Stimulus New-Car Tax Credit

[Judge]

I'm reading that the stimulus bill Obama is about to sign includes a tax break for people who bought or plan to buy a new car under $50,000. I wonder if this means we'll get all the tax back we paid on our new vehicles.

Here's some info on it:

http://jalopnik.com/5146133/new-car-...imulus-package
http://news.yahoo.com/s/ap/20090213/...lus_auto_sales

[Keiichi Tsuchiya]

Does anyone know when this goes into effect? Thanks .

[Monterra]

It means that you can deduct the sales tax (not a tax credit unfortunately) from your taxable income on cars up to 50k as long as you don't make more than 125 single, 250 married filing jointly (adjusted gross) on cars bought in 2009. This deduction savings won't be realized until you file you 09 return- next year. Depending on your tax bracket and tax paid you could save over 1500 off next year's tax bill. My math came out to about 900 in my case- car was only 32.5.

[drivrswntd]

Very cool, just placed an order yesterday

[doodads]

I read that it goes into effect the day Obama signs the bill into law, which is supposed to be today I believe.

[drivrswntd]

Good thing my car is ordered, and wont be here for 2 months then.

[Monterra]

It will apply to all cars purchased in the 2009 calendar year (even ones before the bill is signed) but remember you won't realize the benefit until next spring when you file your 09 return.

[Call]

Actually the bill will be signed on Tuesday, Feb 17th and will go into effect immediately. The deduction can be used on your 2008 tax filings but keep in mind it's a deduction not a credit...you will not realize a dollar for dollar deduction. And, it will only be applicable on your Federal Return not State returns.

For those who may have already filed their 2008 return you can file an amended return now or do so on the 2009 or 2010 returns. Also, if you aren't getting anything back otherwise you don't reallly realize any savings at all

Also, keep in mind all this is subject to change because they have not published the final draft, that usually doesn't occur until about two hours before the President signs it. Funny isn't it? Congress votes for a bill that they usually haven't read and is never the final draft that someone can change the technical wording that can possibly change the effectivieness of the bill all together...happens all the time

Call

[Monterra]

It also no longer applies to interest paid on loans, only taxes thanks to the House.

[Monterra]

I didn't know you could claim on the 08 return that's good news. But if I owe the feds 2k for instance, after the deduction it'll be about 1.1k, savings ARE realized whether or not your getting a check.

[Call]

Originally Posted by Monterra

I didn't you could claim on the 08 return that's good news. But if I owe the feds 2k for instance, after the deduction it'll be about 1.1k, savings ARE realized whether or not your getting a check.

Lets put it this way...it will be counted just like any other deduction if you itemize...the amount you get back will increase if you paid more in than you owe or the amount you may additionally owe will be decreased. If your deductions before applying the sales tax deduction brings you to zero the sales tax deduction will not help you for 2008 so you might consider applying it to your 2009 tax return.

Call

[Monterra]

What? And BTW it's not going to be like any other deduction, it will be applied much like a retirement plan contribution in that it reduces your AGI. Here's the details copied from the AP (I've been doing my homework on this):

Families who earn less than $250,000 a year, or $125,000 for individuals, can qualify. The tax break applies only to the first $49,500 of the purchase price and the deduction is "above-the-line," meaning it can be used by taxpayers who itemize their deductions and by those who do not itemize.

http://www.google.com/hostednews/ap/...O3COgD96AV7QO0

Originally Posted by Call

Lets put it this way...it will be counted just like any other deduction if you itemize...the amount you get back will increase if you paid more in than you owe or the amount you may additionally owe will be decreased. If your deductions before applying the sales tax deduction brings you to zero the sales tax deduction will not help you for 2008 so you might consider applying it to your 2009 tax return.

Call

[Call]

By any other deduction I mean in reference to a post that thought it would be a credit.

Call

[Monterra]

Yeah, no credit that would've been sweet but this is still much better than a sharp stick in the eye. Let me break it down quickly: lowering your AGI (exactly what this will do if you qualify) will lower your tax liability regardless of whether you owe or are in line to get a check. If you owe- you'll owe less; if they owe you, they'll owe you more. The quick math: figure out what your sales tax was/will be- in my case: 32,500*.08375 = 2721.87. Take the sales tax paid and multiply that by your federal marginal tax rate to calculate what you'll save off your federal tax bill: 2721.87*.33 = 898.21. Being that my AGI will be now be lower by 2721.87, my tax liability will be lower by 33% of that or 898.21.

Below are the married filing joint marginal tax rates for 2008:

10% on the income between $0 and $16,050
15% on the income between $16,050 and $65,100; plus $1,605.00
25% on the income between $65,100 and $131,450; plus $8,962.50
28% on the income between $131,450 and $200,300; plus $25,550.00
33% on the income between $200,300 and $357,700; plus $44,828.00
35% on the income over $357,700; plus $96,770.00

[MadMan77]

Does anyone know where it says that you can claim this on your taxes for 2008? Everything I have read only applies to new car purchases during the 2009 calendar year.

[Monterra]

I can't confirm if it's applicable to 2008 returns, my feeling was no because it's based on purchases and I assume income levels from 2009 the latter of which isn't final until the end of 2009.

Call- Do you know where you saw that the deduction will apply to 08 returns as well?

[BMW=BeggingMantoWife]

Here's a question. I purchased the car late in 08 BUT paid my sales tax in 09. Because I paid the tax in 09 I am wondering if I quality? Does anyone have an opinion on this?
Thanks

[BimmerLearner]

Lets hope leasing is included.

[Monterra]

Leasing definitely not included...

Originally Posted by BimmerLearner

Lets hope leasing is included.

[BimmerLearner]

Originally Posted by Monterra

Leasing definitely not included...

Link?

[syenisch]

I ordered in '08 right after Christmas, so I secured '08 prices, but am paying in '09. Also got the 2 months free financing... let's see...

~$300 saved for '08 pricing
~$900 saved from BMW Financing
~$500 saved from stimulus package
----------------------------------

[SLO]

Sucks that it's a sales tax credit when Oregon doesnt have sales tax. Anyone know if those who dont pay sales tax can still apply for the credit on State Income Tax?