Hawai'i car buyers will reap hundreds of dollars in federal tax savings if they purchase a car by year's end because of the recently signed economic stimulus package.

The plan, signed this week by President Obama, includes a provision aimed at boosting car sales by allowing taxpayers to deduct the sales or excise tax.

In effect, someone having to pay $1,000 in general excise tax as part of the car purchase here could deduct that against their adjusted gross income and lower their taxes by hundreds of dollars depending on their tax rate.

"We're starting to see a little bit of a return to the showrooms," said David Rolf, executive director of the Hawaii Automobile Dealers Association. He said people have been attracted by dealers lowering prices and other programs.

"Now when you take the tax deduction, that really makes it an ideal time to make purchases."

There had been some question of whether the sales and excise tax deduction included in the $787 billion package would apply to Hawai'i, since the general excise tax here is levied on business receipts. Consumers end up paying for them when businesses pass the tax on as part of the bill.

Rolf said some quick work by the association, U.S. Sen. Daniel K. Inouye's office and others got Hawai'i's unique general excise tax situation included for the deduction. This was accomplished by mentioning the deduction applied to Hawai'i's situation in a dialogue on the U.S. Senate floor that went into public record.

"People will get a deduction," Rolf said.

As with most tax assistance measures, there are thresholds and rules that apply. For starters, it applies to purchases from the enactment of the stimulus plan on Feb. 17 to the end of the year for tax on the first $49,500 of a car purchase.

It is available to individuals with an adjusted gross income up to $125,000 and couples up to $250,000.

The tax break is what is known as an "above-the-line" deduction, meaning you don't have to itemize your deductions to qualify.

A couple filing jointly in the 25 percent federal tax bracket and buying a $30,000 car on O'ahu would typically pay an excise tax of 4.712 percent, or about $1,413. The resulting deduction from adjusted gross income would result in tax savings of $353.