Tax Tips for the Unemployed

Do You Qualify for a Vehicle Sales Tax Deduction?

We know how good it feels when you can lower your tax burden, right? And one of the ways to reduce your tax burden is through a vehicle sales tax credit.

Since owning a vehicle of any kind such as a car, a boat or any other vehicle are a significant expense, so the amount of tax credit that you can get can easily erase your tax payments, isn’t that interesting? The most important thing for a vehicle sales tax deduction is to qualify to receive this tax credit, for this reason, we have jotted down some of the important things that you must keep in mind to be eligible for this credit.

Deductions vs. Credits: One of the most important things that you must keep in mind is the difference between a tax credit and a tax deduction. A deduction basically reduces your amount of income that you are taxed on. For instance, if your income is $60,000 and you have deductions worth $5000, then your taxable income is going to be $55,000. So, your taxable income is going to be lower than your unadjusted income and therefore you get less income to pay your tax on.

Whereas a tax credit reduces the amount of your tax debt and has nothing to do with your income.

For example, you owe $5000 in the income tax and you get to discover that you are eligible for a tax credit of $2000 and now your tax bill has been lowered to $3000. The vehicle sales tax deduction is available for a range of vehicles, and you can deduct the sales tax for automobiles that run on electric, gas or are hybrid.

How to Qualify for and Claim a Vehicle Sales Tax Deduction: You must itemize to consider doing this and to qualify for a vehicle sales tax deduction there are following steps that apply and you can also check and consult with your tax relief expert and see if you qualify for this tax deduction or not.

The vehicle sales tax deduction is only for new vehicle purchases and not for vehicles that are used or leased since if you lease a car the dealer receives the tax deduction and there are rare chances of you receiving a part of tax deduction. Another important thing is that the sales tax that is paid should be at the same rate as the general sales tax rate. You cannot have both general sales tax deduction and vehicle sales tax deduction at the same time.

To check your potential general sales tax deduction you will need to keep all your receipts for the tax year safely. The vehicle sales tax deduction is available for a variety of vehicles. The vehicle must

be purchased new; it cannot be leased or used. A deduction reduces your total income, so you pay less income tax, unlike a credit that reduces the amount of tax you pay. So, by the end of this article, we hope we have helped you with the common queries related to the vehicle sales tax deduction.