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Deduction For Purchase of New Car Available in States Without Sales Tax

- by Roger McEowen

June 11, 2009

The IRS has announced that the deduction associated with the purchase of a new car that was contained in the massive deficit spending bill signed into law earlier this year (The American Recovery and Reinvestment Act of 2009) is available in the states that do not have a state sales tax.  Those states are:  Alaska, Delaware, Hawaii, Montana, New Hampshire and Oregon.  Under the provision, state or local sales or excise tax paid on the purchase of a new car is deductible.  Taxpayers buying cars in states not having state sales tax can deduct other fees or taxes imposed by the state or local government if the fees or taxes are assessed on the purchase of the car and are based on the car's sales price as a per-unit fee.  To qualify for the deduction, the car must be purchased between after February 16, 2009 through December 31, 2009.  The deduction is only claimable on 2009 tax returns.  IR 2009-60 (Jun. 10, 2009).