Tax Deductions Extended to States Without Sales Tax

The American Recovery and Reinvestment Act of 2009, which passed earlier this year, allows taxpayers to deduct state or local sales (or excise) taxes when buying a new car.

That's great for car buyers living in states with high tax rates, but what about buyers in states like Alaska, Delaware, Hawaii, Montana or Oregon which don't have state tax?

Now there's good news. Buyers from states with no sales tax will still benefit. Taxpayers in these states can now deduct other fees and taxes imposed by the state or city based on the car's sales price.

To qualify, the car has to be purchased between February 16, 2009 and January 1, 2010, and is good for fees or taxes paid on up to $49,500 of the purchase price of the car.

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