IRS tilts new vehicle deductions toward taxpayers

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in Leaders & Managers,Management Training,Small Business Tax,Small Business Tax Deduction Strategies

The IRS has yet to issue formal guidance on whether multiple vehicles can qualify for the new vehicle sales tax deduction (see Read the 'fine print' on new car deductions). But taxpayers can expect some good news on the way.

Alert: There’s no limit per taxpayer, an IRS spokesperson recently told tax publisher CCH. Therefore, if you qualify, you can write off sales and excise taxes for two or more vehicles purchased this year.    
 
According to the spokesperson, a taxpayer may deduct the taxes paid on the purchase of more than one vehicle, even if the total of the purchase price exceeds $49,500. There is no limitation on the number of vehicles an individual can purchase.

Here’s the whole story:
Under the new economic stimulus law, you can deduct sales and excise taxes attributable to the first $49,500 of the price of a new vehicle purchased after Feb. 16, 2009, and before Jan. 1, 2010. The write-off phases out for an AGI between $125,000 and $135,000 for single filers and an AGI of $250,000 and $260,000 for joint filers. 

Prior to the information provided to CCH, it wasn’t clear how the $49,500 limit would be applied, whether it would be available for only one vehicle per taxpayer, and whether the maximum total amount of sales tax could be deducted regardless of the number of vehicles purchased or if the limit applied to each vehicle purchase. Now it appears the IRS will take a pro-taxpayer view.

Tip: We expect the IRS to issue a pronouncement soon or at least clarify the issue on its web site.

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