Car buyers in states without sales tax are now eligible for the tax rebate on new car purchases. The Internal Revenue Service and Treasury Department decided this week that new car buyers in states without sales tax will be able to use the tax break granted under the American Recovery and Reinvestment Act of 2009.

New car buyers in Alaska, Delaware, Hawaii, New Hampshire and Oregon will be able to deduct from their taxes the costs of non-sales tax fees and taxes that are assessed when purchasing a new vehicle, according to The IRS Newsroom.  New car buyers will pay these fees and taxes normally, then include the cost as a deduction on their 2009 tax returns, filed in April, 2010.  It was previously believed that new car buyers would only be able to deduct the sales tax on their vehicle.  New car buyers in no-sales tax states will be eligible even if they purchased before this week.

“This special tax break is available for people purchasing a new car this year, and that can include people in states without a sales tax,” Doug Shulman, IRS Commissioner, said. “This means that more people can take advantage of this deduction when they file their tax returns next year.”

New cars, light trucks, motorcycles and motor homes are all eligible for tax deductions under the American Recovery and Reinvestment Act of 2009.  Any vehicle purchased for less than $49,500 from February 16, 2009 to Jan 1, 2010 is eligible. New vehicles that cost more than $49,500 will only be eligible for a rebate on the taxes and fees charged on the first $49,500 of the purchase.

New car buyers with an individual income of more than $125,000 or a joint family income of more than $250,000 will be ineligible for the tax deduction.

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