Money is tight these days, but if you are in the market for a new vehicle, now is the time to buy. Apart from the great discounts available at dealerships with General Motors and Chrysler vehicles in the lot, there could be a nice tax write-off, too. Among the various clauses of the American Recovery and Reinvestment Act of 2009 is a welcome boost for taxpayers: a new federal income tax deduction for state excise and sales taxes on new vehicle purchases. There are limits based on taxpayer income and vehicle prices, but many buyers will qualify for this tax break. Your tax professional can provide full details, but here are the key aspects of the new sales tax deduction.
You could be eligible for further financial incentives under the Car Allowance Rebate System (CARS) law, which was passed by Congress in June 2009. The CARS law (sometimes referred to as Cash for Clunkers) is designed to help consumers purchase a new, more fuel-efficient car or truck when they trade in a less-fuel efficient car or truck.
The Department of Transportation has a website devoted to the CARS law (www.cars.gov) that provides detailed information and a list of commonly asked questions. In brief, the rebate system applies under the following conditions:
Many dealers are sweetening the rebate deal with additional factory incentives. If you want to take advantage this program or the vehicle tax deduction, bear in mind that Cash for Clunkers is slated to end in November or when the funding is gone (whichever happens first), and the new vehicle tax break is available to qualified buyers only until year-end.