Financial Planning for Generation X & Y Women
 
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Expert Q&A Archive

01/20/2010
What kind of tax credit is available for purchasing a car?
I was wondering about the tax credit that is available for the purchase of a new car. Is that only new cars? I purchased a new used car.
Rosemary Ervin, CPA:
expert info »
The American Recovery and Reinvestment Act of 2009 provides a deduction for state and local sales and excise taxes paid on the purchase of qualified new vehicles purchased between 2/16/09 and 12/31/09. State and local sales taxes paid on up to $49,500 of the purchase price of a qualifying vehicle are deductible on Schedule A, itemized deductions. If you do not itemize, you will be allowed the deduction on a special line on the 2009 tax return. You must be the first owner of the vehicle. There is no tax credit, it is simply a deduction and it phases out if your income exceeds $125,000 (single) and $250,000 (married filing jointly). Example: you purchased a vehicle in July 2009 for $40,000 and live in a state with 6% sales tax. Your 2009 income may be reduced by up to $2,400.