Tax Breaks For Purchasers of New Cars
The newly passed stimulus bill contains a measure to encourage people to buy new cars by giving them a tax break. Purchasers of new cars and trucks will be allowed to deduct sales or excise taxes. This is an above-the-line deduction, so you don’t have to itemize to claim it. The deduction is limited to sales tax on purchases of up to $49,500. The amount you save will depend on your state sales tax rate and the price of your car or truck.
If your state imposes a 4% sales tax and your car costs $40,000, the deduction will reduce your adjusted gross income by $1,600, says tax publisher CCH. The deduction is limited to car and truck purchases made between the date the bill becomes law and Dec. 31, says Tom Ochsenschlager, vice president of taxation for the American Institute of Certified Public Accountants. Congress “is trying to get people to buy cars right away,” he says.
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