Now is a great time to buy a new car. The recession has hit the major car dealers hard and they are offering great deals on new cars. And to make the deal even getter, the IRS is allowing a deduction on your 2009 income taxes for state and local sales and excise taxes you pay when buying a new passenger car.
There are a few qualifications.
The deduction is only good for purchasing a new car, light truck, motor home or motorcycle. Taxes paid on the purchase of a used car will not be deductible.
You must purchase the new car after February 16, 2009 and before January 1, 2010.
You can only deduct the taxes paid on purchase prices up to $49,500. This doesn’t mean that you can’t deduct the taxes if you buy a more expensive vehicle, the deduction is just limited to the taxes on the first $49,500 that you pay.
The deduction will start to phase out if your income is over $125,000 and you are a single filer, $250,000 for joint filers.
The deduction is only good for your 2009 income tax return.
You don’t need to itemize to be able to take the deductions.
How will this work for you? Well, lets say you purchase a $30,000 vehicle and you pay 10% in state, local and excise taxes, or $3,000. You will get to deduct $3,000 from your taxable income for 2009. That will save you $450 if you are in the 15% bracket and $750 if you are in the 25% tax bracket.
Not enough to make me run out and buy a new car, but not a bad deal if you are going to buy one anyway!