Write Off Sales Tax
 

Just in case some of you guys might not be aware of this;

Those of you that bought/buy in '09 can write off the sales tax of the purchase. It's not a huge amount, but everything helps.

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.

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.

Agree totally -- Money is money.

It's Free money!

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.

Anybody know if this applies to tax paid on new lease initiated in 2009?

anyone know for maryland taxes?

im really interested. i purchased mine for around 34k.

what is maryland's tax bracket and how much can i expect to get back? please msg me =) i always like to do my w-2's first thing in january instead of waiting until march or something. plus i need the money haha.

$ub$cribed

This is for your federal return, not state. You should know how much you paid in state taxes, and you can deduct it on your federal return. The return instructions should have detailed information on how to complete the deduction.

Of course.. this does not apply to those that simply take the standard deduction. You'd have to itemize.

its been this way in Texas for a while and I luuuuuvvvvv it! I deduct, well what dont I deduct!:tup:

What's been this way in Texas for a while? Texas has no state income tax, and you've never been able to deduct sales tax from a car purchase on your federal return before.

I think I read somewhere that this applies even to people who do not itemize because it's a line added to the 1040 itself. Not 100% sure though.

Deduct...not write off.

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?

Yes that is correct.

Deduction and write off are the same exact thing.

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.

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.

^^^ I'm sorry, yes I made a typo. Meant to say deduct cost of tax paid ON the car. And that in the end this saving is negligible for an say an average buyer who say makes 50-70k a year.

The formula is quite simple assuming you don't drop to a lower bracket from your deductions: (Federal Tax Bracket) * (Sales Tax Paid)


@60k/year you're in the 25% tax bracket
If you paid 2,000 on sales taxes on the car then you get back $500. That's almost 2 Playstation 3s!

It was $900+ for that particular person since he is in the 30% bracket and he paid almost 10% in sales taxes.

^^^^ Oh okay....

Florida also has no state income tax and we are alowed to deduct ALL sales taxes paid during the year. I keep all my receipts and the actual tax paid is always more than what is printed in the tax table especially if a major purchase ...ie auto...was made during the year.