How to Buy a New Car with the Stimulus

When President Obama signed his stimulus package into law, it included a myriad of incentive programs. Among these was a significant tax deduction designed for middle-class citizens. The significance of this deduction is that it allows you to purchase a new automobile while enjoying a large reduction in the amount of taxes you owe for the year. This package may only be available for a few years, so take advantage of it if you can, and enjoy your new car.

Instructions

1

Determine the effect of this stimulus package on your personal income. The stimulus package, signed into law by President Obama, designates an income tax deduction when purchasing certain cars. This is a deduction and not a tax credit. The difference is that a tax credit is a direct reduction in your tax responsibility. A tax deduction is a calculated reduction in your yearly earnings for the purpose of calculating your tax debt. This means that if you earned $60,000 during the year and purchase a car worth $30,000, your tax responsibility will be calculated as if you earned $30,000. This is important for you to know when it comes time to file your taxes.

2

Select a car that meets the requirements to qualify for this deduction. Your purchased automobile can be of any type as long as it weighs less than 8,500 pounds. The only exception to this rule is if you are purchasing a mobile home, which can surpass this weight limitation. The deduction cannot surpass $49,500 in price. If your new car exceeds this price, you can claim the first $49,500 for your deduction. This includes any car, motorcycle, light truck or mobile home.

3

Calculate your expected yearly income for the year you are purchasing the new car. As long as your yearly income is less than $125,000, you are eligible for the full deduction. The size of the deduction decreases as your income approaches $135,000, and after $135,000, you are no longer eligible for the deduction.

4

Check the current tax laws involving new car purchases for the time period when you intend to purchase your new car. The stimulus package deduction may continue into the future with congressional support, but you should be aware of the current laws for this package before you make an investment into a new automobile.

5

Keep all of your records regarding your new car purchase. You will be required to fill out a Schedule L form and attach it to your 1040 or 1040A form when filing your yearly income tax. You will need to check the box on line 40b on your 1040, or 24b on your 1040A forms.