Tax Break for New Wheels
If you bought a new car or truck last year, you can claim a special deduction.
What’s better than that new-car smell? The smell of money! And you’ll get to enjoy both if you bought a new vehicle last year, whether it was a car, a motorcycle, a light truck or a motor home. Remember, you must buy a new car to get a tax break -- you can’t purchase a used car or lease a vehicle. And timing matters.
As long as you bought the new vehicle after February 16, 2009, through the end of the year, you may be able to deduct the state or local sales tax or excise tax. The deduction is limited to the tax you paid on up to $49,500 of the purchase price, but there is no limit on the number of eligible vehicles.
To qualify for the full deduction, your income can’t top $125,000 if you’re single or $250,000 if you’re married filing jointly. A partial deduction is available for individuals with income between $125,000 and $135,000 and for joint filers with income between $250,000 and $260,000.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
You can claim the sales-tax break on new-vehicle purchases whether or not you itemize your deductions. Itemizers claim it on Schedule A. Non-itemizers claim the deduction on the new Schedule L, “Standard Deduction for Certain Filers.”
More options for itemizers
Although the special sales-tax deduction applies only to new vehicles, itemizers may be able to deduct the sales tax they paid on new vehicles purchased on or before the February 16 start date of the new tax break, or on used vehicles they bought at any time during the year. (Sales tax paid on leased vehicles is eligible, too.) To do so, you must choose to deduct state sales taxes rather than state income taxes. In most cases, income taxes will represent the bigger deduction and are the smarter choice. But those with little taxable income, such as retirees, or residents of states with no income tax, including Florida and Texas, may want to choose the sales-tax deduction. You can base the deduction on actual receipts or use IRS tables keyed to household income, size and state. Plus, you can add sales taxes paid on big-ticket items, such as cars, boats, recreational vehicles and building materials.
Double up
If you bought a new vehicle last year and you itemize, you can harvest a double tax break: Claim an itemized deduction for your state income taxes, and claim the special deduction for sales taxes paid on your new vehicle. Of course, itemizing makes sense only if it gives you a bigger write-off than the standard deduction.
-
Americans, Even With Higher Incomes, Are Feeling the SqueezeA 50-year mortgage probably isn’t the answer, but there are other ways to alleviate the continuing sting of high prices
-
Hiding the Truth From Your Financial Adviser Can Cost YouHiding assets or debt from a financial adviser damages the relationship as well as your finances. If you're not being fully transparent, it's time to ask why.
-
How to Manage a Disagreement With Your Financial AdviserKnowing how to deal with a disagreement can improve both your finances and your relationship with your planner.
-
3 Smart Ways to Spend Your Retirement Tax RefundRetirement Taxes With the new "senior bonus" hitting bank accounts this tax season, your retirement refund may be higher than usual. Here's how to reinvest those funds for a financially efficient 2026.
-
5 Retirement Tax Traps to Watch in 2026Retirement Even in retirement, some income sources can unexpectedly raise your federal and state tax bills. Here's how to avoid costly surprises.
-
First the Penny, Now the Nickel? The New Math Behind Your Sales Tax and TotalRounding Tax A new era of "Swedish rounding" hits U.S. registers soon. Learn why the nickel might be on the chopping block, and how to save money by choosing the right way to pay.
-
Over 65? Here's What the New $6K Senior Tax Deduction Means for Medicare IRMAATax Breaks A new tax deduction for people over age 65 has some thinking about Medicare premiums and MAGI strategy.
-
How to Open Your Kid's $1,000 Trump AccountTax Breaks Filing income taxes in 2026? You won't want to miss Form 4547 to claim a $1,000 Trump Account for your child.
-
In Arkansas and Illinois, Groceries Just Got Cheaper, But Not By MuchFood Prices Arkansas and Illinois are the most recent states to repeal sales tax on groceries. Will it really help shoppers with their food bills?
-
7 Bad Tax Habits to Kick Right NowTax Tips Ditch these seven common habits to sidestep IRS red flags for a smoother, faster 2026 income tax filing.
-
10 Cheapest Places to Live in ColoradoProperty Tax Looking for a cozy cabin near the slopes? These Colorado counties combine reasonable house prices with the state's lowest property tax bills.
