DAILY NEWS BUSINESS WRITER
Monday, September 14th 2009
Some car dealers expect a rush at the end of the year as buyers look to take advantage of a special tax break.
The end of the Cash for Clunkers program means that government-funded aid that could make buying a car a great deal is over, right?
Wrong.
While Cash for Clunkers captured virtually all the attention of car shoppers, another government program aimed at stimulating the economy also offers incentives to many car buyers. And you still have plenty of time to get going.
The government’s economic stimulus package includes a provision that lets consumers deduct state and local sales and excise taxes paid on up to $49,500 of the purchase of a qualified new car, light truck, motorcycle or motor home.
“It’s a nice break, it applies to a lot of people,” said Jackie Perlman, a tax analyst at H&R Block’s Tax Institute.
The deduction starts to phase out for individual taxpayers whose modified adjusted gross income is $125,000 or more, and for joint filers starting at $250,000. The break — which taxpayers would list on their 2009 returns, due next April — applies to cars purchased between Feb. 16 and Jan. 1, 2010.
The special deduction is available even if you don’t itemize your federal return. The minority of taxpayers who choose to deduct their state and local sales taxes from their federal return rather than their state and local income taxes can only claim the special car tax deduction once.
Your savings would vary based on the cost of the car and your tax bracket.
In one example, assume you bought a car for $30,000. The sales tax (8.875% in New York City) would be $2,662.50. That amount is deductible from your federal return. If you’re in the 25% tax bracket, your tax savings would come to $665.63.
If you buy a new car and are eligible for the tax break, be sure to save all receipts and related paperwork.
Brian Benstock, general manager of Paragon Honda and Paragon Acura in Woodside, Queens, said so far the tax break has not made much of an impression on car buyers.
“It’s been a big yawn, people are not paying attention to it,” he said.
But Benstock predicts that will change in December as the deadline for taking advantage of the deduction approaches. He plans to advertise the tax break in November and December.
“It’s good for everyone,” Benstock said. “I have a feeling in December we will be doing a lot of business.”
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