New Motor Vehicle Purchase Tax Deduction

New year. Sorry, time to think about your taxes…Because an estimated 40% of Americans do their own taxes, the do-it-yourself filer may forget about a deduction for Taxes and Fees on New Motor Vehicle Purchases.

Did you buy a new car, light truck, motor home or motorcycle in 2010? The general Sales Tax and 2010 New Vehicle purchase Sales Tax deductions have been extended for this year. t means that you can deduct state, local, and excise taxes related to the purchase. If your state has no sales tax, you can instead deduct other taxes or fees the purchase generated.

A neat feature of this deduction is you can use it to increase your standard deduction or take it as a regular itemized deduction, whichever works out best for you. There is no limit on the number of vehicles for which you can claim the deduction, provided each is a qualified new one. Consult your tax advisor.

8 Responses to “New Motor Vehicle Purchase Tax Deduction”

  1. 1 Gas Man Jan 16th, 2011 at 4:29 pm

    Thanks for the reminder. My wife & I both bought new cars this year. Hopefully help out some.

  2. 2 Mike H Jan 16th, 2011 at 7:05 pm

    I was hopeful after reading this that I could claim the sales tax on the new bike I purchased last spring. However, in checking this out I cannot find any extension of this beyond purchases completed by January 1st, 2010. I copied and pasted below how it reads on the 2010 1040 schedule A form worksheet.

    Did you (or your spouse if filing jointly) pay any state or local sales or excise taxes in 2010 for the purchase of any new motor vehicle(s) after February 16, 2009, and before January 1, 2010

    I interrupt this to mean you can only claim if you purchased by January 1st but paid the tax in 2010. I’d love to be wrong on this.

  3. 3 Wiz Jan 17th, 2011 at 5:30 am

    Is it just for brand new vehicles, or used one’s that are new to you? Wiz

  4. 4 Otis Jan 17th, 2011 at 8:54 am

    Dude! You just saved me some money that I’ll be spending on beverages in Cincy!!

  5. 5 KM Jan 18th, 2011 at 4:31 pm

    I looked into this to verify it as I bought a new scoot last year. I couldn’t find any official source to verify the extension of the tax credit. Does anyone have a source of this?

  6. 6 grayhawk Jan 18th, 2011 at 5:51 pm
  7. 7 Sherri Jan 24th, 2011 at 11:09 am

    After speaking with a tax preparer this is what I have come to understand. The sales tax can be deducted, but you must choose between this deduction and deducting the state income taxes you paid thru your paycheck. You cannot claim both, so if you live in a state with no income tax or very low income tax, it may behove you take this deduction, but you have to see which is best for you. It is also my understanding you can only claim this deduction if you itemize your deductions. This deduction isn’t available to non-itemizers. Also, because this was part of the tax package that was passed so late last year, forms for this deduction as well as others and all software won’t be available until I think mid-February so we are stuck waiting for the IRS to catch up to the passed legislation. So many tax-preparation sites aren’t able to do this for you yet. If this is something you want to do, I would suggest getting all your paperwork together and/or get a head start on your taxes so that when the forms are out it is the last thing you do and then can file. Hope this helps.

  8. 8 Bob Wilson Apr 15th, 2011 at 11:49 am

    I bought a new car in feb of 2010 and paid the state of FL $1800 in sales tax… When I filed my federal tax return for 2010 I didn’t know that I could deduct this amount and so filed my taxes without it included.. I have since found out that I could have deducted it… QUESTION: Should I file an amended return for 2010 or can I deduct it on my 2011 tax return when I file that next year? Thanks for your assistance..

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Cyril Huze