Tax News

CCH (cch.taxgroup.com) reports:

  The IRS has issued a reminder to individual taxpayers who are considering buying a new car that they have until Dec. 31 to take advantage of a tax break that may not be available in 2010. Taxpayers who buy a qualifying new motor vehicle after Feb. 16, 2009, can deduct the state or local sales or excise taxes they paid on the first $49,500 of the purchase price. Qualifying motor vehicles include new passenger automobiles, light trucks, motorcycles, and motor homes.

  The deduction is reduced for joint filers with modified adjusted gross incomes between $250,000 and $260,000 and other taxpayers with modified adjusted gross incomes between $125,000 and $135,000. Taxpayers with higher incomes do not qualify.

  Taxpayers who take the standard deduction need to complete Schedule L and attach it to Form 1040 or Form 1040A to increase the standard deduction by the allowable amount of state or local sales or excise taxes paid on the purchase of the new vehicle and to check the box on line 40b on Form 1040 or line 24b on Form 1040A. Taxpayers who itemize should include the allowable amount of state or local sales or excise taxes from the purchase of the vehicle on Form 1040, Schedule A.

IR 2009-119