Read our Monthly Newsletter
Taxpayers who itemize deductions may elect to deduct state and local general sales and use taxes instead of state and local income taxes, for tax years beginning before 2010.
For tax years beginning after Dec. 31, 2008, the Recovery Act provides a deduction for qualified motor vehicle taxes. It expands the definition of taxes allowed as a deduction to include qualified motor vehicle taxes paid or accrued within the tax year. The deduction generally is allowed to itemizers. It also is allowed to those claiming the standard deduction.
Qualified motor vehicle taxes are state or local sales or excise taxes imposed on the purchase of a qualified motor vehicle. Only taxes on that portion of the cost of qualified motor vehicle not exceeding $49,500 ($24,750 for a married person filing separately) may be deducted.
The amount of sales or excise taxes that may be treated as qualified motor vehicle taxes is phased out ratably for a taxpayer with modified AGI between $125,000 and $135,00 ($250,000 and $260,000 on a joint return).
A qualified motor vehicle is a (1) passenger automobile, light truck or motorcycle the gross vehicle rating of which is not more than 8,500 pounds and (2) a motor home the original use of which commences with the taxpayer.
The deduction for qualified motor vehicle taxes is not available to a taxpayer who elects to deduct state and local sales and uses in lieu of income taxes as an itemized deduction.
The deduction for qualified motor vehicle taxes is allowed in computing the AMT.
Return to American Recovery and Reinvestment Tax Act of 2009 overview page.
Posted: February 15, 2009