Sales Tax Deduction For New Car Purchases Ends Dec. 31


This year, automotive dealerships received a lift from the highly publicized “Cash for Clunkers” campaign. However, a little-known government program gives new car buyers money back on their taxes.

Taxpayers who buy a new vehicle by Dec. 31, may deduct state and local sales and excise taxes paid on the purchase on their 2009 tax returns next year.

“This deduction enables taxpayers to buy now and get cash back later on their tax returns,” said IRS Commissioner Doug Shulman.

The deduction is limited to new cars, light trucks, motor homes and motorcycles valued up to $49,500.

The amount of the deduction is phased out for taxpayers whose modified adjusted gross income is between $125,000 and $135,000 for individual filers and between $250,000 and $260,000 for joint filers.

The deduction is available regardless of whether a taxpayer itemizes deductions. The deduction; however, may not be taken on 2008 tax returns.

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