Daycare Tax Tips

Cash for Clunkers signed into law on June 24, 2009

Applies to vehicles purchased/leased between July 1 and Nov 1, 2009

The Consumer Assistance to Recycle and Save Act of 2009 authorizes the issuance of an electronic voucher to offset the purchase price or lease price for a qualifying new fuel efficient vehicle upon the surrender of an eligible trade-in vehicle to a dealer participating in the program. Receive a $3,500 credit when you trade a car rated at 18 miles per gallon or less for a new car rated at 22 mpg or more. You will get $4,500 if the replacement gets at least 10 mpg more than your old vehicle. To qualify, your trade-in must be a 1984 or newer model that's in drivable condition. Also, you must have owned and insured it for at least one year prior to trading it in.

Dealers who participate in the program are required to accept the vouchers as partial payment or down payment for the purchase or qualifying lease of any new fuel efficient automobile or truck offered for sale or lease by that dealer. They must also transfer each eligible trade-in vehicle surrendered to the dealer under the program to an entity for disposal. The dealer is prohibited from charging additional fees for using this voucher.

The program is set to start officially in late July and applies to new vehicles purchased or leased between July 1, 2009 and November 1, 2009. Only one voucher can be issued to a single person and only one voucher may be issued to joint registered owners of a single eligible trade-in vehicle. Only one voucher may be applied toward the purchase or lease of a single new fuel efficient automobile.

Under the Act, the voucher is not treated as taxable income of the purchaser for federal purposes. California residents please note that unless the Legislature enacts conforming legislation, the voucher will likely be treated as taxable on the purchaser's state tax return. (Thanks to Spidell Publishing for making this point.) Taxation of vouchers is also a possibility in other states with an income tax.

California clunker program

The California Air Resources Board has a completely different "cash for clunkers" program. The state program is aimed at getting high-polluting vehicles off the road and provides cash incentives of up to $4,000 ($1,000-$1,500 for turning in a qualifying car and $2,000-$2,500 in vouchers to be used towards purchasing a fuel efficient car). The highest incentive amounts are reserved for qualifying low-income residents. Replacement vehicles must be four years old or newer (eight years old or newer for low-income residents).

Previously the California car scrap program applied only to cars newer than model year 1976 which failed the state's smog test. Effective April 1, 2009, the program has expanded to include cars older than 1976. Owners of such cars will be contacted by local air districts.

Posted on 2009-06-30 05:54:26