Buy a car, get a (tax) break

Bad news travels fast in Washington.

On the same day automakers reported their worst January sales in the U.S. in 27 years, the Senate voted to approve a tax break for Americans who take the incredibly bold step of walking into a showroom and — gasp! — buy a new car.

The amendment, brainchild of Sen. Barbara Mikulski (D-Md.), would allow buyers to claim an income tax deduction for the sales tax they pay on a vehicle purchase and for the interest on their loan. The tax break would be available to individuals making up to $125,000 a year and to couples making up to $250,000.

The tax break apparently would be retroactive, covering new vehicles purchased between Nov. 12, 2008, and Dec. 31, 2009, according to Mikulski’s office.

“My amendment is simple,” the senator said in a statement. “If you buy a new passenger car, minivan, or light truck by December 31st of 2009, you will get a tax deduction for your sales or excise tax and the interest on your loan.

“A family would save about $1,500 on a $25,000 car, not counting the additional incentives from dealers.”

Of course, nothing is really simple in our nation’s capital, where even used car dealers are advised to keep a hand on their wallets at all times. As its nomenclature implies, Mikulski’s amendment simply amends the economic stimulus bill now being debated — heatedly, it should be noted — in the Senate.   

Even if that bill makes it through the Senate, the vehicle tax deduction isn’t in the House version of the stimulus package, so a conference committee would have to decide whether it stays or goes.

As Automotive News reported, critics think the tax break is too “delayed action” in nature to do much to help pull the economy out of its current doldrums, not to mention light a spark under the worst car market since what was good for General Motors actually was good for the country.

After all, except for the half a dozen or so folks who actually bought a car during the last six weeks of ’08, the tax break won’t do anyone any good until they start filling out their 2009 tax return — in other words, about a year from now.

-- Martin Zimmerman

Photo: Sen. Barbara Mikulski. Credit: Associated Press

Comments

[Finance Junkie]

The person criticizing the plan missing the mark. The amendment immediately would provide a deferred incentive to tax payers that could immediately impact dealers. Increased new car sales means more car salesman jobs soon thereafter. Additionally, car manufactures may eventually increase car sales, increasing manufacturer's ability to spread fixed costs across increasing car sales and eventually slowing losses.

[Jack]

THAT'S GREAT! SO WHAT ABOUT THE REST OF US THAT PURCHASE A VEHICLE DURING THE TAX YEAR OF 2008??? I PURCHASED A NEW VEHICLE ON 1 MARCH 2008 AND NOW I'M UNEMPLOYED. SO ALL THE PEOPLE THAT WAS BUYING A CAR WHEN THE ECONOMY SUCKED LAST YEAR GETS SCREWED OUT OF THIS RELIEF. IT WOULDN'T KILL THEM TO MAKE IT BACK TO 1 JAN 2008 FOR THE TAX YEAR MAKING IT FAIR TO MILLIONS MORE AND PUTTING THAT MUCH MORE $$$ INTO THE ECONOMY!

[Barbara Siegman]

Dear Jack,
You should write your congressman or Senator since this isn't final yet. Maybe they would make it retroactive to Jan. 1, 2008. It is worth a try.

[CarWONK]

What about those of us in states that have no personal income tax? Current federal tax code already allows us to take a deduction for state sales tax. Would we get to take it twice?

[O]

I feel your pain. I bought one back in September. Economy was already jacked then....

[Fred]

I leased my Audi 1 1/2 years ago and now it's leasing for $100 less than I'm leasing it for. Where's my tax break? How do you think I feel driving an overpriced Audi in LA? I'm a laughing stock now.

[Miguel]

This is not an Economic Stimulus bill but a handout to all the Obama lover that think they are entiled to something just because, now they appear that they voted for him. He already for got you suckers if you don't see him saying it. He must be insane if he thinks he can get his budget passed looking like this is going to creat jobs. Great we loss a great job at Microsoft now where digging ditches to build an Obama bridge.

[keith]

I buy used cars. If some jerk wants to buy a new Hummer, I don't want my tax dollars subsidizing it. Pay for your own car and I'll pay for mine.

[Amy]

I think this plan should include tax break to used car sales as well...coz 1) increasing sales of used cars will also pull new car sales...2) its fair to poor people who can only afford used cars (remember they pay higher interest rates for used cars!!)

[Paul]

If you are too poor to buy a new car you are probably getting plenty of money back already. They should not retro pay anyone for buying a car last year. You were going to buy the car anyway. The point of this is to stimulate the economy by people buying new cars now not a year ago. That is why it's part of a STIMULUS package. Not a give me free money package.

[Lloyd]

If the stimulus is capped at $250,000 a year you probably target people who are already in hock! Why not allow everyone the credit---include used cars and business also--- that is the point---don't target people who already are in hock and allow fence sitters who have money but are afraid to spend!!

[Boraxo]

Subsidizing the sale of all new vehicles regardless of mileage - how incredibly short-sighted. Here is an opportunity to target incentives in a way that helps the environment - the higher the mileage, the bigger the tax break.

[gary]

maybe the incentive for higher mileage cars should be a bit higher than those with ave or below ave mileage??
Does that make any sense?

[Philmer Posey]

I would like to buy a new car,but I don't need a tax break at the end of the the year when I file my taxes , I need a tax break during the time of me purchasing a new car, that is what gives me the incentive to get myself into more debt. I would like to see my break off the top,not the bottom.

[Jordan]

I highly doubt dealers are going to sell below the price they paid and you can get close to that using this process my dad swears by: http://excarsalesman.typepad.com/

[Jordan]

You simply have to be able say 'no, thanks at that price' at least once to the dealer. This gives them a strong message that you are serious about your research.

You should also bring a piece of paper to the dealership and make sure you do all the math of the finance calculations yourself. The point is not that they will do the math wrong. The point is you will see exactly how the deal is structured. Do not be afraid to take the time to do this or look like a fool for mapping out your car deal in the dealership.

My dad swears by this process, http://tinyurl.com/nxutm2

[arizona bankruptcy attorney]

Will the reckless spending from Congress every stop? My guess is no......until voters realize there is no free lunch and that taxpayers must now bail out our own nation from the fraudlulent spending of our money.