New car purchases eligible for tax deduction

WARWICK, R.I.—If you bought a new car this year, you may be entitled to a special tax break.

Car sales plummeted after the Cash for Clunkers program ended, but the IRS is reminding everyone that you can still get a break if you buy a new car.

“There’s a bunch of credits from the Recovery Act that are set to expire. One of them is if you bought a new car this year, you may qualify to deduct the sales tax that you paid for it. But you have to buy that car by the end of December,“ said Peggy Riley of the IRS.

You don’t have to itemize to take the tax credit, and the car can’t cost more than $49,500. But if you want to buy a more expensive car, you can still take advantage of the tax break.

“If you purchase a car more than that, you can deduct sales tax you would have paid up to the $49,500,“ Riley said.

After Cash for Clunkers, car sales took a nose dive. But the head of the Rhode Island Automobile Dealers Association said things should pick up soon.

“It has slowed down a little bit. Inventories are very light. Some of the manufacturers have put shifts back to work to increase production. So, dealers should be starting to get vehicles again before too long,“ said Jack Perkins, executive vice president of the RIADA.

The IRS is encouraging people to take advantage of the new car tax break while they can.  The deadline is Dec. 31.