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Weeks remain for consumer, business tax incentives

November 15, 2010

After the "cash for clunkers" program frenzy, sales crashed in September for most automakers and their dealers. But now is a great time to remind customers that they still can take advantage until Dec. 31 of the generous tax deduction for state sales taxes (and some other state fees) on the purchase of qualifying new vehicles.

These savings, which in Illinois would be about $1,680 on a $28,000 car, will not be available after Dec. 31, so remind customers that now is a great time to buy.

"For those thinking about buying a new car, this deduction may give them a little more drive to make their purchase this year," said Internal Revenue Service Commissioner Doug Shulman. "This deduction enables taxpayers to buy now and get cash back later on their tax returns."

The deduction is limited to the state and local sales and excise taxes paid on up to $49,500 of the purchase price of a qualified new car, light truck, motor home or motorcycle.

The deduction amount 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.

New vehicles must be purchased  between Feb. 16 and Dec. 31, 2009, to qualify for the deduction. The special deduction is available regardless of whether a taxpayer itemizes deductions on their return.

Business customers can be reminded that they can take advantage of generous accelerated depreciation and expensing tax incentives if they purchase certain qualifying vehicles. Those incentives are part of the federal stimulus bill signed in February, the American Recovery and Reinvestment Act of 2009.

Among other aspects, the depreciation limitation on the amount of certain passenger automobiles is increased from $2,690 to $10,690 in the first year. Vehicles must be used for business at least 50 percent of the time.

 

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