"This tax deduction not only increases support for the auto industry as it seeks to rebuild, but also puts money back into the pockets of hard-working Americans," Neal Wolin, deputy treasury secretary said.
The tax break, offered under the American Recovery and Reinvestment Act of 2009, allows for new car buyers, who purchased vehicles this year, to deduct state or local sales or excise taxes paid. To be eligible for the tax break, vehicles must be bought in between February 16, 2009 and January 1 2010. The tax deduction is valid regardless whether customers itemize their return.
"Building on the Recovery Act, the Treasury Department is taking steps to make sure every American, in every state, qualifies for a tax deduction when purchasing a new car," Wolin said in a statement quoted by the aforementioned source.
The returns can be claimed on the 2009 tax return filings next year. The deduction is limited to the fees and taxes paid for a value of up to $49,500 of the purchased car, light truck, motor home or motorcycle.
The amount of the deduction is phased out for taxpayers whose modified adjusted gross income is in between $125,000 and $135,000 (for individual filers) or $250,000 and $260,000 (for joint filers).
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