New car tax break still available

The "cash for clunkers" program ended abruptly on
Monday, August 24. The program, which provided up to
$4,500 to those who traded in their old cars for more
energy-efficient new ones, was so successful that the
$3 billion in government funding was depleted long
before the original November 1 deadline.

If you're in the market for a new car, the IRS wants
you to know there is still a tax break that may get you
motivated to make your purchase this year.

Recent legislation provides an above-the-line tax
deduction for the state and local sales and excise
taxes paid on up to $49,500 of the purchase price of a
qualified new car, light truck, motorcycle, or motor
home. The IRS issued a clarification stating that other
fees or taxes based on the vehicle's sales price may be
deductible in states that have no sales tax.

To qualify for the deduction on your 2009 tax return,
the vehicle must have been purchased after February 16,
2009, and before January 1, 2010. The deduction is
phased out for taxpayers whose adjusted gross income
falls between $125,000 and $135,000 (single) or
$250,000 and $260,000 (joint).