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Whoops! Cash For Clunkers Payments Are Taxable!
The Business Insider ^ | Aug. 25, 2009, 2:19 PM | Jay Yarow

Posted on 08/27/2009 6:35:01 PM PDT by rawhide

Some of the drivers that bought new cars through cash for clunkers are learning that it wasn't quite the deal they hoped for.

Keloland Television: 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.

"They didn't realize that would be taxable. A lot of people don't realize that. So they're not happy and kind of surprised when they find that out," Nelson said.

We imagine that MOST people didn't know the rebates were taxable...

...The amusement here is how most (if not all) states compute sales tax (charged when you register the vehicle.)

When you buy a new car you pay tax on the difference between the new car's purchase price and the trade-in you present to the dealer. This is an intentional distortion in the law that is intended to favor dealers over private-party used car sales; if you sell your used car privately the new buyer pays sales tax but you do not get the offset on the purchase of your replacement vehicle - the only way to get that is to trade the car.

Dealers use this, of course, in negotiations, effectively pocketing the sales tax - and why not? It's a real difference to you!

But the "cash for clunkers" is not a trade-in. That's a $4,500 check from the government, basically.

So you get nailed at least once and possibly twice. Specifically, you pay sales tax on the full vehicle price (effectively paying sales tax on the $4,500!) and what's worse those states that tax income (that would be most of them!) might wind up counting this as income for state income tax purposes too, effectively taxing you twice.

(Excerpt) Read more at businessinsider.com ...


TOPICS: Extended News; Government; News/Current Events
KEYWORDS: cash; cashforclunkers; clunkers; taxable
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1 posted on 08/27/2009 6:35:02 PM PDT by rawhide
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To: rawhide

Hell, the short short list would be “What isn’t taxable?”


2 posted on 08/27/2009 6:37:13 PM PDT by webschooner (First they ignore you, then they laugh at you, then they fight you, then you win -- Mahatma Gandhi)
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To: rawhide

When they start taxing tax itself you know it’s full bore FUBAR.


3 posted on 08/27/2009 6:41:44 PM PDT by tflabo (Truth or Tyranny)
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To: rawhide

I would be surprised if any state would call the $4500 “income tax”.

But because the car costs $4500 more, not only do they pay sales tax, they also pay more in property tax if they live in a personal property tax state.


4 posted on 08/27/2009 6:44:29 PM PDT by CharlesWayneCT
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To: tflabo
When they start taxing tax itself you know it’s full bore FUBAR.

They've been doing that for years...........ever bought a 12 pack of beer or a pack of smokes?

5 posted on 08/27/2009 6:45:38 PM PDT by Gabz
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To: rawhide

Ha! HA!

6 posted on 08/27/2009 6:46:17 PM PDT by LiberConservative (OneBigAssMistakeAmerica)
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To: rawhide

your post is correct, but in a Clintonian way
it may be taxable at the state level, it’s definitely NOT taxable as federal income tax:

http://www.cars.gov/faq#category-01

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.


7 posted on 08/27/2009 6:46:52 PM PDT by nascarnation
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To: rawhide

So in addition to the car payment on the brand new car, including the sales tax on the brand new car (assuming there’s sales tax), there’s a tax on the receipt of the $4500 as income.

What a deal!! Sign me up, Government. Industry and frugality are the ways to wealth. Government schemes are not.


8 posted on 08/27/2009 6:51:21 PM PDT by cotton1706
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To: rawhide

buying stock in rope futures..


9 posted on 08/27/2009 6:53:07 PM PDT by hadaclueonce ("Endeavor to persevere.")
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To: rawhide

Subject to sales tax but not income tax.


10 posted on 08/27/2009 7:15:45 PM PDT by Raycpa
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To: rawhide

out of all the massive amount of stupidity contained in the CfC program, people are only now getting pissed off because its taxable? THIS is why we keep electing stupid legislators. people still arent paying attention.


11 posted on 08/27/2009 7:27:07 PM PDT by wafflehouse (RE-ELECT NO ONE !)
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To: CharlesWayneCT

Understand that there is already a double digit % in buyer’s remose because many just realized that they will actually have a monthly car payment - not in their budget because their trade-in was paid for - and their auto insurance must now be full coverage and that is a whole lot more expensive for a new car than for liability of a “clunker” and guess what, even though that car is new, it’s going to have to have its oil changed by the dealer and eventually it’s going to need tires and new brakes and license renewal is going to be more expensive and.... Any wagers on the fact that this will be the next bubble to burst. Dog is going to be busy with his repo business!


12 posted on 08/27/2009 7:36:44 PM PDT by Grams A (The Sun will rise in the East in the morning and God is still on his throne.)
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To: rawhide

I can’t help but laugh, the ever generous govt strikes again. They just never disappoint.


13 posted on 08/27/2009 7:37:32 PM PDT by pepperdog (As Israel goes, so goes America!)
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To: Raycpa

Yes, there is no federal income tax, but states may count it as income, to be taxed, as mentioned in the article.


14 posted on 08/27/2009 8:12:51 PM PDT by rawhide
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To: rawhide

So to clarify the $9000 (in taxpayer money) per car the government payed under this program ($4500 in admin fees) will be partially reclaimed in taxes. Tax revenue which goes to fund the highly inefficient IRS and then wasted by the treasury on other programs similar to “Cash for Clunkers”. WOW what a scam the Fed has going.


15 posted on 08/27/2009 8:12:51 PM PDT by RockyMtnMan
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To: rawhide

16 posted on 08/27/2009 8:18:19 PM PDT by BenLurkin
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To: webschooner

A tax credit — which it should have been all along.


17 posted on 08/27/2009 8:18:37 PM PDT by BenLurkin
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To: rawhide

LOL! The people who offered and took advantage of this program really weren’t thinking, were they?


18 posted on 08/27/2009 8:22:34 PM PDT by Salvation (With God all things are possible.)
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To: tflabo
When they start taxing tax itself you know it’s full bore FUBAR.

Social Security.

Your income was taxed during your working years, and taxed again when you're retired.

19 posted on 08/27/2009 8:36:17 PM PDT by Cobra64
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To: wafflehouse
out of all the massive amount of stupidity contained in the CfC program, people are only now getting pissed off because its taxable? THIS is why we keep electing stupid legislators. people still arent paying attention.

Stupid voters keep electing stupid legislators.

20 posted on 08/27/2009 8:44:39 PM PDT by Cobra64
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