tax planning deductions
It’s Fall: 10 Weeks of Alternative Minimum Tax Planning Ideas…Week 3 Sales Tax on New Cars – Special Alternative Minimum Tax Benefit Expires Dec. 31
If you still are thinking about buying a new car but haven’t done it yet, you’d better start visiting showrooms soon. The new tax law allowing a one-time deduction for sales tax paid on a new vehicle will expire in just 6 weeks; after December 31st it’s too late. New car models currently are arriving in dealer showrooms, so whether you end up negotiating a good price on a leftover 2009, or are one of the first in your neighborhood to own a 2010, it makes no difference – both of them qualify.
Under the stimulus bill enacted last February, this tax benefit is separate and distinct from the “cash for clunkers” program; in fact, you can take advantage of both so long as you qualify under each program’s requirements.
The extra good news for AMT payers is that, unlike the rule for general sales taxes, and for state income taxes and property taxes that we already have told you about, this new-car sales tax break is available even if you are stuck in the Alternative Minimum Tax!
A quick summary of the rules:
- State and local sales taxes paid on up to $49,500 of the purchase price of qualifying vehicles are deductible.
- In a state that does not have a sales tax – such as Alaska, Delaware, Hawaii, Montana, New Hampshire and Oregon – other fees or taxes are deductible so long as they are assessed on the purchase of the vehicle and are based on the vehicle’s sales price or as a per unit fee.
- Qualified motor vehicles include new – not used – cars, light trucks, motor homes and motorcycles.
- Purchases must have occurred after February 16, 2009, and before January 1, 2010.
- The deduction can be taken regardless of whether or not you itemize your deductions on your tax return – i.e., even if you take the standard deduction you are still eligible for this one.
- The deduction is claimed on your 2009 Federal income tax return, not on your 2008 as can be the case with certain casualty losses.
- The amount of the deduction is phased out for taxpayers whose modified adjusted gross income is between $125,000 and $135,000 for individual filers and between $250,000 and $260,000 for joint filers.
If you already have bought a car that qualifies, you need to go and figure out how much this new benefit will save you if you haven’t done so already.
If you’re still wavering over whether to do it or not, you need to calculate the tax savings you will get – up to 28% of the sales tax paid even if you are in the AMT, and then figure this in to what you can afford. Maybe this will help you make the decision!
About the Author
George Bauernfeind is with AMTIndividual.com, providing analysis, customized strategies, and an online dual tax calculator / planner to help you reduce your Alternative Minimum Tax. Visit www.amtindividual.com or www.amtblog.com to read more articles on the Alternative Minimum Tax.
Are there any advantages to after tax health plan deductions?
I received a letter from my employer’s human resources department recommending that I pay my portion of my health plan premium on a before tax basis. I currently pay on an after tax basis. Are there any advantages to the way I’m doing it now, or should I listen to them and switch?
It’s only beneficial in very rare situations. An example would be if you are eligible for the EIC and having the premiums deducted after tax results in a higher EIC payment to you. If you are not collecting the EIC, or if you are but are at an income level where an increase in income reduces your EIC amount then you will virtually always benefit from having the premiums deducted pre-tax.
Tax Deduction | Family Tax Planning Suggestions
DAVE GARDNER: Do you need a tax preparer to help with your 1040 form?
With tax season upon us, you have a decision to make. Should you file your tax return the old fashioned way with pen and paper tax forms?