Cash for a Clunker Appliance

Similar to last year’s cash for clunker program, the American Recovery and Reinvestment Act of 2009 has allocated $300 million for rebates to eligible residential consumers when they recycle their used appliances and purchase new energy-efficient ones (otherwise known as ENERGY STAR appliances).  Each state is in charge of designing  and implementing its own unique Appliance Rebate Program, and the Department of Energy (DOE) has already approved all of them.  A handful of states (Iowa, Kansas, Minnesota, Rhode Island) have started their programs, but most will launch theirs later this month.  Click here for details of the program available in your state. Continue reading

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At the Showroom, Don’t Forget the Deduction

As 2010 car models start creeping into showrooms and auto dealers lay on incentives in the hopes of beating the continued decline in car sales, buying a new car may start looking like an attractive option again.  And even with the end of the Cash for Clunkers program, the US government is still willing to give you a nudge in the “buy” direction.

For any new passenger vehicle purchase made between February 17 and December 31, 2009, inclusive, you may be eligible to deduct state, local, and excise taxes from your 2009 federal income tax.  The only two restrictions are: (1) the deductible taxes are limited to those levied on the first $49,500 of the purchase price (that is, you don’t get a higher tax deduction simply for buying a Lamborghini), and (2) you can only take the deduction if your modified adjusted gross income (MAGI) is less than $135,000 if you are filing individually or $260,000 if you are married and filing jointly.  The deduction is also phased out for individual filers with MAGIs between $125,000 and $135,000 and joint filers with MAGIs between $250,000 and $260,000.

Other than the limitations above, the deduction initiative is quite generous.  It covers not only cars, but also light trucks (maximum gross weight of 8,500 pounds), motorcycles, and even motor homes.  You can take the deduction for as many new cars as you buy during the period, as long as you are eligible within the two restrictions detailed above.   Furthermore, even if your state does not have sales taxes, you can still deduct fees or other local government taxes associated with the vehicle, as long as they are based on the purchase price or assessed as a per unit fee.

While this deduction may not stir car purchases in the way the now-extinct Cash for Clunkers did, it may still prove to be a nice incentive when coupled with all the markdowns on 2009 models and the extra features added to the 2010 models to boost holiday season sales.

Cash for a Clunker, Deduction for a Brand New Car

If you need a new car, now is the best time to get one.  Here are the two reasons why:

1) Under the Consumer Assistance Recycle and Save Act of 2009  (commonly known as the Cash for Clunkers Act), you can trade in a less-fuel-efficient vehicle (less than 22 mpg for a passenger car, for example) for a $3,500-4,500 voucher to go towards the purchase of a more-fuel-efficient vehicle.  This program is in effect from July 1, 2009 to November 1, 2009, and as far as we know, there are no restrictions on the brands of cars you can purchase as long as the new car is more fuel efficient than the old one.  Click here for more information.

2) The IRS is allowing consumers to deduct from their 2009 federal taxes the state and local sales taxes paid on the purchase of a new vehicle.  Remember, a deduction lowers the amount of income on which you will be taxed.  Purchases, however, must be made between after February 16, 2009, and January 1, 2010 and are limited to new vehicles (not used).  The deduction also phases out at higher incomes.  Click here for more information.

If you have a less fuel efficient car and are looking to buy a new car, you have until November 1st of this year to take advantage of both incentives.  And if you don’t, the tax break alone may still make purchasing a new car this year a great deal.