IRS Allows deduction for sales & use tax imposed on purchase of new vehicles in 2009!
The IRS has stated that in 2009, a taxpayer can deduct the state or local sales and excise taxes imposed on the purchase of a qualified motor vehicle after February 16, 2009, and before January 1, 2010.
What is a Qualfied Motor Vehicle?
The IRS has defined a a qualified motor vehicle as "a passenger automobile, light truck, or motorcycle, the original use of which begins with that purchaser and that has a gross vehicle weight rating of 8,500 pounds or less. A qualified motor vehicle also includes a motor home, the original use of which begins with that purchaser."
However, the IRS has stated that the amount of tax a taxpayer is able to deduct is limited to the tax that is imposed on the first $49,500 of the purchase price of the vehicle. The deduction is phased out over a $10,000 range that begins when modified adjusted gross income is more than $125,000 ($250,000 if married filing a joint return). No deduction is allowed when modified adjusted gross income is equal to or more than $135,000 ($260,000 if married filing a joint return).
The new deduction can be used to increase the amount of your standard deduction or you can take it as an itemized deduction (if you are not electing to take the state and local general sales tax deduction).