No, this is NOT a sales
pitch; it's the U.S. government talking.
President Obama has signed a
$787 billion economic recovery package, passed by both the Senate and House of
Representatives, which includes $1.68 billion in tax breaks for new-car buyers.
The new law could save you hundreds of dollars on your NEW car purchase.
How does New Car Purchase Stimulus or incentive
Work?
To
understand the new car buyer stimulus first make sure that you understand the
following two points.
1.When you make any new car purchase, the state of Pennsylvania
charges sales tax on the purchase price of a new car.
2.When you take an Auto loan to buy your new car, you pay interest
on this Auto loan.
Both the above - i.e. sales tax, excise tax charged by the state
as well as interest on the Auto loan taken to purchase this new car will now be
tax deductible according to this new auto stimulus or car buyer incentive.
Remember if you do not take any auto loan, you get less benefit from this
car-buyer stimulus.
EXAMPLE
Suppose you buy
a car for $30,000.00 and the state
taxes you your 6% Sales Tax which is $1,800.00. Then you Finance the $30,000.00 for 60 Months at 5.90% interest
you would pay $1,004.90 in interest in the first year. Then state taxes as well as the auto loan
interest ($1,800.00 + $1,004.90) are tax deductible. In other words you can
subtract $2,804.90 from your total taxable income.
In order to be
eligible for this new car buyer stimulus you must meet the following criterion.
1.Income Limits
for new car stimulus: The deduction is phased out for individual taxpayers with
modified annual gross income between $125,000 and $135,000. For joint filers
the deduction is phased out if the combined annual gross income is between
$250,000 and $260,000. Thus to get full benefits of this special deduction for
sales tax and auto loan, your annual income must be at most $125,000 (if your
are individual taxpayer and $250,000 if married).
2. Dates of New Car
Purchase to qualify for new car stimulus: The New Car must be purchased after
17th February 2009 and before December 31, 2009. Cars purchased before 17th
February 2009 are not eligible for the New car stimulus according to
information released by IRS.
3. Maximum new car
price, Maximum new car weight to qualify for new car stimulus: The above
incentive or car buyer stimulus is available only for new cars which cost up to
$49,500. Moreover the car must weigh less than or equal to 8,500 pounds (That
means sport utility vehicles, light trucks, motorcycles and even motor homes
qualify, according to CCH, a tax information service).
For more information go to www.Money.MSN.com/TAX
