Sales Tax on New Autos Officially Deductible

During his press conference on the auto industry, President Barack Obama announced that the state and local sales and excise taxes on new-vehicle purchases would be tax deductible for 2009. That same day, the Internal Revenue Service made the tax deduction official.

Here are the details: The sales tax for any new car, truck, motor home or motorcycle purchased between Feb. 16, 2009, and Jan. 1, 2010, can be deducted on your 2009 taxes. This deduction is available for individuals with an adjusted gross income of less than $125,000, or for joint filers under $250,000. The deduction phases out for taxpayers whose AGIs fall between $125,000 and $135,000 for individuals and between $250,000 and $260,000 for joint filers.

The deduction is only good for the taxes paid on a vehicle up to $49,500 of the purchase price. So if you buy a $70,000 car, you won’t be able to deduct the taxes for the additional $20,500.

Two important points to emphasize: First, even if you haven’t filed for 2008 yet, the deduction can only be used on your ’09 taxes. Second, the law is retroactive, so if you purchased a car after Feb. 16, this is a bit of good luck for you.

Comments

Another give-away by the fool that I voted for! At least make it retroactive to Jan 1 2009 instead of discriminating against all the hard working folks who did purchase prior to Feb 16th. And remove the income cap as it makes no sense! The idea is to sell cars so why have a stupid cap for the year the tax deduction is in place. It's obvious that BHO is no Bill Clinton. So far BHO has proven that he has little clue on how to create jobs. Paul Krugman is right on the money when he says you can't tell the difference between GW Bush's policies and BHO's. How very sad.

Not cool. I purchased my first brand new car (after several used purchases in my life) on February 14.
Not cool at all.

I purchased on Feb 16 when law was about to be signed. And gues what? The bill had ruling that it will apply to purchases between 12/1/08 and 1/1/10. But IRS made it "after 2/16"

These types of "give aways" make a lot more sense than giving automakers huge amounts of taxpayer cash. In addition to this deduction, interest paid on car loans should also be deductible, and they should throw in a $2500 tax credit for any American who buys an American nameplate vehicle. That would end the US automakers' crisis immediately. I agree the deduction should be given to all who stepped up to buy a car this year, not just those after 2/16.

LOL at people whining about it not being retroactive enough to cover them. All rebates/sales/etc have a cutoff date - and every one of them has somebody whining about having bought something on the other side of that date. Hey, the pundits tell us the used vehicle prices are way up so sell that one you bought for a profit and then buy another new one and get your mondo tax deduction. Or, back in reality-land, accept that this is real life and just because deductions are being handed out you aren't in line for it - and just keep the whining to yourself.