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| Auto Sales and Excise Tax Deduction |
| The American Recovery and Reinvestment Act signed into law by the President on February 17, 2009, permits taxpayers to take a deduction for state and local sales and excise taxes paid on the purchase of new cars, light trucks, motor homes and motorcycles. The deduction is available on new vehicles purchased from Feb. 17, 2009, through Dec. 31, 2009. In states that don't have a sales tax, the law provides a deduction for other taxes or fees paid. This deduction is available whether or not a taxpayer itemizes deductions on Schedule A. |
| The deduction is limited to the taxes and fees paid on up to $49,500 of the purchase price of an eligible vehicle. The deduction is reduced for joint filers with modified adjusted gross incomes (MAGI) between $250,000 and $260,000 and other taxpayers with MAGI between $125,000 and $135,000. Taxpayers with higher incomes do not qualify. |
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| 7 Common Questions About The Sales Tax Deduction On New Car Sales |
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1. When do I have to buy the car to get the deduction? Purchases must occur after Feb. 16, 2009, and before Jan. 1, 2010. |
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2. Can I claim the deduction on my 2008 taxes? The deduction may not be taken on 2008 tax returns. |
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3. When do I get the deduction? Taxpayers will claim this deduction when filing their 2009 federal income tax return next year. |
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4. How expensive of a car can I buy and still deduct sales tax? State and local sales taxes paid on up to $49,500 of the purchase price of qualifying vehicles are deductible. |
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5. Can I get this deduction on the purchase of a used car? No. Qualified motor vehicles generally include new cars, light trucks, motor homes and motorcycles. |
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6. Do I have to itemize on my taxes in order to get this deduction? This deduction can be taken regardless of whether or not you itemize other deductions on your tax return. |
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7. Our family does well financially. Can we still get the deduction? The amount of the deduction is phased out for taxpayers whose modified adjusted gross income is between $125,000 and $135,000 for individual filers and between $250,000 and $260,000 for joint filers. |
| **Customers with questions related to their particular tax situation should be advised to consult with their financial adviser** |