June 11, 2009 / 3:02 PM / in 10 years

US car tax break includes states without sales tax

WASHINGTON, June 11 (Reuters) - The U.S. Treasury said on Thursday that it expanded its offer of a tax break on new car sales to those bought in states without a sales tax.

“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,” said Neal Wolin, deputy treasury secretary.

Under the American Recovery and Reinvestment Act of 2009, taxpayers who bought a new vehicle this year were entitled to deduct state or local sales or excise taxes paid on the purchase.

“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.

Now new sales made in states without a sales tax, such as Alaska, Delaware, Hawaii, Montana, New Hampshire and Oregon, can also qualify for the deduction, the department said.

To be eligible for the tax break, the vehicle must have been bought after Feb. 16, 2009 and before Jan. 1, 2010, the department said. The special deduction is available regardless of whether taxpayers itemize on their returns.

Taxpayers can claim this only on their 2009 tax returns filed next year. The deduction includes state or local sales or excise taxes paid on the purchase.

The deduction is limited to the fees and taxes paid on up to $49,500 of the purchase price of a qualified new car, light truck, motor home or motorcycle.

The amount of the deduction is phased out for taxpayers whose modified adjusted gross income is between $125,000 and $135,000 for individual filers and between $250,000 and $260,000 for joint filers. (Reporting by Nancy Waitz; Editing by James Dalgleish)

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