On March 30, 2009 the Internal Revenue Service announced that taxpayers who buy a new car between February 16, 2009 and January 1, 2010, may be eligible to deduct the state and local sales and excise taxes from their 2009 tax returns. According to IRS Commissioner Doug Shulman, “This deduction enables taxpayers to buy now and get cash back later on their tax returns.” Excellent!! But what if you live in a state without state sales tax – such as Alaska, Montana, or New Hampshire?
More good news! On June 10, 2009, the IRS announced that taxpayers who live in states without a state sales tax can also benefit from this break. Taxpayers in these states can deduct other state or local fees or taxes associated with the purchase of a vehicle, as long as these fees or taxes are assessed on the basis of either the vehicle’s sales price or assessed as a per unit fee.
What You Need to Know
The deduction is limited to fees or taxes paid on up to $49,500 of the purchase price of a qualified vehicle
Qualified vehicles generally include a new – not used – car, light truck, motor home, or motorcycle
The vehicle must be purchased after February 16, 2009, and before January 1, 2010
Taxpayers can claim this deduction only on their 2009 tax return
This deduction is available whether or not taxpayers itemize their deductions. Taxpayers who do not itemize will add the taxes or fees to the standard deduction on their 2009 tax return
The amount of the deduction is phased out for individual filers whose income is between $125,000 and $135,000, and for joint filers whose income is between $250,000 and $260,000. The deduction is not available for taxpayers whose income is above the $135,000 individual filer or $260,000 joint filer threshold
The deduction may not be taken on 2008 returns
For more information on this special tax break, visit the official Internal Revenue Service website at IRS.gov.
Source: IRS.gov