The Federal stimulus package signed into law yesterday is laddened with initiatives designed to help boost our nation’s economy. None of these provisions, however, will affect the die-hard motorcyclist more than the provision, which allows motorcycle buyers to deduct the sales and excise taxes on their 2009 tax return. Yeah, you really just read that. If you buy a motorcycle under $49,500 and subject to certain restrictions, you can take the tax portion of the OTD price and subtract it from your tax statement next April 15th. How much a buyer benefits will depend on the taxes paid and their personal tax situation, but it the case of your typical sportbike, that’s still nearly a grand off your taxes.
Motorcycle dealers counting on a big boost will not find it here and would be far better served by concentrating on building their business and delivering excellent customer service.
Quick summary:
– The deduction is available to non-itemizers.
– The taxes deducted only apply up to the portion of a vehicle’s purchase price of $49,500.
– There is an income limitation of $125K for single taxpayers or $250K for couples.
Specific text from the stimulus bill:
Digging through the actual stimulus bill (yes I did, so you don’t have to!) the text that applies is below:SEC. 1008. ADDITIONAL DEDUCTION FOR STATE SALES TAX AND EXCISE TAX ON THE PURCHASE OF CERTAIN MOTOR VEHICLES.
(a) IN GENERAL.—Subsection (a) of section 164 is amended by inserting after paragraph (5) the following new paragraph:
‘‘(6) Qualified motor vehicle taxes.’’.
(b) QUALIFIED MOTOR VEHICLE TAXES.—Subsection (b) of section 164 is amended by adding at the end the following new paragraph:
‘‘(6) QUALIFIED MOTOR VEHICLE TAXES.—
‘‘(A) IN GENERAL.—For purposes of this section, the term ‘qualified motor vehicle taxes’ means any State or local sales or excise tax imposed on the purchase of a qualified motor vehicle.
‘‘(B) LIMITATION BASED ON VEHICLE PRICE.—
The amount of any State or local sales or excise tax imposed on the purchase of a qualified motor vehicle taken into account under subparagraph (A) shall not exceed the portion of such tax attributable to so much of the purchase price as does not exceed $49,500.
‘‘(C) INCOME LIMITATION.—The amount otherwise taken into account under subparagraph (A) (after the application of subparagraph (B)) for any taxable year shall be reduced (but not below zero) by the amount which bears the same ratio to the amount which is so treated as— ‘‘(i) the excess (if any) of— ‘‘(I) the taxpayer’s modified adjusted gross income for such taxable year, over ‘‘(II) $125,000 ($250,000 in the case of a joint return), bears to For purposes of the preceding sentence, the term ‘modified adjusted gross income’ means the adjusted gross income of the taxpayer for the taxable
year (determined without regard to sections 911, 931, and 933).
‘‘(D) QUALIFIED MOTOR VEHICLE.—For purposes of this paragraph—
‘‘(i) IN GENERAL.—The term ‘qualified motor vehicle’ means—
‘‘(I) a passenger automobile or light truck which is treated as a motor vehicle for purposes of title II of the Clean Air Act, the gross vehicle weight rating of which is not more than 8,500 pounds, and the original use of which commences with the taxpayer,
‘‘(II) a motorcycle the gross vehicle weight rating of which is not more than 8,500 pounds and the original use of which commences with the taxpayer, and
‘‘(III) a motor home the original use of which commences with the taxpayer.
‘‘(ii) OTHER TERMS.—The terms ‘motorcycle’ and ‘motor home’ have the meanings given such terms under section 571.3 of title 49, Code of Federal Regulations (as in effect on the date of the enactment of this paragraph).(c) DEDUCTION ALLOWED TO NONITEMIZERS.—
(1) IN GENERAL.—Paragraph (1) of section 63(c) is amended by striking ‘‘and’’ at the end of subparagraph (C), by striking the period at the end of subparagraph (D) and inserting ‘‘, and’’, and by adding at the end the following new subparagraph: ‘‘(E) the motor vehicle sales tax deduction.’’. (2) DEFINITION.—Section 63(c) is amended by
adding at the end the following new paragraph: ‘‘(9) MOTOR VEHICLE SALES TAX DEDUCTION.— For purposes of paragraph (1), the term ‘motor vehicle sales tax deduction’ means the amount allowable as a deduction under section 164(a)(6). Such term shall not include any amount taken into account under section 62(a).’’.(e) EFFECTIVE DATE.—The amendments made by this section shall apply to purchases on or after the date of the enactment of this Act in taxable years ending after such date.
Source: The Kneedragger
Just learned I can deduct the taxes paid on my motorcycle on this years tax return!!!11 http://is.gd/1aXNL WIN
Anyone know more about the federal stimulus that makes motorcycle purchases tax deductible http://bit.ly/4okMg
Unfortunately, the 2009 tax forms I just downloaded from IRS.gov don’t agree with what is said in this article about deducting sales tax on a motorcycle. Yes, the law says that you should be able to get the additional deduction for sales tax, but good luck actually getting it —
The 2009 IRS forms require you to file Schedule L to calculate the amount of the deduction to take on Form 1040 line 40a. If you bought a Buell 1125R for $6,000 and your state’s sales tax rate was 5%, then your sales tax amount would be $300.00. So far so good…
If you run through the numbers on IRS Schedule L, you will be disappointed. Form 1040 Schedule L is used to calculate the amount by which your standard deduction should be INCREASED by the amount of sales tax paid on your new vehicle purchase. Instead, this form has a mistake in it — the calculations on Sch Line 20 actually tell you to REPLACE your standard deduction with the calculated tax credit amount, when it should tell you to INCREASE your standard deduction by the calcualted tax credit amount.
For a single (or married filing separately) person, the amount of the standard deduction is $5700. Adding $300 for sales taxes paid should bring your standard deduction up to $6000, but it doesn’t. Instead of ADDING the $300 figure to the $5700 standard deduction, the official IRS forms tell you to REPLACE the $5700 standard deduction with an amount of $300. The way the fax forms are written right now, taking this deduction will cause you pay tax on an additional $5400 in “income”; you lose $5700 – $300 = $5400 in deductions, and your taxable income increases accordingly.
It looks like the IRS instructions for Schedule L have a pretty significant mistake in them. Its too bad that the IRS makes it next to impossible to report this kind of error.