Monday, May 11, 2009


I have gotten several questions on the new tax break for new car purchases. I think that the following summary should answer all of the questions.

Taxpayers who buy a new passenger vehicle this year may be entitled to deduct state and local sales and excise taxes paid on the purchase on their 2009 tax returns next year. The deduction enables taxpayers to buy now and get cash back later on their tax returns.

The deduction is limited to the state and local sales and excise taxes paid on up to $49,500 of the purchase price of a qualified new (not used) car, light truck, motor home or motorcycle.

But like many tax breaks, 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.

In addition the vehicle must be purchased after Feb. 16, 2009, and before Jan. 1, 2010, to qualify for the deduction. The special deduction is available regardless of whether a taxpayer itemizes deductions on their return. The deduction may not be taken on 2008 tax returns.

Larry Kopsa CPA