If you’re still considering a new car purchase this year, but are concerned about making a big-ticket purchase during tough times, the legislation passed earlier this year to jump-start the economy included a tax incentive for new car purchases.

Laurie Asch, Senior Tax Analyst for the Tax & Accounting business of Thomson Reuters, explains how to ‘wheel and deal’ the tax break – which will expire soon, as 2009 is coming to a close – as well as various tax credits (two new for 2009) for purchases of new energy-saving cars, which could lessen your sticker shock.

First up is a free ride on sales tax. If you buy a new car, SUV, or light truck by year-end, you can deduct the state or local sales or excise taxes paid on up to $49,500 of the purchase price. Ashe says you’ll get the deduction whether you itemize or claim the standard deduction, and it’s allowed for alternative minimum tax (AMT) purposes.  She also says that you may also claim the deduction for more than one car. For example, for a married couple whether filing jointly or separately, each spouse can deduct the taxes for his or her own new car.  However, the deduction phases out if your modified adjusted gross income is between $125,000 and $135,000 (between $250,000 and $260,000 on a joint return).

Asch says you don’t have to use the car for business, and it doesn’t have to be an energy saver, however you must purchase the vehicle by December 31, 2009 – before Congress puts on the brakes. One other potential road block: you can’t take this deduction next April if you elect to deduct state and local sales taxes in lieu of state and local income taxes.

In addition to the above deduction, if your new car is an energy saver and is certified as meeting applicable environmental requirements, you could be entitled to any number of credits, which could apply for both regular tax and AMT purposes.

For certain credits, the amount allowed for a particular manufacturer’s cars phases out after a set number of its vehicles is sold. So, even if your new car otherwise qualifies, you may not get the full credit. Ask your dealer, or go to IRS’s Web site (www.irs.gov) to find out what you can claim for your new car.

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