The Economic Stimulus Hits Home
I just realized that I qualify for a special 2009 sales-tax deduction for purchasing a new car. In fact, my household will get two deductions because my wife also purchased a new vehicle this year. It’s about time that some of the stimulus dollars stimulated my pocketbook.
I’d heard about this, of course, but I figured it would not apply to me. These types of tax give-a-ways never seem to come my way, usually due to income restrictions. But sure enough, I checked the IRS website www.IRS.gov/recovery and it says the following:
The American Recovery and Reinvestment Act permits taxpayers to take a deduction for state and local sales and excise taxes paid on the purchase of new cars, light trucks, motor homes and motorcycles. The deduction is available on new vehicles purchased from Feb. 17, 2009, through Dec. 31, 2009. In states that don't have a sales tax, the law provides a deduction for other taxes or fees paid. This deduction is available whether or not a taxpayer itemizes deductions on Schedule A. The deduction is limited to the taxes and fees paid on up to $49,500 of the purchase price of an eligible vehicle.
As I expected, the amount of the deduction is reduced or eliminated for high income tax payers. Fortunately, the administration does not consider us rich enough take away this gift.
Just as the credit market meltdown made buying a car a no-brainer compared to leasing, this tax break fell into our laps when both of our cars were coming off leases. The sales-tax deduction did not enter into our buying decisions at all. We would have purchased the vehicles anyway.
I don’t understand the logic of giving tax breaks if they don’t provide an incentive to do something meaningful that otherwise wouldn’t be done. Of course, that’s the fiscally responsible taxpayer in me talking, whereas the tax break recipient in me is quite happy. The McIntyre family will get a deduction of over $3,500 this year.
Keep in mind that this is a deduction, not a credit. So this will reduce taxable income rather than our taxes directly. I would rather have had cash for a clunker, which was a large credit for turning in a gas guzzler. Unfortunately, we didn’t have clunkers to deal. I’m not complaining, though. Even so, our tax bill will be cut by at least $1,000.
Make sure to check out the IRS website. You might also be the beneficiary of the economic stimulus and not know it, or still have the opportunity to qualify for one of the special provisions. The American Recovery and Reinvestment Act of 2009 has all kinds of goodies in the form of tax deductions, tax credits and direct payments to individuals and businesses.
There is even a $250 payment to retired railroad workers. It just so happens that I worked in the railroad industry for seventeen years before changing careers. Do you think I qualify for this too?