Vehicle Finance

If you purchased a new vehicle between the dates of February 16, 2009 and January 1, 2010, you might be entitled to a deduction for your sales and excise taxes on your new vehicle.

State and local excise and sales taxes paid on up to $49,500 of the cost of your new vehicle may be tax deductible under this break for 2009.

Qualified vehicles include new cars, motor homes, light trucks, and motorcycles.

There is a weight limit of 8500 pounds on new cars, light trucks, and motorcycles. There are no weight restrictions on mobile homes.

States like Alaska, Delaware, Hawaii, Montana, New Hampshire and Oregon, where there are no sales taxes, may meet qualifying requirements, as well. Any state or local fees applicable to the purchase of a new vehicle based upon the purchase price or per unit charge in such states, may qualify as a deduction.

You can take this deduction, even if you do not file an itemized return. Taxpayers filing the standard deduction should add the additional amount to the standard deduction on their 2009 income tax return.

The amount of allowable deduction phases out for taxpayers with a modified adjusted gross income of between $125,000 to $135,000 for those filing individually and a modified adjusted gross income of between $250,000 to $260,000 for those who file jointly.

Taxpayers, who do not itemize and claim a standard deduction, must file an attached Internal Revenue Service Schedule L.

Remember that there are more tax credits and deductions available for your 2009 new car purchase if you bought a hybrid or electric vehicle. Some of these deductions and credits are quite sizable. To qualify for some of these further deductions, you may need to file an itemized return for 2009.

For more information on qualifying requirements and filing instructions, you can visit the Internal Revenue Service website at IRS.gov.

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