Tax break on new cars extends to all 50 states

No one at this point doubts the country's, or the world's, economic woes, most especially those within the car industry. So the announcement today that the U.S. Treasury has expanded its offer of a tax break on new car sales to those bought in states without a sales tax comes as a welcome aid.

Under the original deal, which forms part of the American Recovery and Reinvestment Act of 2009, taxpayers who bought a new vehicle this year were entitled to deduct state or local sales or excise taxes paid on the purchase. Now, new sales made in states without a sales tax, such as Alaska, Delaware, Hawaii, Montana, New Hampshire and Oregon, can also qualify for the deduction.

"This tax deduction not only increases support for the auto industry as it seeks to rebuild, but also puts money back into the pockets of hard-working Americans," deputy treasury secretary Neal Wolin revealed to Automotive News.

To be eligible for the tax break, the vehicle must have been bought after February 16, 2009, and before January 1, 2010, and is available regardless of whether taxpayers itemize on their returns. The catch is that taxpayers will only be able to make the claim on their 2009 tax returns filed next year.

Furthermore, the deduction is limited to the fees and taxes paid on up to $49,500 of the purchase price of a qualified new car, light truck, motor home or motorcycle. Finally, taxpayers whose modified adjusted gross income is between $125,000 and $135,000 (between $250,000 and $260,000 for joint filers) miss out.