PsychDoc

I don't know if any of you guys saw this. Thought I'd pass it along.

>>>New Car Buyer Tax Perks
Probably Won't Clear the Lots

What the plan promises: Those who buy a new car between now and December 31 can deduct state and local sales and excise taxes. The purchase price limitation cap is $49,500.
What you could have received: The plan's $2.5 billion toward the car-buying tax breaks is a far cry from the Senate's plan, which sought $11.5 billion in tax breaks and a deduction for interest paid on car loans.
Final verdict:As far as a stimulus goes, it will have very minor impact.<<<

vybzkartel

Might only be able to use it for domestic cars, lol!

PsychDoc

Here's a little better description:

>>>•New car buyers. Purchasers of new cars and trucks will be allowed to deduct sales or excise taxes. This is an above-the-line deduction, so you don't have to itemize to claim it.
The deduction is limited to sales tax on purchases of up to $49,500. The deduction phases out for single taxpayers with adjusted gross income of more than $125,000, and married taxpayers whose AGI exceeds $250,000.
The amount you save will depend on your state sales tax rate and the price of your car or truck. If your state imposes a 4% sales tax and your car costs $40,000, the deduction will reduce your adjusted gross income by $1,600, says tax publisher CCH.
The deduction is limited to car and truck purchases made between the date the bill becomes law and Dec. 31, says Tom Ochsenschlager, vice president of taxation for the American Institute of Certified Public Accountants. Congress "is trying to get people to buy cars right away," he says.
The bill also expands a tax break for people who take public transit to work. The bill allows employees to set aside up to $230 a month in pretax dollars to cover the cost of a bus, train or van pool, up from $120. Employees were already allowed to set aside up to $230 a month for parking. If the employer subsidizes public transportation, employees can receive up to $230 a month without paying taxes on the benefit.<<<

S2000 Driver

Doc,

Any idea of the effective start date of this plan?

Those of us who purchased new cars in 2008 -- December for me -- want to know.

Thanks.

PsychDoc

I'm not sure, but my suspicion is that it would only be applicaple to vehicles purchased after the stimulus bill was signed. And I believe that was this past Tue. if I'm not mistaken.

S2000 Driver

I suspect you're right.

Oh well, just another cost of being on the leading edge!

PsychDoc

I'd say you have to think of it as if you got a car that's every bit the equal (and superior in many significant ways) of the E-class or the 528xi at the price of a Maxima.

It's not a huge savings either. Figure in a state like NY, the sales tax rate is 8.75%. So on a car costing $40k that's $3500. Assuming that your marginal tax rate for state and federal is about 40% that's $1400 back in your pocket. Not bad, but probably not a deal breaker.

Hey, maybe the dealer can give you a new bill of sale with today's date on it (lol).

RAR

Does anyone know if this applies to leased cars? Lets say I buy my leased TL after the bill is signed and before December 31, 2009.

RAR

Interesed

Looks like anyone that bought a car between Nov 2008 - Dec 2009
http://jalopnik.com/5146133/new-car-...imulus-package

S2000 Driver

Wow, I hope you're right!

CL6

terrible idea

'06 Anthracite TL

Care to elaborate?

erick3

we're already in debt...trillions

Audioholics

does this apply for used car purchases too? I just bought a used 07 TLS last month. Had I known about this, I may have instead got a new Hyundai Genesis or Infiniti G37 Sedan.

KeithL

Except this is dated before the bill was signed.

nyyanks81

Does this plan apply for people who paid cash for a new vehicle and those who financed?

ESHBG

Here's what I got in an email from a local dealer, which if this is accurate, means that I missed this BY 7 F*CKING DAYS?!?!?!?!?!? ARGH!!!!!!!!!!!

CONSUMER AUTO INCENTIVE INCLUDED IN FINAL STIMULUS BILL (H.R. 1) “ AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009”
President Obama signed the American Recovery and Reinvestment Act of 2009.
House approved the bill by a vote of 246-183 and the Senate passed the package by a vote of 60-38. Please s ee more information on the incentive below.
What Taxes are Deductible? (1)
• State Motor Vehicle Sales
• Local Motor Vehicle Sales
• Motor Vehicle Excise Taxes
What Customers Qualify for the Deduction?
• Individual customers with modified adjusted gross income of less than $125,000 or joint-filers
making less than $250,000 a year in 2009 would qualify for the deduction.
• Deductible as an “above the line” (for itemizers and non-itemizers) deduction on federal tax return.
Effective Date
• New vehicle purchases shall apply to purchases on or after the date of enactment (February 17, 2009)
until December 31, 2009.
What New Vehicles Qualify for the Deduction?
• Any new vehicle under 8,500 pounds gross vehicle weight.
• New vehicles of any model year – when the original use commences with the taxpayer.
• Any vehicle sold for under $49,500 qualifies for the full deduction. Consumers may deduct sales
taxes on the first $49,500 of any vehicle sold above this price.
THIS IS A GENERALIZED SUMMARY. Tax savings will depend on one’s individual tax rate. For more specific information on eligible customers, taxes and applicability, dealers are encouraged to consult with an accountant or tax professional.
1) “For purposes of this section, the term ‘qualified motor vehicle taxes’ means any state or local sales or excise tax imposed on the purchase of a qualified motor vehicle.”- (Text of H.R. 1)

