Previously, under the American Recovery and Reinvestment Act of 2009, taxpayers who buy a new motor vehicle this year are entitled to deduct state or local sales or excise taxes paid on the purchase. The Treasury Department has determined that purchases made in states without a sales tax — such as Alaska, Delaware, Hawaii, Montana, New Hampshire and Oregon — can also qualify for the deduction. We're not really sure how as they haven't paid any sales tax, but whatever, who are we to argue?

To qualify for the deduction, the vehicle must be purchased after Feb. 16, 2009, and before Jan. 1, 2010. The special deduction is available regardless of whether taxpayers itemize deductions on their returns. Taxpayers can claim this special deduction only on their 2009 tax returns next year. The deduction is limited to the fees or taxes paid on up to $49,500 of the purchase price of a qualified new car, light truck, motor home, or motorcycle. We have no idea what "qualified" means but we're hoping it doesn't only mean this.

If you're looking to get the most bang for your hybrid buck, it's best to avoid the Honda Civic hybrid, Toyota Prius and Toyota Camry hybrid—the tax credit on the latter two have already been reduced to zero. There's a good number of eligible hybrids, but at the rate people are snatching up these vehicles, don't expect the full tax credit to last. [LA Times]

(Image via XKCD)

Now we understand that our Representatives in the House are busy people, what with all the time it takes to investigate the moral fiber of our baseball players and pretending that there's not a war on, but surely they'd benefit from spending just a few minutes picking out better cars or scouring the internet for deals. We're even prepared to help them do so, for free.

Representative McNulty, you might find the Mazda5 has greater utility than your Mariner, it also gets 28mpg on the highway and is available in your area, Albany, for just $249 a month for 24 months. And did you know that the regular 4-cylinder Mariner gets marginally better fuel economy and is available straight from Ford.com for $279/month? It beats riding the boat.

Mr. Towns, if fuel economy is your greatest concern, we'd humbly suggest that an SUV, much less one powered by a 3.5-liter V6, may not be the best car for you. What about a Toyota Prius? Not only will it carry more street-cred with your liberal Brooklyn constituency, but it's available for just $330!

And finally, Mrs. Slaughter. $808 will get you a lot of car, especially if you need one that's safe in the snow. BMW's X5 is amazingly capable in bad conditions and they'll let you have one for only $729/month. That'll save the taxpayers $79 each month and more importantly, might save your life. [via The NY Times]
Photography credit: DBKing

Donate that old Jalopy to charity
Seeing old cars go is sometimes a heart wrenching experience. You babied that old Dodge Monaco through thick and thin, and she did you right, but it's time for the relationship to end. Instead of going through the hassle of listing it in the want ads and inspecting potential buyers to make sure they'll take good care of her, why not just donate it to charity? It is after all just a car, and if you let them haul it away you'll get to claim 100% of the auction value the charity receives on the car against your taxes — if it goes for more than $500. Okay, so maybe half a grand isn't a lot and you can't use this one unless you exceed the standard deduction, but every little bit helps.

Buy a hybrid
In the zeal to encourage the population to buy into a technology both unproven and dubiously implemented for fuel economy, the Federal government offers a tax credit to those who buy hybrid cars like the Ford Escape. The credit varies based on number of manufacturers vehicles on the road and fuel economy so choose wisely.

Buy the opposite of a hybrid - a giant truck
Despite changes to the law in 2004, the tax break for businesses that purchase pickups with a GVW over 6000 lbs still exists, as well as the break for buyers of expensive SUVs. The only catch is the maxiumum value can't exceed $100k and the first year deduction has been reduced from almost 100% to somewhere around 75%, pity. Regardless, if you're a small business owner trying to make the balance sheet read zero, here's a good way to have your cake and eat it too.

Use your car for work - and claim it
If you're work sees you driving your personal car frequently, you can deduct a raft of expenses not covered by your employer. Mileage is normally reimbursed by the employer, but if it isn't that can be deducted, as well as a portion of maintenance, and upkeep.

Depreciate it as an asset
If you own a small business, you can claim your car as a business asset. Of course, this is subject to usage rules under the 179 exemption of 50% or greater usage for work, but as an asset, a car has a depreciation schedule just like anything else in a business. The only trick is to define the useful life of the vehicle properly so you don't end up with a rattly bucket of bolts you have to hang on to for tax purposes.

Unfortunately, to take advantage of those big breaks you'd have to complete transactions by December 31st of last year. Still, mileage and wear and tear deductions can be used — if you've kept you're receipts that is.
Read more at: WWLaw, GooGoBits, IRS.gov

*Always consult with a licensed tax professional. We're not licensed tax professionals. We're automotive journalists. We know you get confused.

Now I've bought quite a few car parts on eBay; in addition to having more used parts than the biggest junkyard you ever saw, eBay is also a great source for NOS stuff. It was a relief when the pawnbrokers weren't able to ram through their pet bill requiring California eBay sellers to get fingerprinted and licensed, but now there's pressure looming to get eBay to report all sellers' transactions to The Man. Since big-time eBay sellers already report their income to the IRS or face the steely glare of auditors- The Man knows when you're making real money on eBay, because unless your buyers pay cash (not bloody likely) the money's gonna hit a bank account at some point- this would have the effect of scaring away all the guys selling the box of old parts gathering dust in the garage. – Murilee Martin

IRS urged to go after eBay sellers [San Francisco Chronicle]

Related:
IRS Seizes Man's 1967 Ferrari 330 P4 for Back Taxes [internal]

Holy crap. Has Red Ken gone entirely friggin' starkers? As reported previously, London mayor Ken Livingstone plans to increase the congestion charge on large cars and SUVs to 25 quid (currently $47.50), while ditching it for drivers of electric cars and hybrids. He's also planning to ditch the 90% discount for large-car drivers who live inside the zone. This just strikes us as crazy. Bonkers. Nuts. And entirely unfair. – Davey G. Johnson

London Mayor Plans Tripled Traffic Charge on Big Cars (Update3) [Bloomberg]

Related:
Red Ken at it Again: Livingstone Proposes Higher London Congestion Tax for Petrol-Hungry Vehicles [Internal]