IRS Reminds Car Shoppers about 2009 Tax Break
Dealers, don't forget that customers only have a few days left in 2009 to take advantage of the new car sales tax deduction. The Internal Revenue Service has issued a reminder to individual taxpayers who are considering buying a new car that they have until Dec. 31 to take advantage of a tax break that may not be around in 2010. Click here for details. Dealers should also consult their tax professional.
Only One Week Remains to Take Advantage of 2009 Consumer and Business Tax Incentives
Most Businesses May Take Advantage Of Expanded Loss Carryback Option Under New IRS Procedure WASHINGTON — Most businesses may use losses incurred during the economic downturn to reduce income from prior tax years, under a revenue procedure issued Nov. 20, 2009, by the Internal Revenue Service.
The relief provided under the Worker, Homeownership, and Business Assistance Act of 2009 differs from similar relief issued earlier this year in that the previous relief was limited to small businesses.
The current relief is applicable to any taxpayer with business losses, except those that received payments under the Troubled Asset Relief Program. The relief also applies to a loss from operations of a life insurance company.
Taxpayers under the procedure may elect to carry back a net operating loss (NOL) for a period of three, four or five years, or a loss from operations for four or five years, to offset taxable income in those preceding taxable years. An NOL or loss from operations carried back five years may offset no more than 50 percent of a taxpayer's taxable income in that fifth preceding year. This limitation does not apply to the fourth or third preceding year.
The procedure applies to taxpayers that incurred an NOL or a loss from operations for a taxable year ending after Dec. 31, 2007, and beginning before Jan. 1, 2010.
Revenue Procedure 2009-52 provides guidance under § 13 of the Worker, Homeownership, and Business Assistance Act of 2009, which allows taxpayers to elect a 3, 4, or 5-year net operating loss (NOL) carryback instead of a normally 2-year carryback. The election applies to an applicable NOL, which is an NOL for a taxable year ending after December 31, 2007, and beginning before January 1, 2010. The revenue procedure tells taxpayers the time and manner for making the election if the taxpayer (1) has not claimed a deduction for an applicable NOL; (2) previously claimed a deduction for an applicable NOL; or (3) previously filed an election to forgo the NOL carryback. |
Consumers can still take advantage of the generous tax deduction for state sales taxes (and some other state fees) on the purchase of a qualifying new vehicle before Dec. 31. NADA was instrumental in the passage of this provision. These savings will not be available after Dec. 31, 2009, so customers should know that now is still a great time to buy. As well, there are still green vehicle tax incentives for hybrids, diesels and alternative fuel vehicles (follow link below).
As the economy slowly recovers, it is also the perfect opportunity for dealers to remind small business customers that they have just a few weeks left in 2009 to take advantage of generous accelerated depreciation and expensing tax incentives on the purchase of certain qualifying business vehicles (extended in the February stimulus bill, The American Recovery and Reinvestment Act of 2009).
Congress also recently passed an extension of a net operating loss (NOL) provision which will help struggling dealers. The provision was modified to provide businesses of all sizes with a tax break allowing them to carry back losses to get refunds on taxes paid over the past five years. On Nov. 6, President Obama signed the bill into law (PL 111-92). This tax break will help the cash flow of struggling dealers of all sizes as the economy slowly recovers.
The links below provide quick reference guides of the tax incentives from the Stimulus Bill, but do not provide a comprehensive reference for all tax situations. As always, note that the guides are simply summaries and NADA encourages dealers, consumers, and businesses to contact their preferred tax professional for further details.
Links to Resources
Consumer
IRS Website: Guidance on New Vehicle Sales/Excise Tax Deduction
Sales Tax Deduction Showroom Flyer ( .pdf)
IRS: “Seven Facts about the New Sales Tax Deduction for Vehicle Purchases" (.doc)
Guidance for States without Sales Tax (.doc)
Fueleconomy.gov: Guidance to Hybrid, Diesel, Alt. Fuel and Plug In Tax Credits
Business
Q&A from the IRS on the state sales tax deduction ( .pdf)
Bonus Depreciation and Small Business Expensing (.doc)
Updated Guide to Net Operating Loss (NOL) ( .pdf)
GM Tools