The Internal Revenue Service recently published nine facts about the special sales tax deduction for car purchases available through the end of the year even to consumers with bad credit.
New cars and bad credit car loans
At Auto Net Financial, for the last twelve years we have been helping consumers with bad credit raise their FICO scores and reestablish their car credit by financing a vehicle with bad credit auto loans. When we first got into the business, very few subprime lenders would even consider loaning money for a new car. Most of the small regional lenders at that time preferred financing used cars. But as more national bad credit lenders got involved, new vehicles gradually became a part of most lenders programs.
Besides being more reliable, new cars often come with rebates and new car incentives – money that can often be used towards a down payment. And this year, the federal government has even stepped in to make new cars even more affordable to bad credit car loan buyers.
Only 5 weeks left
As a borrower, one of the things that you have control over in order to make the overall bad credit buying process less expensive is timing. And the end of the year is an especially good time to purchase a new car. Most new car showrooms see a drop in traffic between Thanksgiving and Christmas, meaning dealers, and manufacturers, are more inclined to offer better deals and hefty rebates this time of year.
In 2009, bad credit car loan buyers can take advantage of this situation as well as the current sales and excise tax deduction under the American Recovery & Reinvestment Act of 2009 that’s available to all buyers (including bad credit car loan buyers) of new vehicles purchased before January 1st, 2010. But time, as you can see, is running out on the latter.
Here is an explanation plus nine facts from the Internal Revenue Service about the new vehicle sales and excise tax deduction:
Taxpayers who buy new motor vehicles this year may be entitled to a special tax deduction for the sales or excise taxes on those purchases when they file their 2009 federal tax returns next year. This tax break is part of the American Recovery and Reinvestment Act of 2009.
Taxpayers in states that do not have state sales taxes may be entitled to deduct other fees or taxes imposed by the state or local government.
Here are nine important facts the IRS wants you to know about the 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. Motor homes are not subject to the weight limit.
• Purchases must occur after Feb. 16, 2009, and before Jan. 1, 2010.
• Taxpayers who purchase new motor vehicles in states that do not have state sales taxes may be entitled to deduct other fees or taxes assessed on the purchase of those vehicles. Fees or taxes that qualify must be based on the vehicles’ sales price or as a per unit fee. These states include Alaska, Delaware, Hawaii, Montana, New Hampshire and Oregon.
• Taxpayers who purchase qualified motor vehicles may claim the deduction when they file their 2009 tax return in 2010.
• The deduction may not be taken on 2008 tax returns.
• 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.
• For more information on this and other key tax provisions of the Recovery Act visit the official IRS Website at IRS.gov.
The Bottom Line
If you’re planning on financing your next new vehicle with a bad credit car loan, you can take advantage of the ARRA deduction by buying a new car before the January 1, 2010 deadline, making your purchase even more affordable.
For more information about car loans for people with bad credit, we invite you to visit our web site at: www.autonetfinancial.com.