SSFTSX

I am sure it doesnot apply to lease cars as you dont own it. and even buying your lease car is considered a used vehicle.
This whole program will flop unless there is incentives for used car buyers because if there is no demand for used cars how some one can get decent trade in price? and it will lead to further decline in used prices.

Alexander.

iTrader: (1)

But you do pay sales tax, and it is on a brand new car. You have the right to buy the car out at the end of the term, so i don't see why this wouldn't apply to a lease.

ESHBG

Actually the used car market is very stable right now, and we are even seeing a higher price for used cars right now than last year at this time. Why? Because there is a bigger demand for lightly used cars, which are much cheaper to buy than new cars. Also, dealers are getting an excess inventory of new cars and not many good trade-ins for said new cars.

Here is a good article on the subject:

Looking For A Used Car? Look To Pay More

CL6

Pretty much. Where do you think that money is coming from? You. So you're helping me to buy a new car.

'06 Anthracite TL

Sorry - I thought you were objecting to this particular aspect of the stimulus, not the whole stimulus.

SSFTSX

This data does not mean anything. as more higher end vehicles in used car lot tend to make overall average higher.

You cannot deduct tax on used car. Interest rates are higher on used car.
used car maintaince is higher with less warranty coverage.
so from where the demand will come?. only through rapid decline of used price compared to new. People tend hold longer car in recession so they wont even willing to exchange one used car with another.

ESHBG

How can you say, "This data doesn't mean anything," when the market clearly says that it does? Do you think dealers are contacting current car owners and offering to buy back their well taken care of used cars for no reason at all? Do you know how many people I know of personally who were contacted by their dealers? You basically contradicted yourself and proved the point of the article, though, as people are holding onto their cars longer and this is leading to the shortage of well taken care of used cars.

The demand comes from the lower prices of used vehicles and what people need at the time, period. "Let's see, I need a vehicle right now and I can buy a brand new 4Runner for $35,000 or one that is a few years old for $19,000, and I can use that $16,000 elsewhere." People need to buy cars at times, regardless on if there is a recession going on or not...I was in this very same boat actually. My car was literally about to die and the annual inspection was due, and it needed tons of work to pass. Was I going to sink a few grand into a '94 with 178,000 miles on it or put that towards something new(er)?

You mentioned warranty. Well don't forget that many manufacturers offer a better warranty on their used cars than they do their new!

CL6

The only thing it is "stimulating" is bigger government and more debt... about $1.2 trillion of it...

SSFTSX

Firs there is no reason to believe that some one will save money with $19K 4Runner. which is already 3year old.
With new Car you get entire Tax dedcution, You have zero percent finanicing or very low interest rates, you have leases for protecting against excessive depreciaiton.
If every one starts buying used car. Time will come that Mechanics will raise there prices for work on old car as there will be so many. Bank hardly finance more than 5 years old car with decent rate. and Old car do depreciate.
From what is shown in article that dealers are calling one or two year old cars and exchanging it with new. as New car demand has collapsed so dealer want to save themselves from losses. Old cars you can park anywhere in lot.
There is no evidence that people are exchanging old cars with old cars at increasing rate. They rather sit in new cars.

'06 Anthracite TL

You're ignoring the fact that the significant capital savings of buying a 2-3 year old car over a new one offsets the increased risk in not buying new. Low or no interest rate or not, it will cost less to buy the $19k 4Runner than the brand new one.

ESHBG

Bingo.

SSFTSX

There is no such things as capital savings as long as car payments are similar. with new car you get new tires. with 3 year old. you are in need of replacement with in 2 years. And now add this big almost $3K tax deduction above the line on new cars. There is big incentive to buy new.

CL6

Untrue! If you buy a CPO Benz and if it has under 50% remaining on brakes or tires they are replaced with new OEM parts. Used car pricing is much more aggressive than new cars, even with the incentives. And with the economy being what it is the depreciation hit new cars take, even if you buy it low, will still be greater percentage wise than a used car.

stevel

the way I read it...... it is an almost $3K deduction in the form of reducing your gross taxable income.... so if your taxable income is $100K for example, now reduce that by your $3K and now your taxed on $97K instead. so if your taxed income at 25%, all you really saved with this deduction is around $750. that's no longer significant really.

from an earlier post.

unless I'm understanding the program wrong........................