Write Off Sales Tax

dweedlebug

FYI -- Good info regardless, but it REALLY is not as much as most people think.

Look at the back of the Schedule A form for the calculation. A $30,000 car at around 7% tax gets to deduct ~$150.

zip159

It really depends on your tax bracket.

Car: 30,000
Taxes @ 7%: 2,100

Estimating 16% for taxes still equals $336. Sounds good to me.

dweedlebug

Agree totally -- Money is money.

zmyride

Mine is $32000.
Tax is $3120 (9.75% in CA where i live)

I'm in the 30% tax bracket. so $3120 x 30% = $936 tax refundable.

Not bad.

dudafunk

Your 30% sounds like FEDERAL TAX. Where does the question of federal tax brackets come in? I was thinking this is how it works:

Car: 30,000
NY sales tax: 8.625% = $2587
NY sales tax table for salary $20k+ = 6.85%
So refund = 6.85% of 2,587 = $177.

And so, agree with the OP - savings are really negligible. When the quoted post said $936, I felt I had been wrong about this tax credit law. Can someone confirm?

dudafunk

I guess basically you just subtract the car cost from your taxable income for both federal and state tax forms - and THEN carry on with the usual calculation (apply std deductions etc. etc.)... but anyway, I confirmed, its not going to result in a $900+ saving by any means as someone above pointed out.

Micas

That's not correct. You do not deduct the cost of the car from your taxable income. That would be a massive deduction.

You deduct the sales tax that was paid on the car on your federal return, not your state return. Again, this has absolutely nothing to do, what-so-ever, with state tax returns. It's only federal.

Also, as someone pointed out, the amount of money this reduces your tax burden by is directly proportional to the percentage of your adjust gross income that is actually taxed.. i.e., the higher your tax bracket, the more money you save on your tax bill.