New Law Alert: Cash for Clunkers
On June 24, President Obama signed into law the bill containing the "Cash for Clunkers" provision, which pays consumers between $3,500 and $4,500 to trade in their cars or trucks for those that are more fuel efficient.
The official name of the program is the Car Allowance Rebate System (C.A.R.S.), and it will be administered by the National Highway Traffic Safety Administration. The law allocates $1 billion for the program, which runs through Nov 1, 2009 or when the funds are exhausted, whichever comes first.
Buyers may not want to rush a purchase with the expectation they will receive a credit. The NHTSA writes: "While the CARS Act makes transactions on and after July 1 potentially eligible for credits under the CARS program, interested dealers and consumers may want to wait until all of the detailed issues that must be addressed in the implementing regulations are resolved and the final rule is issued. Issuance will occur around July 23."
A few important facts about the credit include:
• Your vehicle must be less than 25 years old on the trade-in date.
• Only purchase or lease of new vehicles qualify.
• Generally, trade-in vehicles must get 18 or less MPG (some very large pick-up trucks and cargo vans have different requirements).
• Trade-in vehicles must be registered and insured continuously for the full year preceding the trade-in.
• Buyers do not need vouchers, as car dealers will apply the credit towards qualifying purchases.
• The vehicle that you are trading in is required to be destroyed. Therefore, the value you negotiate with the dealer for your trade in is not likely to exceed its scrap value. The law requires the dealer to disclose to you an estimate of the scrap value of your trade-in vehicle.
The State of California is not likely to conform to this law, which means any credit received will be taxable income for California purposes.
More information is available at the government website: www.cars.gov.
| Required Circular 230 Disclosure: Any tax advice included in this written or electronic communication was not intended or written to be used, and cannot be used, by the taxpayer, for purposes of avoiding any penalties that may be imposed by governmental taxing authority or agency, or promoting, marketing or recommending to another party any transaction or matter contained herein. |
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