Tax Lawyers Minneapolis

Sales Tax Deduction for Vehicle Purchases

If you are considering whether to buy a new car, it is important to remember that, under the American Recovery and Reinvestment Act of 2009 (the “ARRA”), taxpayers may deduct state and local sales and excise taxes paid on the purchase of new passenger cars, light trucks, motor homes and motorcycles. The deduction is available on new vehicles purchased from February 17, 2009 through December 31, 2009. In states that don’t have a sales tax, the ARRA provides a deduction for other taxes or fees paid as long as these taxes and fees are assessed on the purchase of the vehicle and are based on the vehicle’s sales price or as a per unit fee. This deduction is available whether or not a taxpayer itemizes deductions on Schedule A.

The deduction is limited to the taxes and fees paid on up to $49,500 of the purchase price of an eligible vehicle. The deduction is reduced for joint filers with modified adjusted gross incomes (MAGI) between $250,000 and $260,000 and other taxpayers with MAGI between $125,000 and $135,000. Taxpayers with higher incomes do not qualify.

IRS Announces 2010 Standard Mileage Rates

The Internal Revenue Service today issued the 2010 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes. Beginning on Jan. 1, 2010, the standard mileage rates for the use of a car will be:

  • 50 cents per mile for business miles driven
  • 16.5 cents per mile driven for medical or moving purposes
  • 14 cents per mile driven in service of charitable organizations

Remember, you may not use the business standard mileage rate for a vehicle after using any depreciation method under the Modified Accelerated Cost Recovery System (MACRS) or after claiming a Section 179 deduction for that vehicle. In addition, you cannot use the business standard mileage rate for any vehicle used for hire or for more than four vehicles used simultaneously.

Also note that you always have the option of calculating the actual costs of using your vehicle rather than using the standard mileage rates.

Eugene Sherayzen re-appointed to the MSBA Publications Committee

On June 30, 2009, Eugene Sherayzen was re-appointed to the Minnesota State Bar Association Publications Committee. The Committee is responsible for overseeing the budget and publication of the most important Minnesota legal journal, “Bench & Bar”.

Reduction of Estimated Tax Payments under the American Recovery and Reinvestment Act of 2009 (ARRA)

Prior to the ARRA, small businesses usually had to pay 110 percent of their previous year’s taxes in estimated taxes. The ARRA permits small businesses to reduce their estimated payments to 90 percent of the previous year’s taxes.