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Vehicles eligible for the motorcycle tax
deduction added to the American Recovery and Reinvestment Act
are likely to include on-road and dual-sport motorcycles, as
well as motorscooters and mopeds. The tax deduction -- first
reported by the AMA on Feb. 14 -- was added at the eleventh hour
to the landmark $787 billion stimulus package that President
Barack Obama signed into law on Feb. 17.
"While we are awaiting final language from the Treasury
Department, we believe that many motorcycles and scooters will
qualify," said Ed Moreland, AMA vice president for government
relations. "We have AMA members to thank, because they responded
to our appeal to contact their legislators to make sure that
motorcycles were part of this inclusive and equitable solution."
Moreland added that the efforts of Harley-Davidson, together
with AMA, were instrumental in obtaining the same tax deduction
that was provided in the stimulus plan for automobile, light
truck and RV purchasers. The law also includes a 10 percent tax
credit up to $2,500 for street-legal electric motorcycles
purchased by December 2011.
The sales and excise tax deduction applies to motorcycles
purchased between Feb. 17 and Dec. 31, 2009, with a GVWR (gross
vehicle weight rating) less than an 8,500 lbs., and costing less
than $49,500. Individuals can take the 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
do not have to itemize to claim the deduction.
What qualifies as a motorcycle in the economic stimulus law?
According to section 571.3 of title 49, Code of Federal
Regulations (CFR), a motorcycle is defined under federal law as
"a motor vehicle with motive power having a seat or saddle for
the use of the rider and designed to travel on not more than
three wheels in contact with the ground." In addition, a
"motor-driven cycle means a motorcycle with a motor that
produces 5 brake horsepower or less."
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. To take advantage of the new
law, purchasers would include that amount on their 2009 federal
income tax return, meaning that their taxable income would be
reduced by that amount before taxes are calculated. States set
their own sales tax rates, so the actual amount of savings will
depend on the taxpayer's state and tax rate.
"This victory indicates that our legislators are starting to
recognize how motorcycles reduce traffic congestion, provide
efficient use of limited parking, lessen the impact on our roads
and bridges and help reduce our dependence on foreign oil," said
Moreland.
Moreland added that the AMA would provide additional details of
the tax deduction as soon as the Treasury Department issues its
final rules. Among the questions to be answered are what
model-year products are covered, including yet-to-be-released
2010 models; whether or not all unsold, new models are included,
regardless of year; and whether or not off-road motorcycles are
included. |
