Time To Buy A New 2009 2010 Car?

Question from a reader:”Kim, is it time to buy a new car? If so what year? 2009 or 2010? I have a daughter with special needs and I am thinking of getting a van. Any tax breaks for that?”

My answer is that the perk for buying a new car this year is that in some cases, the sales tax is going to be 100% deductible. If you live here in Southern California (or anywhere in California), the sales taxes are going up about 1% soon and that can add some bucks to the cost of the vehicle for those of us living here in California.

A summary of the work-in-progress by Congress as of this blog entry is here. I think there are some provisions for American cars coming through as well but I would check with the IRS site or with me for more information as it is finalized. There is a lot of talk but until I see it in tax law, I can only go by what has been passed so far by Congress, etc. There isn’t anyting specific for business deductions as of this point as well that is different.

Buying a special needs van may not qualify for anything automotive in the terms of deductions but if there is a specific medical condition that mandates getting the vehicle-and it should be spelled out in the doctor’s letter-you might be able to take it as a medical deduction subject to the 7.5% of your adjusted gross income (AGI).

You still should be able to take your personal property tax deduction for any vehicle for the part of the registration that can be deducted at registration time. If it isn’t spelled out on the bill of sale for the new car, you can see what it is at renewal time.

Make sure if you are spending any money out of pocket for special needs devices or accessories (and that means that you aren’t reimbursed) that you put those items down on Schedule A under medical as well. I am talking about special car seats that are mandated by law but for some special needs children have to be reinforced differently or have other padding or features added. The same holds true for modifications to vans or automobiles so people can drive in their wheelchairs or have certain controls modded so they can access them better. Some of the car controls are pretty high tech but also equates to high cost and not all of it may be covered by health plans, etc. The parts that you pay for out of pocket is what you can take as a deduction.

Hope that helps and good luck!

April 13 2009

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