topic Deduction: Major purchase in Deductions & credits

Deduction: Major purchase

toric2014 — Thu, 23 Jan 2020 20:38:38 GMT

I need advise on how to fill in the Cost Excluding Tax, Sales Tax Paid, and Sales Tax Percent boxes? Purchase price of new car $39,752.43 which includes purchase price and warranties, I made a $13,000 down payment for a total financed $26,752.43. I made a private sale on my prior vehicle of $9,250, instead of trading in- this was applied as a tax credit which acted as a trade in allowance when paying sales tax. Total tax paid $2063.91.

Re: Deduction: Major purchase

ColeenD3 — Thu, 23 Jan 2020 20:59:28 GMT

The amounts of the down payment and amount financed is irrelevant. The amount you paid in sales tax is what counts. You stated that amount was $2063.91

You said you sold your prior vehicle in a private sale but somehow it also counted as a trade in allowance?

Re: Deduction: Major purchase

toric2014 — Thu, 23 Jan 2020 21:06:39 GMT

Thank you for the response. Yes, in the state of Arkansas you can use the sale of a vehicle 45 days prior to or after the purchase of a new vehicle as a tax credit on the purchase, it is called a 45 days tax credit. So it basically acts as a trade in allowance when you pay sales tax. I guess I need to know if I should enter in the total I paid for the vehicle or should I subtract the $9200 from the purchase price since it was deducted when paying sales tax?

Re: Deduction: Major purchase

MarilynG1 — Thu, 23 Jan 2020 21:25:32 GMT

If you are trying to claim an Additional Sales Tax Deduction in your Federal Return for your vehicle purchase, the amount of Sales Tax you paid (as on your contract) is the only number to be concerned about.

You will only receive the Sales Tax Deduction if it is LARGER than the amount of Income Tax you paid on your Wages.

The amount of Sales Tax you were charged most likely was calculated on the Sale Price after the trade in allowance was figured.

Click the link for more info on Sales Tax versus Income Tax.

TurboTax will choose whichever is the larger deduction for you.