McKonomics

The Long Anticipated Pennsylvania State Budget

The state budget for Pennsylvania has finally been passed for the fiscal year 2009-2010. Over the course of the past few months, many strategies were proposed to alleviate the more than $3 billion budget deficit. Included in those strategies were a personal income tax rate increase, sales and use tax on professional services, and a combined reporting requirement for parent and subsidiary companies.

These items were taken off the bargaining table before the final budget passed. However, the state budget still brought about several significant tax changes. Among the changes were amendments to Pennsylvania's sales and use, personal income, corporate net income, capital stock and franchise, and cigarette taxes. In addition, there is a new gross receipts tax on managed care and a tax amnesty program that will begin in 2010. The following are a few changes that will affect corporate taxpayers:

Special Sales Tax Deduction for Car Purchases

With 2010 models arriving in dealer showrooms, the Internal Revenue Service is reminding taxpayers that purchasing a new car, light truck, motor home or motorcycle could qualify them for a special deduction for the state and local sales and excise taxes on their 2009 tax returns.

Purchases made before January 1, 2010, will qualify for this deduction under the American Recovery & Reinvestment Act of 2009 (ARRA).

The deduction is limited to the sales and excise taxes and similar fees paid on up to $49,500 of the purchase price of a new vehicle. The deduction is reduced for joint filers with modified adjusted gross incomes (MAGI) between $250,000 and $260,000 and other taxpayers with MAGI between $125,000 and $135,000. Taxpayers with higher incomes do not qualify.