Tuesday, August 04, 2009

ClunkerCash: That's $4500 (Less Income Tax)

Reported by RDW, (subscription-only link in the post to Automotive News):

How many people are going to be completely stunned when they find out the $3,500 or $4,500 they got for that clunker counts as taxable income as far as the IRS is concerned?



Disgruntled Car Salesman said...

Clearly something that I know and don't discuss.

Headless Blogger said...

I would imagine that you lose the exemption from WI sales tax that goes with a trade-in, too.

For me that is 28% income tax and 5.1% sales tax, or $1,489.50 off my $4,500 clunker cash. That certainly makes doing a trade instead of C for C something to think about.

For the dealer the same math does not apply. The trade-in is only worth the difference between what they give me and what they can sell it for. An all together different number than the Cash for Clunkers payout. The trade-in value of vehicles must be tanking right now. Check me on this DCS.

Disgruntled Car Salesman said...

No, trade ins aren't tanking. The used car market has bobbed up and down over the last 12 months and is up overall currently. In fact, I predict in the next six months you will see a rise in value of older trucks, vans, etc. Supply and demand. Several of our clients are trading in their clunker to get the cash only to turn around and find a different clunker to buy(work vehicle, etc.). The ones that they are trading in, after all, are going to never see the road again in one piece. The used car market in general has not been effected by the CARS program.

Interestingly enough, Headless, the CARS rebate comes off of the discount line on the sales contract. As such, you aren't charged the sales tax on the $3,500 or $4,500. Shocked me too.

Headless Blogger said...

DCS - In that case I'll be over with my '98 Grand Caravan ...