Imagine that, having to treat Free Money as income.
"You're the only person that decides how far you'll go and what you're capable of." - Ben Saunders (Explorer and Endurance Athlete)
Once again: If you buy a $20,000 car you have to pay taxes on $20,000. It does not matter how much your down payment is or who pays your down payment. It does not matter how much you finance or if you finance at all. Your trade in does not matter. If the car costs $20,000 you pay taxes on $20,000. I'll type it slower this time: If the car costs $20,000 you pay taxes on $20,000. But by all means let's blame Obama for state tax laws that have been on the books since before his birth (in Kenya, of course).
Wow. Am I awesome or what?
The difference being, that the sales tax on the price of the car is a totally different animal from the taxes that are going to be collected on the $4,500 that is going to be recorded as income.
CARS.gov - Car Allowance Rebate System - Helpful Q&As for Consumers - Formerly Referred to as “Cash for Clunkers”
Is the credit subject to being taxed as income to the consumers that participate in the program?
NO. The CARS Act expressly provides that the credit is not income for the consumer.