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Thread: Some Surprised By 'Clunker' Tax

  1. #21
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    Re: Some Surprised By 'Clunker' Tax

    Quote Originally Posted by stekim View Post
    Well, of course you would. The $4,500 was eseentially down payment help from the Feds. If you buy a $20,000 car you pay taxes on $20,000! Imagine that.
    And it makes sense when you look at it that way, but I can honestly say that I would have been surprised by that. I assumed that the $4500 was not being considered a rebate to me, but rather an incentive to the car salesman - essentially the government writing him a check for $4500 for every car he decided to sell, which would mean that he would anticipate that by lowering the price on the car he was selling me by $4500.

    Again, it's not like this is anyone's fault, I'm simply saying I can see why some people were surprised by this.
    People sleep peaceably in their beds at night only because rough men stand ready to do violence on their behalf.

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    Re: Some Surprised By 'Clunker' Tax

    Tax Exemption for Car Allowance Rebate System
    Issued by Federal Government



    "Example of how sales tax applies to sales of vehicles
    A new car dealer sells a new fuel efficient SUV to a buyer for $30,000. The buyer
    trades in a qualifying less fuel efficient SUV to the dealer. The CARS rebate on
    the trade-in is $4,500. After deducting the CARS rebate, the selling price of the
    new SUV is reduced to $25,500. Tax applies to the $25,500 directly paid by the
    purchaser. The $4,500 rebate is a nontaxable sale to the United States. If no
    rebate is issued, and the purchaser pays the full $30,000, sales tax applies to the
    $30,000 sales price.

    Example of how tax applies to lease of vehicles
    A new car dealer leases a new fuel efficient passenger vehicle to a customer for a
    contract period of 5 years. The customer trades in a qualifying less fuel efficient
    passenger vehicle to the dealer. The CARS rebate on the trade-in is $4,500. The
    new car dealer elects to report tax based on rental receipts. Before applying the
    CARS rebate to the principle of the lease, the monthly rental payment amounts
    to $350. After applying the CARS rebate to the principle of the lease, the monthly
    rental payment is reduced to $300. Tax applies to the $300 monthly rental
    payment.
    The $4,500 rebate, when applied to a lease to reduce the amount normally paid
    by the lessee, is considered a capitalized cost reduction. Generally capitalized
    cost reductions are taxable, however the CARS rebate is considered a
    nontaxable sale to the United States.
    More CARS Act information
    For more information about the CARS Act and program details, please go to
    CARS.gov - Car Allowance Rebate System - Home - Formerly Referred to as “Cash for Clunkers”, which provides information for both car buyer and dealers.
    Taxpayer Information Section
    If you have any questions regarding this notice, please call our Taxpayer
    Information Section at 800-400-7115 (TDD/TTY: 800-735-2929). Customer
    service representatives are available weekdays from 8:00 a.m. to 5:00 p.m.
    Pacific time, except state holidays."


    This is getting a bit convoluted. Maybe they should have given out a little bit less and made it tax exempt. At the very least it should have saved on the paperwork.
    Thank you

  3. #23
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    Re: Some Surprised By 'Clunker' Tax

    Quote Originally Posted by akyron View Post
    This is getting a bit convoluted. Maybe they should have given out a little bit less and made it tax exempt. At the very least it should have saved on the paperwork.
    The sales tax(not income tax as the OP thought initially) is from the state government. The federal government isn't able, to my knowledge, to be able to work around state's sales taxes.

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    Re: Some Surprised By 'Clunker' Tax

    Quote Originally Posted by apdst View Post
    Huge succes! Massive, even! Beyond our wildest dreams! What's going to happen when thy don't have the cash money to pay the taxes?
    From here: Cash for clunkers, but no tax break in Md. -- baltimoresun.com

    As it turns out, each state determines whether to tax the clunker money. Pennsylvania doesn't, for example, but Maryland applies its 6 percent excise tax to the incentive.
    and

    If it's any consolation, there's no federal tax on the clunker incentive and you may be able to deduct on your federal tax return any state or local taxes paid on a new vehicle purchased this year from Feb. 17 through Dec. 31. A full or partial deduction is available to singles with income up to $135,000 and joint filers with incomes of up to $260,000

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    Re: Some Surprised By 'Clunker' Tax

    "Cash for clunkers" implies that the feds are buying your clunker. I'd say let the feds pay the sales tax on the clunkers they bought and destroyed, but I'd prefer that the people who force us to help buy them brand new cars at least pick up the state sales tax!

    To those who are whining after getting uncle sam to buy their cars...

    boo hoo

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