Cash for Clunkers tax rules have been falsely rumored by many people on the Internet and I want to clear it up for anyone who already took advantage of this program. The truth is that the Cash for Clunkers income is not taxable. It doesn’t matter if you received $3,500 or $4,500 and this program is not a backdoor way for the government to collect tax revenue (as some suggested).
The official Cash for Clunkers FAQ at cars.gov states:
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.
Noticed “NO” in capital letters?
So if you recently purchased your shiny new car with this program, rest assured that you won’t be stuck with a higher than normal tax bill when you file your taxes next year.
More Reading:
- Cars.gov – Government’s Official Website
- More Information on Cash for Clunkers Taxes for Businesses
- More Cash for Clunkers Tax Rules
- Cash for Clunkers Taxes
- Cash for Clunkers Taxes for State
- Cash for Clunkers Taxable
- Cash for Clunkers Tax
- Does Cash for Clunkers Affect Your Taxes?
- Cash for Clunkers Tax Rules
- Tax Rules of Cash for Clunkers
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{ 13 comments… read them below or add one }
I can’t believe people are spreading these tax rumors. I guess people will do anything for money. I wonder if there will be commercials with some bimbo claiming that they are Cash for Clunkers Tax Consultants. I really hope not and thanks for letting us know.
these same folks that took advantage of this deal are the same folks that are in this housing mess. should of thought this program out just a little more.
The car dealers are still running ads after the rebate program stopped. The truth is the car dealers would have come off the price of the cars without any rebates. Another government bailout that should have never happened. This reckless spending by the government is what put us in the crisis were in now. The top 10 cars bought and 8 of them are foreign made. China, Japan, Korea, and Mexico and other countries should send a thank you card to Obama for helping their automakers out. ‘Spending someone elses money is a great idea until it runs out”.
I think on the Federal side, you are safe.
But I think I’ve read it somewhere you might be liable for the state income tax, can’t be sure.
Why in the world would anybody trust anything our government would say?
what it actually says on the govt.cars website is. the use of the term “rebate”in the name NHTSA has chosenfor the program is NOT INTENDEDto have any effect on how CARS transactions are treated understate or federaltax laws.The CARS act provides that the credit is not income to the purchaser, but does not address anyother possible tax issues.
you should be a politician your great at telling half truths.
I’m just so glad the Cash For Clunkers program is done.
Cars is the biggest setback for people’s personal finances in their 20′s. Such a waste of money. Please everyone follow my 1/10th rule.
RB, what’s your 1/10th rule? Thank you.
His 1/10 rule is that the car people buy should have a sticker price of less than 10% of their annual gross salary, which means people should buy cars worth $5,000 or less if their annual salary is $50,000.
Thank you, MoneyNing. I had no idea what it meant till now. Opps, I broke this rule just last year. I bought a pick up that was 25% of my income but had a bit to put down on it and just today paid it off before the one year anniversary. Too late now.
The most important part is to have it paid off, so you’re fine with 25%. You shouldn’t change cars too often though, which is more important than how much you are paying for the vehicle I believe.
Thank you, MoneyNing. No, I don’t buy new cars very often. My last truck died at 13 years and the current car is 9 and going strong.
Good job!