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Some Surprised By 'Clunker' Tax

apdst

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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?

Durn government actually expecting people to realize they had to pay taxes....
 
Yes, its all the Obama Administration's fault that most states levy sales taxes on new car purchases. :roll:
 
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?

What exactly do you want the federal government to do about it?
 
Yes, its all the Obama Administration's fault that most states levy sales taxes on new car purchases. :roll:

Next up, people will complain they didn't know getting full coverage on a brand new vehicle would increase their premium rates.

But we will blame that on greedy corporations to balance out the blame Obama gets for the tax. Yin-yang bitches....:2razz:
 
Yes, its all the Obama Administration's fault that most states levy sales taxes on new car purchases. :roll:

What exactly do you want the federal government to do about it?

That's not what this article is about.

But many of those cashing in on the clunkers program are surprised when they get to the treasurer's office windows. That's because the government's rebate of up to $4500 dollars for every clunker is taxable.

Durn government actually expecting people to realize they had to pay taxes....

In all seriousness, this surprised me. I guess it makes sense when you think about it, but off the top of my head, I certainly wouldn't have expected to have to pay taxes on the $4500 as income.

edit: Or maybe I'm still misreading that, and they're simply saying that you had to pay sales tax on the total amount before you subtract the $4500?

edit2: Looks like that's what they mean.

Cash for clunkers, but no tax break in Md. -- baltimoresun.com
 
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Durn government actually expecting people to realize they had to pay taxes....

I appreciate the sarcasm, but this is a point that no one ever brought up, when C4C was cranked up.



Yes, its all the Obama Administration's fault that most states levy sales taxes on new car purchases. :roll:


If you'll read the article more carefully, you'll see that it's not just sales taxes that are being paid on the rebate, but income taxes, as well.



What exactly do you want the federal government to do about it?


Oh, nothing! I want them t leave it exactly like it is.

This isn't sales tax that's factored into the loan amount, or subtracted from the down payment. This is cash money that the buyers are going to have to pull out of their pockets, when they go to the DMV to register their cars.

I reckon all that free money wasn't free, after all.
 
In all seriousness, this surprised me. I guess it makes sense when you think about it, but off the top of my head, I certainly wouldn't have expected to have to pay taxes on the $4500 as income.

edit: Or maybe I'm still misreading that, and they're simply saying that you had to pay sales tax on the total amount before you subtract the $4500?

edit2: Looks like that's what they mean.

Cash for clunkers, but no tax break in Md. -- baltimoresun.com

It's a rebate, not a reduction in the price of the vehicle. Follows the same rules are rebates always have.
 
I appreciate the sarcasm, but this is a point that no one ever brought up, when C4C was cranked up.

It should not have to be brought up. It's how car rebates have worked in the past.
 
It should not have to be brought up. It's how car rebates have worked in the past.

It's really the fault of the car companies that are being misleading in their advertising. There are plenty of ads out there that say things like "Accord, used to be $17,995, now with government rebate, $12,495."

But you're right, if that's what they're actually talking about in this article, I fail to see how the government could have anticipated or fixed this.
 
It should not have to be brought up. It's how car rebates have worked in the past.

No, it's not. This go-round, the taxes on the rebate aren't factored into the loan amount. It has to be paid out of pocket by the buyers. The article clearly says that.

Looks like free money ain't free, afterall.
 
Imagine that, having to treat Free Money as income. :roll:
 
Imagine that, having to treat Free Money as income. :roll:

Doesn't surprise me, but I bet the folks that bought cars through cash for clunkers aren't going to be too thrilled when they have shell out 300 bucks at the DMV. That oughta win the Libbos more votes.
 
edit: Or maybe I'm still misreading that, and they're simply saying that you had to pay sales tax on the total amount before you subtract the $4500?

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.
 
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.

You're missing the point. The sales tax on the price of the car will be added to the loan amount. The tax on the $4,500 will come out of their pockets. The rebate and the price of the car, are two different things.
 
You're missing the point. The sales tax on the price of the car will be added to the loan amount. The tax on the $4,500 will come out of their pockets. The rebate and the price of the car, are two different things.

The cost of the car is not the loan amount. They are two entirely different things. You do not pay taxes on the loan amount, you pat taxes on the cost of the car. Now, how exactly is it the governments fault that people where ignorant of something as basic as this?
 
The cost of the car is not the loan amount. They are two entirely different things. You do not pay taxes on the loan amount, you pat taxes on the cost of the car. Now, how exactly is it the governments fault that people where ignorant of something as basic as this?

Thanks. It's the simplest things that are so complicated!

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).
 
The cost of the car is not the loan amount. They are two entirely different things. You do not pay taxes on the loan amount, you pat taxes on the cost of the car. Now, how exactly is it the governments fault that people where ignorant of something as basic as this?

I never said that you pay taxes on the loan amount. I said, that the sales taxes on the price of the car are added into the loan.

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.
 
I never said that you pay taxes on the loan amount. I said, that the sales taxes on the price of the car are added into the loan.

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.

You really need to fact check. Source: 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.
 
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.
 
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.
 
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.
 
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
 
"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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