Wednesday, June 17, 2009

Tax Deductions For Car Purchases Now Apply To All States

From the

[T]he American Recovery and Reinvestment Act (ARRA) passed earlier this year, provides a tax deduction for the purchase of a new qualified vehicle. The Treasury announced last week that this incentive now applies to all states – including those that do not impose a sales or excise tax. This includes Alaska, Delaware, Hawaii, Montana, New Hampshire and Oregon.

Purchasers of a new qualified vehicle in the states mentioned above can now take an above-the-line tax deduction for fees and other taxes that are imposed by the state or local government. These fees and other taxes must be based on the vehicle's sales price or as a per unit fee in order to qualify for the deduction.

All of the other provisions of this incentive are the same for all states including:

  • New vehicles include cars, light trucks, motor homes, or motorcycles.
  • The deduction is only available for purchases made on or after February 17, 2009 and before January 1, 2010.
  • The deduction is limited to the sales tax, excise taxes, or fees paid on vehicles with a maximum purchase price of $49,500 dollars.
  • If you are married and you file a joint tax return have, the deduction gets phased-out once your modified adjusted gross income (MAGI) reaches $250,000 dollars and is completely gone if your MAGI is more than $260,000 dollars. For all other taxpayers, the phase-out range is a MAGI of $125,000 dollars to $135,000 dollars.
  • The deduction is available whether or not you itemize your deduction on your tax return.
  • The deduction must be taken on your 2009 tax return (which is filed in 2010).

Blog Archive