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Read the ‘fine print’ on new car deductions

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in Small Business Tax,Small Business Tax Deduction Strategies

Under the new economic stimulus law—the American Recovery and Reinvestment Act of 2009—you can deduct state and local taxes paid to purchase a new vehicle. The rules seem straightforward enough, but watch out for a few interesting twists and turns.

Strategy: Do the tax homework before you buy a new set of wheels. The new vehicle deduction is temporary. It applies to sales made after Feb. 16, 2009, and before Jan. 1, 2010.

Here’s the whole story:
The new law allows you to write off sales and excise taxes attributable to the first $49,500 of a new (not used) vehicle’s price.

Note that the new deduction isn’t limited to passenger automobiles. It also covers new motorcycles, new light trucks and new SUVs, as long as you’re the original buyer and the vehicle doesn’t weigh more than 8,500 gross pounds. New motor homes also qualify.

The write-off phases out at relatively modest income levels. The phaseout occurs for a...(register to read more)

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