New Car Sales Tax Deduction
By Bob Reinhart
The American Recovery and Reinvestment Act of 2009 that was passed by Congress on February 17, 2009 created the New Car Sales Tax Deduction. Buyers of new cars, light trucks, motor homes and motorcycles between February 17, 2009 and the end of the year may deduct the portion of state and local sales and excise taxes attributable to the first $ 49,500 of the vehicles purchase price (per vehicle). There is no limit on the number of vehicles that may be purchased. This is an additional standard deduction (taken whether or not the taxpayer itemizes) and is allowed against alternative minimum tax. The deduction will be phased out for single filers with modified adjusted gross income in excess of $ 125,000 and $ 250,000 for joint filers.
Important - If the taxpayer elects to deduct state and local sales taxes instead of the state and local income taxes on Schedule A then the taxpayer cannot also take the new car sales tax deduction. That would be "double-dipping". Also the New Car Sales Tax Deduction will not lower adjusted gross income (used for many phase-outs).