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.
For now, the biggest impact of the program hasn't hit this office yet, as most of the paperwork is still in the hands of the dealers. But Nelson expects to see move activity in her office in the next month.
"I'm anxious to see what it's going to be like. I have no idea how many people we're going to see. Hopefully the dealers can process their paperwork in 30 days," Nelson said.
And that's when the line at this office will give some indication of how many cars the government program moved off of local lots.
Nelson adds that if you did recently purchase a vehicle, ensure your dealer gets you the paperwork in time because if they don't you could pay extra interest and penalties.
So if you are in the 25% tax bracket, you'll probably love paying $1,100 in federal income tax on your "earnings".
And you want these clowns to run health care......
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2 comments:
The rebate is NOT taxable for to the consumer trading the clunker for a newer vehicle for federal income tax purposes. See http://www.cars.gov/faq. However, the rebate is taxable to the car dealership for federal income tax purposes.
At the state level, sales taxes would likely apply to the gross value of the newer vehicle, and state income taxes may also be incurred (each state has different rules).
The suckers who went for cash for clunkers won't be charged federal income tax on the credit, they just won't get the normal state sales tax deduction a trade-in would give them. More details here: http://www.richerbytheday.com/2009/08/cash-for-clunker-taxation-clarified.html
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