Miss out on Cash for Clunkers? You could still get a tax break! Tax Tip of the Week

Now that the Cash for Clunkers program has ended, there are still incentives for those who purchase new cars in 2009. Specifically, there may be deductions available for the sales tax you pay on the new car.This sales tax deduction can take place in one of two ways.First, the sales tax may be an eligible “above-the-line” (or front page) deduction.  The deduction is limited to sales tax paid on up to a $49,500 purchase price of a qualifying vehicle.  This deduction is phased-out for single taxpayers with adjusted gross income over $125,000, and $250,000 if married.The second alternative is to add it to your sales tax deduction on your itemized deductions (Schedule A). A couple of years ago, you were given the option to either deduct the amount you pay in state and local tax, OR the amount you pay in sales tax. The sales tax paid for new cars can be added to the “Optional Sales Tax Tables” provided by the IRS based upon your income and number of people in your household.If you purchase a new car in 2009, you will need to figure your taxes using both methods to determine which gives you the biggest benefit.So even if you didn’t participate in Cash for Clunkers program, be sure to put the sales receipt of any new car purchase in your tax file.These rules can get complicated; call us with any questions. In Dayton, call 937-436-3133 and in Xenia, call 937-372-3504....until next week.