The American Motorcyclist Association (AMA) is reminding riders that they may be eligible for a federal tax deduction on their 2009 taxes if they bought a new motorcycle last year. The American Recovery and Reinvestment Act a landmark $787 billion economic stimulus package that President Barack Obama signed into law in February 2009 provides a deduction for state and local sales and excise taxes paid on the purchase of qualified new vehicles from Feb. 17 through Dec. 31, 2009. Qualified new vehicles include street and dual-sport motorcycles, scooters, mopeds, cars, light trucks and motor homes.
“At first, Congress was not going to include motorcycles in this bill, but the AMA and the associations members, along with Harley-Davidson and others, persuaded our elected representatives to go back to the drawing board and fix that oversight,” said AMA Vice President for Government Relations Ed Moreland. “Congress responded, and now motorcyclists who purchased a new bike last year can enjoy the same tax savings as those who opted for four-wheeled transportation.”
Eligible vehicles must have a gross vehicle weight rating (GVWR) of 8,500 pounds or less, and cost less than $49,500. Individuals can take the full deduction if they make less than $125,000, or $250,000 for joint filers. The deduction is phased out for taxpayers with income between $125,000 and $135,000 ($250,000 to $260,000 for a joint return). Individuals dont have to itemize to claim the deduction.
To illustrate the impact of the tax deduction, consider the case of a new motorcycle purchase of $10,500. For a 7.5 percent sales tax rate, the tax would be $787.50. The purchaser takes this deduction on the federal income tax form, reducing their taxable income by $787.50. Sales and excise taxes vary by state, so the actual savings will depend on the taxpayers state and tax rate.
To read the Internal Revenue Service “Questions and Answers” about the deduction, go to IRS.gov or click here for more info.