From Cash for Clunkers to new vehicle credits, the government is brainstorming ways to save Detroit with new vehicle tax breaks. The result is that this may be the best time to purchase a new vehicle personally or for your business.
One of the significant tax breaks for new vehicles is a sales tax deduction for non-itemizers. You can deduct the sales tax paid on up to $49,500 of the cost of new vehicles bought before 2010. If you don’t itemize, add sales tax on the vehicle to your standard deduction. If you do itemize and you deduct state income taxes, you can deduct the sales tax paid in addition to your other itemized deductions.
In Florida, if you itemize already then this deduction really doesn’t change anything. Florida doesn’t have a state income tax, so Florida itemizers are already deducting the sales tax on the vehicle through their itemized deductions. Also, The break starts phasing out for married people with AGIs over $250,000, and single people with AGIs over $125,000.
For your business, placing a new heavy SUV in service by December 31st gives even sweeter write-offs. On a new $50,000 SUV with a gross weight exceeding 6,000 pounds, for example, a firm can expense $25,000 – the maximum for vehicles. Then it can claim $12, 500, half of the remaining $25,000 cost, as bonus depreciation, plus regular depreciation of 20% of the $12,500 balance. The total first year write-off on the SUV can be up to $40,000, assuming 100% business use. Used heavy SUVs do not receive bonus depreciation.
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