New Car Purchases Qualify For A Year End Tax Credit/Deduction

Those who have or will buy new passenger vehicles between Feb. 17 and Dec. 31 of this year may be able to deduct state and local sales and excise taxes paid on up to $49,500 of the purchase price. The deduction applies only to 2009 tax returns and is available regardless of whether a taxpayer itemizes deductions on his or her return, according to the I.R.S. site.

The amount of the new vehicle deduction is phased out for taxpayers whose modified adjusted gross income is $125,000 to $135,000 for individual filers and $250,000 to $260,000 for joint filers.

Elsewhere, legislation passed earlier this year created a special tax credit of up to $2,500 for certain low-speed plug-in electric vehicles and two- or three-wheel vehicles (think the smaller vehicles that resemble golf carts). According to the I.R.S. site, the amount of the credit is 10 percent of the cost of the vehicle, up to $2,500, for a purchase made after Feb. 17, 2009, and before Jan. 1, 2012.

Another credit, of anywhere from $2,500 to $15,000 depending on battery capacity and gross vehicle weight rating, is available for plug-in and hybrid vehicles designed for the highway and bought this year, according to Erik Lammert, a tax researcher at the National Association of Tax Professionals. For vehicles purchased next year, the credit tops out at $7,500.