Each spring as the tax season grinds to a merciful halt, I find myself thinking of three things. They are in no particular order, The Masters, buying a new car (fantasy) and fixing my house (reality). As tax seasons continue to become more complex, I have long given up the dream of going to Augusta in tax season. While I am resigned to view the second nine on Sunday with CBS, I am somewhat consoled that tax incentives under the Stimulus Plan will fuel my fantasy to buy a new car and help fund the reality of fixing my home.
First the fantasy. For the first time in a long time, under the Stimulus Plan taxpayers may be able to deduct sales tax on the purchase of a new vehicle.. Many of my clients do not know that sales tax has not been deductible since 1986, although fairly recent legislation allowed taxpayers to elect to deduct sales tax in lieu of deducting income tax. For a short time though, the sales tax on the purchase of a new “ qualified motor vehicle” may be deductible in addition to deducting income tax. The sales tax deduction is available whether the taxpayer itemizes or claims the standard deduction and the deduction can be claimed in computing both regular and alternative minimum tax.
A qualified motor vehicle is a new car, light truck, or motorcycle that has a gross vehicle weight of 8500 pounds or less or a motor home. The vehicle must be purchased between February 17, 2009 and December 31, 2009. The deduction is limited to the sales tax on the first $49,500 of the purchase price of the vehicle. In addition, the deduction is phased out for taxpayers with Adjusted Gross Income between $$125,000 and $135,000 ($250,000 and $260,000 for joint filers).
Now the reality. The Stimulus Plan also provides incentives to taxpayers who choose to make certain improvements to their homes such as doors, windows fans, heaters and air conditioners that are also energy efficient. This is accomplished by modifying the existing residential energy property credit. The existing credit is 10% of certain costs and a fixed amount of other costs, up to a maximum lifetime credit of $500 and was available for the years 2006, 2007 and 2009. The new credit is 30% up to a maximum of $1500 for the years 2009 and 2010 combined. This $1500 maximum can be claimed in addition to the $500 lifetime credit claimed in 2006 and 2007. The new law, though modifies the energy efficiency standards for many of the types of property available for this credit. Most retailers have already adapted by disclosing whether the property qualifies.
First the fantasy. For the first time in a long time, under the Stimulus Plan taxpayers may be able to deduct sales tax on the purchase of a new vehicle.. Many of my clients do not know that sales tax has not been deductible since 1986, although fairly recent legislation allowed taxpayers to elect to deduct sales tax in lieu of deducting income tax. For a short time though, the sales tax on the purchase of a new “ qualified motor vehicle” may be deductible in addition to deducting income tax. The sales tax deduction is available whether the taxpayer itemizes or claims the standard deduction and the deduction can be claimed in computing both regular and alternative minimum tax.
A qualified motor vehicle is a new car, light truck, or motorcycle that has a gross vehicle weight of 8500 pounds or less or a motor home. The vehicle must be purchased between February 17, 2009 and December 31, 2009. The deduction is limited to the sales tax on the first $49,500 of the purchase price of the vehicle. In addition, the deduction is phased out for taxpayers with Adjusted Gross Income between $$125,000 and $135,000 ($250,000 and $260,000 for joint filers).
Now the reality. The Stimulus Plan also provides incentives to taxpayers who choose to make certain improvements to their homes such as doors, windows fans, heaters and air conditioners that are also energy efficient. This is accomplished by modifying the existing residential energy property credit. The existing credit is 10% of certain costs and a fixed amount of other costs, up to a maximum lifetime credit of $500 and was available for the years 2006, 2007 and 2009. The new credit is 30% up to a maximum of $1500 for the years 2009 and 2010 combined. This $1500 maximum can be claimed in addition to the $500 lifetime credit claimed in 2006 and 2007. The new law, though modifies the energy efficiency standards for many of the types of property available for this credit. Most retailers have already adapted by disclosing whether the property qualifies.
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