What does the Stimulus mean to me?

You've probably heard by now that last Friday the Senate approved the AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009--also known as Stimulus Bill H.R. 1, or more commonly "the Stimulus".

But what does this mean to us, the consumers? Does this really make it better to buy a car now? Or are we being roped into dipping into our own pockets to bailout the auto-industry?



Actually, it comes as a much needed relief to most of us. If you're like most people, no matter how tight your budget gets, you still have to have transportation. How are we supposed to get to work without a vehicle? We live in a semi-rural area without the sophisticated public transportation systems found in bigger cities. Put simply, if you want to go somewhere--you need a vehicle, or else you need to be friends with someone who has one. Most of the automakers are offering huge rebates and incentives already, in effort to encourage people to buy...now with the Stimulus Bill in effect, the cost of new car ownership might never be lower.

The actual bill is very hard to find on the internet, so how do we even know what exactly we are getting out of it? Here is a synopsis of the bill, courtesy of NADA (National Automobile Dealers Association) NADA

February 17, 2009
*** UPDATE: INCENTIVE EFFECTIVE FEBRUARY 17 ***

CONSUMER AUTO INCENTIVE INCLUDED IN FINAL STIMULUS BILL (H.R. 1)
“AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009”

Today, President Obama signed the American Recovery and Reinvestment Act of 2009. On February 13, the House approved the bill by a vote of 246-183 and the Senate passed the package by a vote of 60-38.

What Taxes are Deductible? 1
• State Motor Vehicle Sales
• Local Motor Vehicle Sales
• Motor Vehicle Excise Taxes

What Customers Qualify for the Deduction?
• Individual customers with modified adjusted gross income of less than $125,000 or joint-filers making less than $250,000 a year in 2009 would qualify for the deduction.
• Deductible as an “above the line” (for itemizers and non-itemizers) deduction on federal tax return.

Effective Date
• New vehicle purchases shall apply to purchases on or after the date of enactment (February 17, 2009) until December 31, 2009.

What New Vehicles Qualify for the Deduction?
• Any new vehicle under 8,500 pounds gross vehicle weight.
• New vehicles of any model year – when the original use commences with the taxpayer.
• Any vehicle sold for under $49,500 qualifies for the full deduction. Consumers may deduct sales taxes on the first $49,500 of any vehicle sold above this price.

THIS IS A GENERALIZED SUMMARY. Tax savings will depend on one’s individual tax rate. For more specific information on eligible customers, taxes and applicability, dealers are encouraged to consult with an accountant or tax professional.

1 “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.”


February 18, 2009

President Obama Signs Auto Tax Deductions into Law
Yesterday, President Barack Obama signed into law
the American Recovery and Reinvestment Act of 2009.
The new law contains a provision designed to entice
auto consumers back into vehicle showrooms. This
provision applies to eligible purchases between
February 17, 2009 and December 31, 2009. Qualifying
consumers may now deduct:
• State motor vehicle sales taxes
• Local motor vehicle sales taxes
• Motor vehicle excise taxes
Consumer Qualifications:
• Individual taxpayers whose adjusted gross income
is less than $125,000 per year
• Joint-filers whose combined adjusted gross income
is less than $250,000 per year
• Itemizers and non-itemizers who may deduct taxes
"above-the-line" on their federal tax returns
Eligible Vehicles:
• All new model year vehicles currently on dealers'
lots that have no prior purchase history
• New passenger cars and light trucks retailing up
to $49,500 may collect full tax deductions. For
all vehicles above this price, consumers may
deduct sales taxes on the first $49,500
• The vehicle must weigh less than 8,500 pounds
total

New car buyers. Purchasers of new cars and trucks will be allowed to deduct sales or excise taxes. This is an above-the-line deduction, so you don't have to itemize to claim it.

The deduction is limited to sales tax on purchases of up to $49,500. The deduction phases out for single taxpayers with adjusted gross income of more than $125,000, and married taxpayers whose AGI exceeds $250,000.

The amount you save will depend on your state sales tax rate and the price of your car or truck. If your state imposes a 4% sales tax and your car costs $40,000, the deduction will reduce your adjusted gross income by $1,600, says tax publisher CCH.

The deduction is limited to car and truck purchases made between the date the bill becomes law and Dec. 31, says Tom Ochsenschlager, vice president of taxation for the American Institute of Certified Public Accountants. Congress "is trying to get people to buy cars right away," he says.

The bill also expands a tax break for people who take public transit to work. The bill allows employees to set aside up to $230 a month in pretax dollars to cover the cost of a bus, train or van pool, up from $120. Employees were already allowed to set aside up to $230 a month for parking. If the employer subsidizes public transportation, employees can receive up to $230 a month without paying taxes on the benefit.



Of course, the actual amount of your deduction depends on your tax bracket, so consult with a tax professional for more details.



If you are looking for a new car, truck, or SUV, call or come in to any of the Smith Group locations today!