Money Back for New Vehicle Purchases

Taxpayers who buy certain new vehicles in 2009 can deduct the state and local sales taxes they paid. The American Recovery and Reinvestment Act of 2009 (ARRA) provides a deduction for state and local sales and excise taxes paid on the purchase of new cars, light trucks, motor homes and motorcycles through 2009. The deduction is available regardless whether a taxpayer itemizes deductions on Schedule A. Purchased before February 17, 2009 are not eligible for the special deduction. Purchases must be made prior to January 1, 2010.

The deduction is limited to the tax on up to $49,500 of the purchased 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.