C4C Rebates Taxable?

According to KELOland.com (News, Weather and Sports for Sioux Falls, South Dakota, Minnesota and Iowa), the Government Rebates of $3,500 and $4,500 are taxable.

Was this discussed before? I know that the car sales themselves were exempt (in many states) from taxes on the rebated amount, and that there is a Federal Tax deduction for new auto sales taxes paid after a certain date this year, but I was unaware that the rebate would be considered taxable to the buyers.

Was anyone else aware of this? That means that for someone in a 40% tax bracket, that could cost them several grand.

Some body's got to pay the tax, you know there will be a tax, so it's us or the dealers?

Heck, the dealer's ended up with $3,500-$4,500 in income from the government, let them pay the taxes.. LOL

No, I suppose it makes perfect sense to make it taxable, but I would imagine that given all the talk around this program has seemed to focus on it not being taxable, I suspect that many people will get a rude surprise when this see this.

It was really taxable to all of us, since the cost to each taxpayer for this program was about $10. So, I guess it is good that those who benefited from this can pay us back up to a third of it in taxes.

This is sales tax, not income tax.

It actually depends on the state. Some states treated it as a trade-in which reduces the PRICE PAID for the car and thus the sales tax due. In Ohio it was treated as a payment from a third party which, under Ohio law, does not reduce the PRICE PAID. In Ohio you figure the total cost of the car then add tax to get a total. You then subtract the C4C rebate from the total. Sales Tax is Sales Tax. It is hard to get around it.

This is a great post. It has info on many states.
Cash For Clunkers – Taxable or Not? The Sales Tax Connection

Also, if you did not do the research to figure this out - or look at the paperwork when you bought your car - then it is ignorance, not "surprise" as to whether it is taxable or not. The information is out there, you just have to look for it.

Included or not included, in both cases, don’t forget about the Stimulus Plan that will let you write off your sales taxes on a new car at the end of the year when you file your 2009 Income Taxes.

$1800 of tax. That could make some of the clunkers be better off as trade ins. On top of that in Maryland a trade in also reduces sales tax, as far as I know a clunker does not.

Ring..... Ring.... Hey, the its the government calling... they want their (our) money back!

As Schaefsn stated, this is a sales tax, not income tax. Therefore if the state's sales tax is 10%, it would be $450 max. additional tax for some states.

no - the consumer will pay no income tax on the C4C "rebate".

CARS.gov - Car Allowance Rebate System - Helpful Q&As for Consumers - Formerly Referred to as “Cash for Clunkers”

Keep in mind that this doesn't result in any additional benefit for some of us. Those who itemize and live in a state with no income tax will see no change, as they're already deducting sales tax paid and can't "double dip" and deduct the auto portion twice. Also, even though I live in California where I get to deduct state income tax paid, I'm still predicted to get the bigger deduction from combined general and auto sales tax paid than income tax plus auto sales tax paid under this special plan and this would've been true in any of the few past years.

First of all if you bought a car from C4C - that is tax payers' money in the first place. So yes people should be taxed. It's ridiculous - you already got a good deal. Stop whining. Or else they should just take all the money back! What a waste of tax payers money. C4C is a program that rewarded people who were dumb and bought gas guzzlers in the first place. It would never reward someone who already had a feul efficient car (like a Camry or Corolla)! If a 98 camry can't qualify and a 2004 Hummer can - that is just plain stupid. It's rewarding the biggest pollution culprits. We should tax them instead!!

It's middle class welfare. Poor people still couldn't afford a new car and rich (ok there are a few with old cars) people didn't have clunkers.

Oh goody, another thread that's turned into the politics of C4C, whether it worked, whether it was fair, whether it was worth it, etc.

Anyhoo, as sort of already discussed, it is not taxable as income. So nobody's paying 40 percent tax on it.

As for sales tax, the Cash for Clunkers rebate may or may not be included in the amount you'll have to pay sales tax on depending on your local state's laws (and how they choose to interpret those laws).

In my local states, Missouri and Illinois, the amount is deducted from the sale price of the car before you pay sales tax. Basically it is treated the same as a trade-in. So when I wrote my check the other day to Missouri, it was on the price of my Prius minus the $4,500.

A Google search for "cash for clunkers sales tax <yourstatenamehere>" should turn up information about whether your state is applying sales tax to the C4C rebate amount.

Wow, the middle class finally gets a break, how about that.:rockon:

Who do you think is picking up the entire tab? The poor don't have money & the rich have the power to write the tax code.

ok, I"ll send it back right after I return last year's stimulus check