Purchase of home or new vehicle could generate tax breaks

“If you’re considering buying a main home or a new vehicle, be aware that you may qualify for a tax credit or a deduction after the purchase,” said Delaware’s IRS spokesperson, Gregg Semanick, this week.

For the first-time homebuyer’s credit, buyers are considered to be first-time homebuyers if they, and their spouse if they 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). They can claim the credit either on their 2008 tax return or on their 2009 tax return next year.
The credit may not be claimed before the closing date of the purchase. But, if the closing occurs after the buyer’s 2008 return is filed, they can still claim it on their 2008 tax return by filing an amended return, Form 1040X.

The amount of the credit begins to phase out for taxpayers whose modified adjusted gross income is more than $75,000, or $150,000 for joint filers.

Those who are thinking about buying a new car may be able to claim a new tax deduction related to the purchase. If they buy a brand new passenger vehicle this year, they may be entitled to deduct fees or taxes that are assessed based on the vehicle’s sales price, such as the document fee. This deduction can be claimed only on their 2009 tax return filed next year.
The deduction is limited to the document fee paid on up to $49,500 of the purchase price of a qualified new car, light truck, motor home or motorcycle.

The amount of 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 taxpayers itemize deductions on their 2009 return but may not be taken on their 2008 tax return.

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