Sales Tax and Fees Deduction for Vehicle Purchases

If you are thinking about a new car, truck, SUV, or minvan, this is the time to purchase it. In addition to the Honda Model Clearance Sale at Bernardi and the Cash for Clunkers program that will be implemented next month, you may also be entitled to deduct state and local sales and excise taxes paid on the purchase on your 2009 tax return.

Internal Revenue Service Commissioner Doug Shulman said, “This deduction enables taxpayers to buy now and get cash back later on their tax returns.” You must purchase after February 16, 2009, and before January 1, 2010, to qualify for the deduction.

The special deduction is available when you file your 2009 tax return - regardless of whether you itemize deductions on Schedule A.

The deduction is limited to the tax on up to $49,500 of the purchase price of an eligible motor vehicle. The deduction is phased out for joint filers with modified adjusted gross income between $250,000 and $260,000 and other taxpayers with modified AGI between $125,000 and $135,000.

Taxpayers who make qualifying new vehicle purchase this year can estimate their deduction with the help of IRS Publication 919, How Do I Adjust My Withholding? Lines 10a to 10k on Worksheet 10 take into account purchases above the $49,500 limit, as well as the income phase-outs.

Related Items:
IR-2009-60, Special Tax Break on New Car Purchases Available in States With No Sales Tax
IR-2009-30, Special Tax Break Available for New Car Purchases This Year
Flyers, posters and marketing products
Seven Facts about the New Sales Tax Deduction
The American Recovery and Reinvestment Act of 2009: Information Center