Motorcycles Included in 2009 Stimulus

2009 Tax Credit for Motorcycle and RV Purchase

The recent stimulus package that was signed into law on Tuesday (2/17/09) had a last minute inclusion for motorcycles and recreational vehicles. Cars and light trucks already had dibbs on their dollar share of the stimulus billions, and with the successful lobbying from the AMA, Harley-Davidson, and other industry groups, along with the support of four senators from areas most affected by a struggling motorcycle industry (Bob Casey, D-PA, Christopher Bond, R-MO, Russell Feingold, D-WI, and Herb Kohl, D-WI), motorcycles and RVs quietly squeaked there way into the bill. This is not an industry-saving piece of legislation, as we understand it, but may be a gentle purchase incentive for certain buyers. The cost to include motorcycles and RVs to the stimulus is estimated at around $100 million.  

Section 1008 of the Stimulus Plan

Section 1008 in the stimulus bill allows taxpayers purchasing a motorcycle or RV under $49,500 to deduct state and federal sales tax paid in 2009 when filing their ’09 tax returns. It is important to understand that this is a tax deduction and not a tax credit.  A tax deduction reduces income reported and not taxes owed. To be eligible for the tax deduction, a single person’s annual modified adjusted gross income for that tax year cannot exceed $125,000 or $250,000 for a joint return.  The effective date for this deduction, according to the language of the bill itself applies, "to purchases on or after the date of the enactment of this Act in taxable years ending after such date." We interpret this to mean that for any bike purchased after the date the Act was signed until one year from that date.You may want to check with the dealer on that if you are purchasing close to the beginning or ending date.

What does that mean to me?

Let’s say you were buying a bike that costs $20,000 and you pay 6% sales tax where you live.   The sales tax wold come to $1,200 and is deductable from your taxes next year.  So if your tax bracket is say 30%, then that would be a savings of $400.  Not a lot, but every little bit helps.  If you were thinking of buying a new motorcycle anyway, that’s $400 worth accessories that you won’t have to shell out the cash for.