2009 Federal Sales Tax Deduction The
American Recovery and Reinvestment Act of 2009 contains an important
tax incentive for individuals and businesses who purchase a new
passenger automobile, light truck or motor home from February 17, 2009
through the end of 2009. In general, buyers will be permitted to deduct
the sales/excise tax imposed on their new vehicle purchase on their
federal income tax return. What Taxes are Deductible?
The law allows a deduction for state or local sales or excise tax
imposed on the purchase of a qualified motor vehicle. In Minnesota that
includes: • 6.5% motor vehicle sales tax that dealers collect and remit to the Deputy Registrar. • $20 transit tax charged by dealers in 5 counties around the Twin Cities. •
$20 local excise tax charged on sales of vehicles by dealers located in
Baxter, Brainerd, Mankato, New Ulm, Owatonna and Rochester. What New Vehicles Qualify for the Deduction? • Cars, light trucks and SUV’s with a gross vehicle weight of 8500 lbs or less. • Motorcycles. • Self propelled motor homes. •
New vehicles of any model year – when the original use commences with
the taxpayer. Extrapolating from other IRS regulations, MADA believes
that new vehicle demonstrator vehicles are eligible for the deduction. •
Eligible vehicles sold for under $49,500 qualifies for the full
deduction. Consumers may deduct sales taxes on the first $49,500 of any
vehicle purchased above this price. How about Leases? There’s no deduction for sales tax paid on a new vehicle lease. What Customers Qualify for the Deduction? •
Individual customers with modified adjusted gross income of less than
$125,000 or joint-filers making less than $250,000 a year in 2009 would
qualify for the deduction. • Deductible as an “above the line” (for itemizers and non-itemizers) deduction on federal tax return. Minnesota Income Tax Deduction? No. Sales taxes deducted on a federal return are added back in to determine Minnesota taxable income. Effective
Date. The new sales tax deduction applies to new vehicle purchases made
on or after February 17, 2009 through December 31, 2009.
