In the Market for a New Car?
There’s a new, albeit small, benefit this year if you’re in the market for a new car. If you purchase a new car between 2/17/09 and 12/31/09, you can take a deduction for the sales tax paid on that purchase up to the first $49,500 of the purchase price. This is phased out for those with Adjusted Gross Income above $250,000 for MFJ and above $125,000 for all other taxpayers. How does this help you? If you purchase a $40,000 vehicle and your local sales tax rate is 7%, then you would get a tax deduction of $2,800. You would then multiple $2,800 times your effective tax rate, and that’s your savings. Let’s say your effective tax rate (your tax liability on line 56 divided by your total income on line 43) is 15%, then your savings would be $420. So, does this make me want to run out and buy a new car? Definitely not. But, if you’re in the market for a new car and the deals are good, it makes sense to make the purchase before year-end rather than wait until 2010 (unless, of course, the government extends this tax deduction, but we won’t know that until late December).
