Another incentive to buy a vehicle runs through end of 2009

Itemization is not necessary.

The federal government is now offering a non-itemized deduction for state, local sales and excise taxes paid on the 2009 purchase of qualified new vehicles.

This program is yet another economic stimulus perk being offered by the American Recovery and Reinvestment Act of 2009, which Congress passed Feb. 16.

“Sales tax is deductible as an itemized deduction,” said IRS spokeswoman Deirdre Harris. “What’s different about this deduction is that it’s available for people who do not itemize.”

The deduction applies to the state and local sales taxes paid on the first $49,500 of the purchase price. For example, if you buy a $50,000 vehicle, you would pay taxes only for the $500 that exceeds the purchase price limit of $49,500. Collier and Lee County do not have an excise tax for vehicle purchases, so the deduction would apply to the state’s 6 percent sales tax.

“This is available for purchases made on Feb. 17 through Dec. 31,” Harris said.

Qualifying vehicles include new cars, light trucks, motor homes and motorcycles that have a gross vehicle weight rating of 8,500 pounds or less. Used cars do not qualify for the tax deduction.

Taxpayers will claim this deduction when filing their 2009 federal income tax return next year.

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

Unlike the Cash for Clunkers program, which limited a single person or joint-registered owners of a single eligible trade-in vehicle to one lease or purchase credit on a new vehicle, there is no limit on the number of qualified vehicles for which someone can claim the deduction.

Single taxpayers with an income of less than $125,000 and joint taxpayers with an income of less than $250,000 will receive the full deduction. The tax 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.

Many South Florida car dealership representatives said that in light of the current recession, any effort to help save consumers money is a good idea.

“We’ve made all our sales staff aware, so they’re making customers aware as they walk into the showroom about the fact that there’s a tax deduction when they purchase a new vehicle,” said Ken Morrand, director of operations for Germain Motor Co. in Florida. “Anything to help the consumer is a good idea.”

Although David Parker, sales manager at DeVoe Automotive Group, thinks the non-itemized tax deduction is a good incentive to get consumers buying, he doesn’t think the deduction will be as successful as the Cash for Clunkers program.

“I doubt it’s going to be a huge encouragement like the federal program, CARS, because that’s $4,500 immediate discount,” Parker said. “This is an $1,000 to $1,500 tax write-off.”

The Cash for Clunkers and the monetary breaks offered by the American Recovery and Reinvestment Act are all what economists call fiscal policy or government spending policies that affect macroeconomic conditions such as tax rates, interest rates and government spending, in an effort to control the economy.

“Generally they’re a short-term policy that will be used in the short-run to help with the economic recovery,” said Gary Jackson, director of the Regional Economic Research Institute and associate professor of economics at Florida Gulf Coast University.

“In the long-run of course, the implication is that those are tax dollars that eventually will have to be paid back.”

E-mail Sarah Donovan at sdonovan2@gmail.com.

© 2009 marconews.com. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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