US President Barack Obama Monday backed a plan to offer tax incentives to consumers trading in old cars for newer fuel-efficient models to boost the auto industry and help the environment.

In announcing his plan to aid two of Detroit's Big Three automakers, Obama said he would support an idea endorsed by several members of Congress -- an "ambitious incentive program to increase car sales while modernizing our auto fleet."

"Such fleet modernization programs, which provide a generous credit to consumers who turn in old, less fuel-efficient cars and purchase cleaner cars have been successful in boosting auto sales in a number of European countries," he said.

"I want to work with Congress to identify parts of the Recovery Act that could be trimmed to fund such a program, and make it retroactive starting today."

Meanwhile, the US tax authority said Monday that taxpayers who bought new passenger vehicles this year might be entitled to deduct state and local sales and excise taxes paid on the purchase on their 2009 tax returns next year.

"For those thinking about buying a new car this year, this deduction may give them a little more drive to make their purchase this year," said Internal Revenue Service commissioner Doug Shulman.

"This deduction enables taxpayers to buy now and get cash back later on their tax returns."

The deduction is limited to the state and local sales and excise taxes paid on up to 49,500 dollars of the purchase price of a qualified new car, light truck, motor home or motorcycle.

The tax break is available on vehicles bought between February 16 and December 31 and to taxpayers with annual gross income up to 135,000 dollars for individual filers and 260,000 dollars for joint filers.