On February 16, 2009, President Obama signed the American Recovery and Reinvestment Act of 2009, which was created to stimulate the U.S. economy. Of particular interest to vehicle dealers is a provision that allows customers to deduct the amount of State and local sales taxes from their income tax bill. More specifically:
· - The income tax deduction is an “above the line” deduction, so it will be available to itemizers and non-itemizers.
· - The deduction is available only to people who purchase new vehicles that are under 8,500 pounds gross vehicle weight.
· - The deduction is available only for purchase made between February 16, 2009 and December 31, 2009.
· - For vehicles that cost more than $49,500, the deduction applies only to the sales tax from the first $49,500 of the selling price. For vehicles that cost $49,500 or less, all of the sales tax is deductible.
- The deduction is available only to individuals with a modified adjusted gross income of $125,000 or less or joint filers with modified adjusted gross incomes less than $250,000.
Please consult with your tax advisor with your specific situation.