New Car Buyer Tax Break for 2009

IRS today announced a special tax break for new car purchases (the tax break was actually approved by the congress as part of the American Recovery and Reinvestment Act of 2009). If you are planning to buy a new car, then you may get a break on state and local sales taxes and deduct taxes paid for the  new vehicle on 2009 tax returns (next year).

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 car, light truck, motor home or motorcycle.

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.

New cars purchase between February 16, 2009 and January 1, 2010 are eligible for this special tax break for tax payers, regardless whether he/she itemizes deductions or not. This tax break, however, can’t be claimed on 2008 return.