The U.S. Government’s recently approved stimulus package includes tax breaks for consumers who purchase new on-road two or three wheeled motorcycles or scooters in 2009.

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.