Important Car Tax Deduction For Auto-Buyers

The economy has seen better days. The struggles of the economy were the impetus for the passage of the American Reinvestment and Recovery Act, known commonly as the Federal Stimulus Bill. Included in this act is a car tax deduction.

Originally conceived as a credit, this car tax deduction seeks to provide an incentive for prospective automobile buyers and to help jump-start a moribund automotive industry. The window for taking part in this offer is limited - only cars purchased between February 17, 2009 and December 31, 2009 qualify for the savings. This effort has similar goals to the earlier "Cash for Clunkers" program, an Obama-administration initiative which gave rebates to those looking to trade in fuel-inefficient vehicles to purchase new ones.

Not everyone is eligible for this car tax deduction: there are income restrictions on those looking to take part. Those filing singly with a reported income of more than $135,000 or filing jointly for more than $260,000 are ineligible. For those with a singly filed income between $125,000 and $135,000 or a joint filed income between $250,000 and $260,000, the amount of the deduction is decreased as the income increases. However, all with an income of below $125,000 (filing singly) or $250,000 (jointly) are eligible, which means that a majority of Americans are eligible to take part in this program. Furthermore, the reduction is available whether or not you itemize other deductions on your Schedule A.

The car tax deduction might also not be available for the specific model of car you wish to buy. If you want to take advantage of the car tax deduction, the purchased car has to weigh below 8,500 pounds. While the vast majority of cars, motorcycles, light trucks, motor homes, SUV's and RV's fall below this ceiling, not all of them do: Hummer's H1 and H2 are both too heavy to be included. Leased cars are also ineligible for this deduction.

While this car tax deduction is not available to businesses, it could mean big savings for individuals or families looking for a new vehicle. Take note: because only cars purchased before the end of 2009 are eligible, time is running out for those looking to save - this car tax deduction will be in your rearview in less than a week.

Xavier is a native New Yorker that loves reading, writing and learning about new topics - especially when they lead to car tax deductions.