Summary of Vehicle Tax Deductions for New Car Purchasers
INCENTIVE EFFECTIVE FEBRUARY 17, 2009

What Taxes are Deductible?

• State Motor Vehicle Sales
• Local Motor Vehicle Sales

For purposes of this section, the term ‘qualified motor vehicle taxes’ means any state or local sales taxes imposed on the purchase of a qualified motor vehicle. (Gross Receipts/ Business Taxes are not deductible.)

What Customers Qualify for the Deduction?

• Individual customers with modified adjusted gross income of less than $125,000 or joint-filers making less than $250,000 a year in 2009 would qualify for the deduction. Deduction phases out to zero when income reaches $135,000 ($260,000) for joint filers.
• Deductible as an “above the line” (for itemizers and non-itemizers) deduction on federal tax return.

Effective Date

• New vehicle purchases shall apply to purchases on or after the date of enactment (February 17, 2009) until December 31, 2009.

What New Vehicles Qualify for the Deduction?

• Any new vehicle under 8,500 pounds gross vehicle weight. Passenger Automobile, Light Truck or Motorcycle. Motor Home (No weight restriction)
• New vehicles of any model year – when the original use commences with the taxpayer.
• Any vehicle sold for under $49,500 qualifies for the full deduction. Consumers may deduct sales taxes on the first $49,500 of any vehicle sold above this price.

Please Note
Deduction does not apply to sales taxes on lease payments.
Deduction is also allowed in computing Alternative Minimum Tax.
If customer itemizes and elects to deduct state and local sales taxes in lieu of state and local income taxes he cannot take this deduction as he will be taking the deduction as part of the itemized sales tax deduction.

THIS IS A GENERALIZED SUMMARY. Tax savings will depend on one’s individual tax rate. For more specific information on eligible customers, taxes and applicability, you are encouraged to consult with an accountant or tax professional.

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