IADA - The Idaho Automobile Dealers Association, Inc.

2009 New Car Sales Tax Deduction

Seven Facts about the New Sales Tax Deduction for Vehicle Purchases

Taxpayers who buy a new car or several other types of motor vehicles this year may be entitled to a special tax deduction when they file their 2009 federal tax returns next year. The tax break is part of the American Recovery and Reinvestment Act of 2009.

To see the marketing materials available, CLICK HERE

Here are seven things you should know about this new deduction:

1. State and local sales taxes paid on up to $49,500 of the purchase price of qualifying vehicles are deductible.
2. Qualified motor vehicles generally include new (not used) cars, light trucks, motor homes and motorcycles.
3. Purchases must occur after Feb. 16, 2009, and before Jan. 1, 2010.
4. This deduction can be taken regardless of whether or not you itemize other deductions on your tax return.
5. Taxpayers will claim this deduction when filing their 2009 federal income tax return next year.
6. The amount is phased out for individuals with income between $125,000 - $135,000 and between $250,000 - $260,000 for joint filers.
7. The deduction may not be taken on 2008 tax returns.

Special Sales Tax Deduction for Car Purchases Available through End of 2009

As I’m sure you know, the American Recovery and Reinvestment Act of 2009 provides a deduction for state and local sales and excise taxes paid on the purchase of new cars, light trucks, motor homes and motorcycles through 2009. It also provides for the deduction of other taxes or fees paid in states with no sales tax. This deduction is available regardless of whether a taxpayer itemizes deductions on Schedule A.

Purchases of new vehicles from Feb. 17, 2009, through Dec. 31, 2009 are eligible. The deduction is limited to the tax on up to $49,500 of the purchase price of an eligible motor vehicle. The deduction is phased out for joint filers with modified adjusted gross income between $250,000 and $260,000 and other taxpayers with modified AGI between $125,000 and $135,000.

Note: To qualify, passenger automobiles, light trucks, and motorcycles cannot have a gross vehicle weight rating of more than 8,500 pounds.

There are several ready-made marketing materials available to assist you in providing information on the deduction to potential customers. You can find flyers and posters in 6 languages (English, Spanish, Chinese, Korean, Russian and Vietnamese), 30 and 60 second radio public service announcements (in English and Spanish), and even a widget (see below -- widgets are portable on-screen tools that you can place almost anywhere online to direct others to IRS.gov for the complete details and deadlines for all Recovery Act tax provisions).

To see the marketing materials available, CLICK HERE