On June 9, the Consumer Assistance to Recycle and Save Act was passed by the US House of Representatives. The intent of the legislation is to reduce the number of inefficient vehicles on the road while, of course, spurring vehicle sales for the troubled auto industry.
Under the legislation, also referred to as the “Cash for Clunkers” program, purchasers (and qualified lessees) of new vehicles will be eligible for vouchers up to $4,500 if they:
- Trade in a passenger car that has been registered and in use for at least a year that gets 18 miles per gallon or less. A new vehicle with fuel efficiency improvement of at least 4 miles per gallon will qualify for a $3,500 voucher, while improvement of at least 10 mpg will qualify for a $4,500 voucher.
- Trade in a light duty truck that has been registered and in use for at least a year that gets 18 miles per gallon or less. A new vehicle with fuel efficiency improvement of at least 2 miles per gallon will qualify for a $3,500 voucher, and improvement of at least 5 miles per gallon will qualify for a $4,500 voucher.
The program also includes provisions for large light-duty trucks and work trucks. To be eligible, your trade-in vehicle must be destroyed by the car dealer and not re-sold. The program will be administered by the National Highway Traffic Safety Administration, who will issue more detailed program guidelines, assuming the legislation passes the Senate and is signed into law by President Obama.
Whether Cash for Clunkers is ultimately passed or not, the government is already offering some incentive to purchase new vehicles this year through the IRS. For qualified purchases of new motor vehicles after February 16, 2009 and before January 1, 2010, the state or local sales and excise taxes paid on the purchase can be deducted on your 2009 federal income tax return. There are limitations on the deduction, both for the purchase price of the vehicle and for the taxpayer’s income. For more info, visithttp://www.irs.gov/formspubs/article/0,,id=208101,00.html