“CASH FOR CLUNKERS” IS THE LATEST BREAK FOR NEW VEHICLE PURCHASES IN 2009
In the market for a new car, and ready to give up your “clunker?” New car buyers may qualify for a $3,500-$4,500 cash voucher for trading in their “clunkers” for more fuel-efficient models this year. Liberty Tax Service reminds you that this new CARS Car Allowance Rebate System” incentive is in effect until November 1, 2009, or until the funding is depleted. Participating car dealers will apply the credit to qualifying new car purchases at the time of the purchase. Here are some conditions that must be met in order to qualify:
- The trade-in vehicle must be under 25 years old, working, and have an average gas mileage of 18 miles per gallon or less. It must be owned and insured by the same person for the past year.
- To qualify for a $3,500 credit, the buyer must purchase either a new passenger car getting at least 4 more miles per gallon, a new small truck getting at least 2 more miles per gallon, or a new large truck weighing 6,000-8,500 pounds getting at least 1 more mile per gallon. The new passenger vehicle must have new mile per gallon requirement of 22 miles, a small truck 18 miles per gallon, and a large light-duty truck 15 miles per gallon.
- To qualify for a $4,500 credit, the buyer must purchase either a new passenger car getting at least 10 more miles per gallon, a new small truck getting at least 5 more miles per gallon, or a new large truck weighing 6,000-8,500 pounds getting at least 2 more miles per gallon.
The CARS Act requires that the trade-in vehicle be crushed so that it will not be resold for use in the United States or elsewhere as an automobile. The credit amount is not considered as taxable income. Under the CARS Act, you may purchase a new vehicle or lease a new vehicle, provided the lease period for the new vehicle is at least five years.
Participating car dealers will apply the credit to qualifying new car purchases at the time of the purchase.
New car buyers may also benefit from deducting state and local sales taxes and excise taxes for new car purchases whether they itemize or not. There are additional benefits for buying some hybrid models.
A Sales Tax Deduction for Buying a Car
Car buyers will be able to deduct the state and local sales and excise taxes they pay on new cars, light trucks, recreational vehicles and motorcycles through 2009, but not the interest on their car loans.
Hybrid Vehicles Tax Break
The IRS still allows a tax credit for purchasing some hybrid cars. The allowable credit amount is subtracted from the amount of federal taxes owed. A full or partial credit amount may be available, depending on the number of hybrid vehicles sold by the manufacturer. A hybrid vehicle is one that combines an electric motor with a gasoline-powered engine. The vehicle must be purchased for your use, and you must be the original owner.