Accounting for the rest of us

No matter what state you live in, you can take advantage of a tax deduction for the purchase of a new motor vehicle.

The American Recovery and Reinvestment Act (ARRA) of 2009 offers taxpayers who buy a new motor vehicle in 2009 to deduct state or local sales or excise taxes paid on the purchase. On June 10, the IRS and the Treasury Department said that a tax deduction is also available in states that do not have a state sales tax.

Taxpayers in states without state sales tax may instead deduct other fees or taxes imposed by the state or local government. The fees or taxes that qualify must be assessed on the purchase of the vehicle and must be based on the vehicle's sales price.

Also worth noting is that the IRS has formally stated that the deduction for state and local sales and excise tax paid on new vehicles is available for multiple purchases of new cars, light trucks, motor homes and motorcycles. The $49,500 purchase limitation is a per vehicle limitation, rather than an overall limitation on the deduction.