Military servicemembers tax alert: before Dec. 31st 2009 you can take advantage of a motor vehicle tax break which was instituted for the year 2009 and may or may not be available after that.
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New Car Tax Break: Cars, Trucks, Motor Homes

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Military servicemembers tax alert: before Dec. 31st 2009 you can take advantage of a motor vehicle tax break which was instituted for the year 2009 and may or may not be available after that.

TAX BREAKS ON MANY NEW VEHICLES

At least for 2009, taxpayers who purchased a qualifying new motor vehicle after Feb. 16 2009 are eligible to deduct state, local, or excise taxes paid on the first $49,500 of the new car price.

$49,500 for a car? If this sounds like a luxury tax, think again: vehicles that qualify for the new car tax deduction include new passenger automobiles, motorcycles, motor homes, and light trucks.

In fact, the Internal Revenue Service (IRS) wants to remind you that this is one tax deal that greatly benefits middle to lower income car owners, both for servicemembers who itemize their taxes, and those who take standard deduction.

The new car tax deduction is only reduced for taxpayers with modified adjusted gross incomes (MAGI) between $125,000 and $135,000 and joint filers between $250,000 and $260,000. Taxpayers with higher incomes than listed above do not qualify for the tax deduction.

The new car tax is adjustable for states without sales tax, and can be applied to other qualified taxes and fees based on price at the time of purchase.

HOW TO FILE FOR THE NEW CAR TAX DEDUCTION

To receive your new car tax benefit if you file the standard deduction option, complete the Schedule L and attach it to Form 1040 or Form 1040A. This allows an increase on the standard deduction by state, local sales, or excise taxes paid for the sale of your new motor vehicle.

In addition, fill in the box on line 40b on Form 1040 or line 24b on Form 1040A.

Servicemembers who itemize their taxes should include the allowable amount of state, local sales, excise taxes from the purchase of the vehicle on Form 1040, Schedule A.



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