate, but I guess beggars can’t be choosers.
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Image credit: emilio labrador at Flickr
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