Those who are looking to buy a new car can look forward to added benefit of tax relief in the form of sales tax deduction from taxable income. The incentive is offered to those who have bought new vehicle between Feb 2009 and December 2009. The taxes are deducted up to $ 49,500 of the cost of the car. The amount will vary as per the sales tax rate in each state.
The salient features
This was a good enough reason for individuals to buy a new car and reduce tax burden. It also rejuvenated new car industry and this became an added sales promotion tool besides new car discounts offered by manufacturers and dealerships.
How it works? The percentage of tax deduction varies from one state to another. So one has to calculate the deduction based upon the state applicable rate. For example the sales tax in California is 9.25%. So when one purchases a new car worth $30,000, the sales tax would be $2,775. This amount of $ 2,775 is deducted from the taxable income for 2009 of that individual. So if one has an annual income of $ 50,000, the new car sales tax of $2,775 would be deducted and one is liable to pay tax on the difference which is $ 47,225. There is a straight reduction in the taxable income. This is being considered as a big benefit over and above new car discounts that one gets on the purchase.
Who qualifies? This tax benefit or incentive on purchase on new car is available to
This kind of cash incentive is available in the next returns and helps save extra and that may be useful in the next car purchase or to pay up insurance to the car insurance company.
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