Special Sales Tax Deduction for New Car Purchases Ends December 31, 2009

The American Recovery and Reinvestment Act of 2009 provides for a new deduction for the state and local sales and excise taxes paid on the purchase of a qualified new car, light truck, motor home, or motorcycle.  The vehicle must be purchased after February 16, 2009 and before January 1, 2010.  The amount of the deduction are the taxes paid on up to $49,500 of the purchase price.  The special deduction is available regardless of whether a taxpayer itemizes deductions on their tax return.  Even taxpayers living in states without sales taxes (e.g., Montana, Oregon, etc.) but that impose fees or non-sales taxes on the purchase of the vehicle would be entitled to a deduction of those fees or taxes.  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.  For more information, see http://www.irs.gov/newsroom/article/0,,id=211310,00.html.