What is in it for the Car Buyer

I am going to be highlighting separate parts of the new tax breaks and who can use them. I recently got a call from a car salesman. Every car salesman needs to know this credit. The complete synopsis is at the end of this post. If you have any questions, please feel free to post a comment and I will respond as soon as I can.

Bottom line, if you are looking to head to one of these dealerships that is closing and closing its inventory, keep your receipt. IF you are buying a new car, you can deduct the sales tax. Unlike a lot of tax breaks, this is above the line. OK, so what does "above-the-line" mean and why is that good. Above the line simply refers to being above the line for "Adjusted Grose Income" which means you don't have to itemize to take it. As a tax payer, you have the choice to either add up all of your deductions (ie, itemize) or take the standard deduction (last year it was 5,250 for a person or 10,500 for a married couple). So if you get a $2,000 deduction that brings your total "itemized deductions" to $4,500, you obviously are better off with the standard and that $2,000 deduction is really worthless to you. By taking it above-the-line, you essentially deduct it before you get to the itemized or standard comparison. In other words, everyone actually gets it that isn't rich (Adjusted Gross Income too high, see below).

Temporary Tax Deduction on Car PurchasesPurchasers of new vehicles will get an above-the-line deduction for the state sales taxes, local sales taxes, and excise taxes paid. To qualify, a vehicle must be newly purchased for first use by the taxpayer and must (1) be a passenger vehicle, light truck, or motorcycle with a gross weight of no more than 8,500 pounds, or (2) be a motor home.Deductible taxes cannot exceed the portion attributable to the first $49,500 of the price paid for any single vehicle.Phase-outs start for individuals with AGI greater than $125,000 ($250,000 for MFJ).