Last week Roni Deutch Tax CEO Offer Roni Deutch posted helpful new article for anyone thinking about purchasing a new vehicle. We have included a snippet of the entry below, but be sure to check out The Tax Lady Blog for the full text.
Local Tax Deductions
One of the biggest incentives to buy a new vehicle is the federal tax law that allows you to deduct both local and state taxes paid. However, you must make the purchase between February 16 and December 31, 2009. Although the savings begin to phase out with more expensive car purchases, this deduction can easily save you thousands of dollars come April 2010. To qualify, single taxpayers need to have an adjusted gross income of less than $125,000, and for joint taxpayers, the cap is $250,000.
Plug-In Hybrids
If you are looking to get a new fuel-efficient vehicle, then you may want to consider waiting for one of the new plug-ins due to be out later this year. There are lots of advantages to buying plug-in hybrids, especially ones that can run entirely on their battery power without using any fuel. However, there are also specific tax benefits that have become law during the Obama administration. For the first 250,000 plug-ins sold, owners will receive a tax credit ranging between $2,500 and $7,500. After those first cars are sold, the credits will still be available but in reduced amounts.
Sales Tax & Registration
When buying a car for the first time, many buyers will make the mistake of assuming that the price tag on the car is the exact amount they are going to pay. This is untrue. Although the price listed on the vehicle will be your main expense, sales tax and registration can easily increase your total costs by a few thousand dollars. When you are estimating the type of car you can afford, be sure to add in your local sales tax and registration! That way you can avoid potential surprises when you go to sign the purchase documents.
Business Expenses
If you are going to be using the car you purchase for your business or primarily as a business vehicle, then you may be able to benefit from additional tax deductions for purchasing and maintaining the vehicle. However, be sure to check with an accountant or tax professional before taking any of these deductions, as the IRS can be very strict about vehicle related expenses.
State and Local Incentives
If you have been eyeing a certain vehicle but are not sure it is in your budget, then make sure you to check your state and local tax laws. Although most federal hybrid credits began phasing-out already, there are still numerous states that are offering tax incentives to purchase a hybrid or eco-friendly vehicle.
According to their newest press release, the IRS has published the “spring 2009 issue of the Statistics of Income Bulletin, which features information on high-income individual income tax returns filed for tax year 2006.”
For tax year 2006, taxpayers filed nearly 4.1 million returns with adjusted gross income of $200,000 or more, up from 3.6 million returns in the prior year. These high-income returns represent almost 3.0 percent of all returns filed for 2006.
The Statistics of Income (SOI) Division produces the SOI Bulletin on a quarterly basis. Articles included in the publication provide the most recent data available from various tax and information returns filed by U.S. taxpayers. This issue of the SOI Bulletin also includes articles on the following subjects:
- Foreign Earned Income Exclusion: In tax year 2006, about 335,000 U.S. taxpayers living abroad reported approximately $36.7 billion in foreign-earned income and claimed nearly $18.4 billion in exclusions from income.
- Possessions Tax Credit: For tax year 2005, 102 U.S. corporations claimed the possessions tax credit for income derived from business operations in U.S. possessions. The total credit claimed was just less than $1 billion. Most corporations that claimed a possessions tax credit did so for operations in Puerto Rico, and those corporations claimed more than 98 percent of the total credit amount.
- Qualified Zone Academy Credit: Financial institutions claimed total tax credits of $135 million under the Qualified Zone Academy Bond program in tax year 2005, up from $117 million in 2004.
- Filings of Individual Income Tax Returns: Taxpayers filed 143.0 million individual income tax returns for tax year 2007, an increase of 3.3 percent from the 138.4 million returns filed for 2006. Adjusted gross income increased 6.9 percent from 2006 to $8.5 trillion for 2007, and taxable income rose 6.8 percent to $5.9 trillion. The alternative minimum tax increased 8.6 percent to $20.9 billion, while total income tax rose 6.5 percent to $1.1 trillion.
The Statistics of Income Bulletin is available at IRS.gov. Copies of the Statistics of Income Bulletin are available from the Superintendent of Documents, U.S. Government Printing Office, P.O. Box 371954, Pittsburgh, PA 15250-7954. The annual subscription rate is $53 ($74.20 foreign), single issues cost $39 ($48.75 foreign).