With all of the talk about auto industry bailouts, and bankruptcies, most consumers have become quite weary of buying a new car. However, if you were holding out, now is just as good of time as ever to get that new vehicle. In fact, there are plenty of tax benefits to encourage you. To help the readers of my blog wanting to know more about these savings, I have put together the following list of tips for new car buyers.
Local Tax Deductions
One of the biggest incentives to buy a new vehicle is the federal tax law that allows you to deduct both local and state taxes paid. However, you must make the purchase between February 16 and December 31, 2009. Although the savings begin to phase out with more expensive car purchases, this deduction can easily save you thousands of dollars come April 2010. To qualify, single taxpayers need to have an adjusted gross income of less than $125,000, and for joint taxpayers, the cap is $250,000.
Plug-In Hybrids
If you are looking to get a new fuel-efficient vehicle, then you may want to consider waiting for one of the new plug-ins due to be out later this year. There are lots of advantages to buying plug-in hybrids, especially ones that can run entirely on their batter power without using any fuel. However, there are also specific tax benefits that have become law during the Obama administration. For the first 250,000 plug-ins sold, owners will receive a tax credit ranging between $2,500 and $7,500. After those first cars are sold, the credits will still be available but in reduced amounts.
Sales Tax & Registration
When buying a car for the first time, many buyers will make the mistake of assuming that the price tag on the car is the exact amount they are going to pay. This is untrue. Although the price listed on the vehicle will be your main expense, sales tax and registration can easily increase your total costs by a few thousand dollars. When you are estimating the type of car you can afford, be sure to add in your local sales tax and registration! That way you can avoid potential surprises when you go to sign the purchase documents.
Business Expenses
If you are going to be using the car you purchase for your business or primarily as a business vehicle, then you may be able to benefit from additional tax deductions for purchasing and maintaining the vehicle. However, be sure to check with an accountant or tax professional before taking any of these deductions, as the IRS can be very strict about vehicle related expenses.
Car Pooling
If you are planning to use your new vehicle to carpool to work, make sure to check with your employer to see if they offer any incentives for doing so. Even if your employer does not participate in a program, you could still consider forming a carpool with some of your coworkers. To learn more about how you can save money by sharing a ride, check out this article about carpooling on doityourself.com.
State and Local Incentives
If you have been eyeing a certain vehicle but are not sure it is in your budget, then make sure you to check your state and local tax laws. Although most federal hybrid credits began phasing-out already, there are still numerous states that are offering tax incentives to purchase a hybrid or eco-friendly vehicle.