Clunker Cash: Taxed?

[Gerry Clinchy]

Does anyone know if it is true that the $4500 govt rebate in the Cash For Clunkers will be taxable income?

[YardleyLabs]

Does anyone know if it is true that the $4500 govt rebate in the Cash For Clunkers will be taxable income?

Not taxable for federal tax. May be taxable by state depending on state.

[Terry Britton]

Per my MBA accounting class, rebates should not be taxed and are looked at as a delayed discount in the price you pay.

[luvmylabs23139]

The 4500 rebate will be sort of taxed by most localities both in the sales tax on the vehicle and the property tax value.

[Gerry Clinchy]

Per my MBA accounting class, rebates should not be taxed and are looked at as a delayed discount in the price you pay.

It would appear that the $4500 was like an additional discount or rebate as it was in addition to whatever the car would have been worth as a trade-in.

I wonder if dealers withdrew some of the discounts they had been offering prior to the CFC program? I had read a comment that some dealers had reverted to selling some cars at "full list", rather than at previously discounted price. Most car buyers are used to negotiating the advertised price, so I'd be surprised if many buyers would have fallen for that gimmick. I recall that dealers around here have often offered a $3000 trade-in for anything you can drive into them. I'm almost surprised that the $4500 was that much of an incentive. Obviously, it was as car sales took a leap for the period it was available.