Stimulus Tax break

[Jimmy]

Source RIA:

New Law. The 2009 Recovery Act provides that qualified motor vehicle taxes are deductible either as part of the standard deduction or as an itemized deduction.

For these purposes, qualified motor vehicle taxes are any state or local sales or excise tax imposed on the purchase of a qualified motor vehicle.

The deduction is limited to the amount of qualified motor vehicle taxes attributable to the first $49,500 of the purchase price (purchase price limitation).

The amount of taxes treated as qualified motor vehicle taxes that can be taken as a deduction is phased out ratably for a taxpayer with modified adjusted gross income (AGI) between $125,000 and $135,000 ($250,000 and $260,000 on a joint return). Specifically the amount otherwise deductible (after application the purchase price limitation) is reduced (but not below zero) by the amount that bears the same ratio to allowable qualified motor vehicle taxes as the excess (if any) of the taxpayer's modified AGI for the tax year over $125,000 ($250,000 in case of a joint return), bears to $10,000.

For this purpose, modified AGI means the taxpayer's AGI determined without regard to Code Sec. 911 (citizens or residents of the US living abroad), Code Sec. 931 (income from sources within Guam, American Samoa, or the Northern Mariana Islands) and Code Sec. 933 (income from sources with Puerto Rico).

Illustration 1: Taxpayer purchases a car for $25,000 in a locality that imposes a 6% sales tax. The Taxpayer's modified AGI is $130,000. The qualified motor vehicle tax is $1,500. The purchase price limitation does not apply. However, since the taxpayer's modified AGI exceeds $125,000 by $5,000, the taxpayer's qualified motor vehicle tax deduction is reduced by $750 ($1,500 x $5,000/$10,000). Thus, a $750 qualified motor vehicle tax deduction is permitted.

Illustration 2: Taxpayer purchases a car for $25,000 in a locality that imposes a 6% sales tax. The taxpayer's modified AGI is $135,000. The qualified motor vehicle tax is $1,500. The purchase price limitation does not apply. However, since the taxpayer's modified AGI exceeds $125,000 by $10,000 the taxpayer's qualified motor vehicle tax deduction is reduced by $1,500 ($1,500 x $10,000/$10,000). Thus, no deduction is permitted in this case.

A qualified motor vehicle is:

a passenger automobile or light truck (as defined in title II of the Clean Air Act), or motorcycle (within the meaning of 49 CFR 571.3) the gross vehicle weight rating of which is not more than 8,500 pounds and the original use of which begins with the taxpayer, and
a motor home (within the meaning of 49 CFR 571.3) the original use of which begins with the taxpayer. (Code Sec. 164(b)(6)(D) )
RIA observation: For definitions under title II of the Clear Air Act (42 USC 7521 et seq.), see FTC 2d/Fin ¶L-18024.1; TaxDesk ¶397,106; . 49 CFR §571.3 relates to the Federal Motor Vehicle Safety Standards definitions.
Qualified motor vehicle taxes are not treated as part of the cost of the acquired property or, in the case of a disposition, as a reduction in the amount realized on the disposition. (Code Sec. 164(b)(6)(E) )

A deduction of qualified motor vehicle taxes is not allowed for taxpayers who make an election under Code Sec. 163(b)(5) to deduct state sales tax in lieu of state income tax. (Code Sec. 164(b)(6)(F) )

In addition, the qualified motor vehicle component of the standard deduction is allowed as a deduction for AMT purposes. (Code Sec. 56(b)(1)(E) as amended by 2009 Recovery Act §1008(d))

The above provisions do not apply to purchases after Dec. 31, 2009. (Code Sec. 164(b)(6)(G) )

Effective: For purchases of qualified motor vehicles on or after date of enactment in tax years ending after that date (2009 Recovery Act §1009(e)) and before Jan. 1, 2010. (Code Sec. 164(b)(6)(G) )

[wilson]

Well,

If it is other than a “Tax Lien Certificate” sale, then if you have purchased the tax deed sale, then you will not be liable against any kind of tax liens, deeds or mortgages of the trust that is drawn on the land that you have purchased. Here you will be purchasing the deed to the property and the deed will be entirely clear and free from any other documents and will be free from all the problems.

[Buckbo]

Originally Posted by Rob53

From what information I have been able to find on the final passed version of the 787B stimulus bill, only the tax paid on the purchase price will be tax deductible for the tax year 2009. The interest paid on the loans will not be deductible. Considering that interest rates should be very low, the dollar amount paid on interest should not be a great deal of money anyway, unless you are financing 30K or more. I know that every little bit helps in tax relief, but at least the biggest chunk of change (state tax) will be a tax break for us. Here in the great Welfare State of California, I will pay nearly 3K tax on my 2SS/RS. So, that 3K comes right off the top of my taxable income for the year, next years tax time. Better than a poke in the eye I reckon.

Is it tax deductable on the short form or do you have to itemize?

[Mr_Draco]

Originally Posted by Buckbo

Is it tax deductable on the short form or do you have to itemize?

You do NOT have to itemize to get the deduction.