IRS Explains New Tax Credit

The American Recovery and Reinvestment Act of 2009 makes it possible for individuals who buy a new passenger vehicle this year to deduct state and local sales and excise taxes on their 2009 tax returns.

Here is a brief overview, care of the Michigan office of the Internal Revenue Service:

• The American Recovery and Reinvestment Act of 2009 provides a deduction limited to 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, 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.

• The vehicle must be purchased after Feb. 16, 2009, and before Jan. 1, 2010, to qualify for the deduction. Purchases before Feb. 17, 2009, are not eligible for the special deduction.

• The special deduction is available regardless of whether a taxpayer itemizes deductions on their return.

• The deduction may not be taken on 2008 tax returns, which are currently being processed.

• More information is available at www.irs.gov.