Bad Credit Car Loans and the Excise Tax Deduction
by Steve Cypher on Monday, February 8th, 2010In 2009 many bad credit car loan customers took advantage of the sales and excise tax deduction. Here are some facts about this tax saving deduction from the Internal Revenue Service.
Making a new car more affordable
At Auto Credit Express, we are reminded of that fact that in 2009, like the cash for clunkers program, the sales and excise tax deduction for new vehicles portion of the American Recovery and Reinvestment Act ended at the beginning of 2010. Not only were consumers with excellent credit able to take advantage of the program, credit challenged consumers who purchased a new vehicle with a bad credit auto could also qualify – meaning that in addition to reestablishing their car credit and raising their FICO scores, they’ll also be saving hundreds of dollars off the transaction price.
And if you’re one of those fortunate consumers that were able to take advantage of this program, you may be wondering what to do next. Fortunately, the IRS recently issued an information sheet regarding the facts surrounding the deduction. Here is that information:
Eight Facts about the New Vehicle Sales and Excise Tax Deduction
If you bought a new vehicle in 2009, you may be entitled to a special tax deduction for the sales and excise taxes on your purchase.
Here are eight important facts the Internal Revenue Service wants you to know about this deduction:
• State and local sales and excise taxes paid on up to $49,500 of the purchase price of each qualifying vehicle are deductible.
• Qualified motor vehicles generally include new cars, light trucks, motor homes and motorcycles.
• To qualify for the deduction, the new cars, light trucks and motorcycles must weigh 8,500 pounds or less. New motor homes are not subject to the weight limit.
• Purchases must occur after Feb. 16, 2009, and before Jan. 1, 2010.
• Purchases made in states without a sales tax — such as Alaska, Delaware, Hawaii, Montana, New Hampshire and Oregon — may also qualify for the deduction. Taxpayers in these states may be entitled to deduct other qualifying fees or taxes imposed by the state or local government. The fees or taxes that qualify must be assessed on the purchase of the vehicle and must be based on the vehicle’s sales price or as a per unit fee.
• This deduction can be taken regardless of whether the buyers itemize their deductions or choose the standard deduction. Taxpayers who do not itemize will add this additional amount to the standard deduction on their 2009 tax return.
• The amount of the deduction is phased out for taxpayers whose modified adjusted gross income is between $125,000 and $135,000 for individual filers and between $250,000 and $260,000 for joint filers.
• Taxpayers who do not itemize must complete Schedule L, Standard Deduction for Certain Filers to claim the deduction.
As we see it
Any time you can make a bad credit car loan more affordable, it’s a good thing. And bad credit auto loan buyers who took advantage of the program should be aware of how they can now claim the deduction on their 2009 income tax returns. And what is probably the most important thing to remember? That would be the fact that taxpayers don’t have to itemize in order to take advantage of this deduction.
For more information about car loans for people with bad credit, we invite you to visit our web site at: www.autocreditexpress.com.
For more information about these rules and other eligibility requirements visit IRS.gov/recovery.
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