U.S. President Barack Obama Monday touted a new tax break that will allow many new car buyers to deduct sales and excise taxes on their 2009 tax returns.

He made the tax benefit pitch as he spoke at the White House on the federal government response to U.S. automakers' plight.

The new car tax deduction was enacted as part of economic recovery legislation passed earlier this year. Only purchases of new cars, light trucks, motor homes or motorcycles made after Feb. 16, 2009 and before Jan. 1, 2010 will qualify.

"This provision could save families hundreds of dollars and lead to as many as 100,000 new car sales," Obama said at the White House.

IRS also issued a press release Monday outlining details of how the tax deduction will work.

The deduction - which would be taken on 2009 tax returns filed next year - is available regardless of whether a taxpayer itemizes deductions. It isn't available to individuals with income in excess of $135,000 or married couples with income in excess of $260,000.

It is available for sales and excise taxes on up to $49,500 of the purchase price of a new vehicle.

For example, a taxpayer who paid $25,000 for a new car in California after April 1, 2009 - when the state sales tax rises one percent to 8.25% - will be able to deduct about $2060 from 2009 taxable income.

Both U.S.- and foreign-made vehicles are eligible for the deduction. The National Automobile Dealers Association says up to 12 million taxpayers could benefit, based on projections of U.S. auto sales for 2009.

 
  -By Martin Vaughan, Dow Jones Newswires; 202-862-9244; martin.vaughan@dowjones.com