Sales Tax Deduction for Vehicle Purchases
2010 update: Pub. 919 no longer contains Worksheet 10. Eligible taxpayers may use Schedule L, Standard Deduction for Certain Filers, to figure their new motor vehicle sales tax deduction. Find it in Prior Year Forms & Pubs .
The American Recovery and Reinvestment Act 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.
Taxpayers who make qualifying new vehicle purchases this year can estimate the deduction with the help of IRS Publication 919, How Do I Adjust My Withholding? Lines 10a to 10k on Worksheet 10 take into account purchases above the $49,500 limit, as well as the reduced deductions for taxpayers at higher income levels.
Questions and Answers
If you have questions about the deduction for sales tax and other fees, these questions and answers might help.
IR-2009-88, Special Sales Tax Deduction for Car Purchases Available through End of 2009
IR-2009-60, Special Tax Break on New Car Purchases Available in States With No Sales Tax
IR-2009-30, Special Tax Break Available for New Car Purchases This Year