The deduction also applies to light trucks, mobile homes and motorcycles. Vehicles up to $49,500 qualify.
Moore Buick GMC in Los Gatos says this has been one of its busiest weeks of the year. In addition to the tax deduction, consumers are also calling to see if the dealership has any Pontiacs in stock. Moore is also a Pontiac dealer, although General Motors earlier this year dropped the Pontiac line. This week, GM offered a $6,500 rebate to move the last of the Pontiacs in stock. Moore has only one Pontiac left.
Customers from Santa Cruz and Saratoga were on the lot planning to take advantage of the tax deduction.
"It helps me go up to the top end instead of the bottom end," said Tom Passerino of Santa Cruz. "We've been with GM for several years and the Buick is a nice upgrade, so we're looking at moving into that."
One family, however, said that they were still looking for the best possible deal, and if that meant buying later and missing out on the tax deduction, that was their preference.
"At the same time, if the price isn't right, then there's no point in buying," said Heidi Cardona of Saratoga.
At Piercey Toyota in Milpitas, floor manager Dave Cepeda said they sold 40 cars yesterday and 20 the day before, which he attributed to the sales tax deduction. The deduction was part of the $787 billion federal stimulus package passed in February.
"There's been a big rush of real Pontiac enthusiasts that want to snap up Pontiacs that are left, and to combine with that, GM came out with a huge $6,500 rebate so virtually every Pontiac across the nation is disappearing," said Cepeda. "We had them lined up from the delivery area all the way around to the front, and it was so busy that our detail department was backed up four, five cars deep. We ended up leaving at 11:46 last night."
Not all consumers can take advantage of the deduction. The deduction is reduced for single earners with incomes between $125,000 and $135,000 and between $250,000 and $260,000 for joint filers. There is no deduction for incomes above those levels.
John Moore, owner of Moore Buick GMC, said the tax program is probably shifting demand for new cars to the end of December that would otherwise be sold early next year.