Purchase of home or new vehicle could generate tax break

From press release

CHICAGOIf you’re considering buying a main home or a new vehicle, the Internal Revenue Service wants you to know you may qualify for a tax credit or a deduction after the purchase.

Qualifying homebuyers generally can file for the First-Time Homebuyer Credit immediately after they purchase a home,

said IRS spokesperson Sue Hales.
However, the deduction for buying a new vehicle is taken when you file your 2009 tax return next year.

Homebuyers can get a tax credit, while new vehicle buyers can get a tax deduction. A tax credit comes directly off the taxes you owe, while a deduction lowers your taxable income, directly reducing your taxes.

Tax credit for purchase of home

For purposes of the homebuyer credit, you are considered to be a first-time homebuyer if you, and your spouse if you are married, did not own any other main home during the three-year period ending on the date of purchase.

Under the American Recovery and Reinvestment Act of 2009, qualifying taxpayers who purchase a home before Dec. 1, 2009 can receive a tax credit of 10 percent of the purchase price, up to $8,000 ($4,000 for married individuals filing separately). You can claim the credit either on your 2008 tax return or on your 2009 tax return next year.

The credit may not be claimed before the closing date of the purchase. But if the closing occurs after your 2008 return is filed, you can still claim it on your 2008 tax return by filing an amended return, Form 1040X.

The deduction is phased out for taxpayers whose modified adjusted gross income is between $75,000 and $95,000 for individual filers and between $150,000 and $170,000 for joint filers.

Tax deduction for purchase of new vehicle

If you buy a brand-new passenger vehicle this year, you may be entitled to deduct state and local sales and excise taxes paid on the purchase on your 2009 tax return next year.

The deduction is limited to the state and local sales and excise taxes paid on up to $49,500 of the purchase price of a qualified new car, light truck, motor home or motorcycle.

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.

The vehicle must be purchased after Feb. 16, 2009, and before Jan. 1, 2010, to qualify for the deduction.

The special deduction is available regardless of whether you itemize deductions on your 2009 return but may not be taken on your 2008 tax return.

To learn more about the tax provisions of the Recovery Act, visit the IRS Web site at www.irs.gov.

From the September 30 – October 6, 2009 issue.