ATTN: DEALERS! can you explain something to me?

[haleyd]

Have any of you ever heard of a "run-through"? i have talked to 3 dealers around here and they know what it is, but none have helped me to really understand it.

this is how i have understood it though... me and the person buying my car go to the dealer and they handle all the paperwork. i then, instead of PAYING the taxes on the money, get a tax CREDIT. that is what i'm confused on though. if i sell the car for 8750 does that mean that at 7% tax, i'm actually going to get 9362 for it? does that mean that i will actually be able to put 9362 down on my camaro??? how exactly does this work?

i hope someone can answer this for me soon because i have to call this guy back today and let him know if i will accept that offer! thanks in advance!!!

[Y2Breeze]

Yes, that's what I heard

[haleyd]

is that how you understood what i said? or you have heard of a run-through as well and you know how it works?

[Y2Breeze]

My brother bought my cousin '93 Civic several years ago... We did it through the Subaru dealer where he bought is new car, so he could save the sale taxes on his new Impreza...

It was in Canada, but looks to be the same way as the US

[haleyd]

the guy i found to buy my car refuses to do it this way. wtf? guess it's not going to be saving me the 630 dollars i hoped it would!

[Teddydog]

How much was a dealer going to charge you to do the paperwork?

Getting the sales tax credit is one of the advantages of trading in a car. For example, I'm trying to sell my Mazda3. If I can trade it in for $12,000, then I only have to pay sales tax on the Camaro for $28000 - 12000 = $16000. Here, that's about $1000 difference in tax. That means I need to sell to a private party for $13000 or more to make to worthwhile. Didn't know you could do that using a dealer as an agent between two private parties, though.

Rob

[SRVFAN]

The taxes that are paid on the new car can be deducted on your 2009 income taxes...

New Car (up to $49,500) Sales Tax Deduction in Obama Economic Stimulus Package - Updated with IRS Eligibility Criteria
written by Andy on Wednesday, February 11, 2009

[Updated July 2009 with IRS rulings] In addition to the working tax rebates and home owner tax credits, the President has approved a scaled back version of the Auto Assistance Ownership amendment in the final economic stimulus package. This amendment provides tax breaks for new vehicle buyers by giving them a federal-income-tax deduction on local sales and excise taxes, but not on the interest on loans, as was originally proposed. It enables taxpayers to buy now and get cash back later on their 2009 tax returns. It is applicable to any new vehicle purchased after Feb 17th 2009 (the date the stimulus bill was signed into law). Here are all the eligibility criteria, based on recent IRS press releases:

The deduction is limited to the state and local sales and excise taxes paid on up to $49,500 of the purchase price of a qualified new foreign or domestic cars, SUV's, light trucks, motor homes or motorcycles that weigh no more than 8,500 pounds. You can still buy a qualifying vehicle for more than $49,500 (e.g a $80,000 BMW per a commenter's question below), but you will only get a tax deduction up to the specified limit.

The deduction is only available to families making less than $260,000 (or $135,000 for single filers). It is phased out for taxpayers whose modified adjusted gross income is between $125,000 and $135,000 for individual filers and between $250,000 and $260,000for joint filers.

The new vehicle must be purchased on or after Feb. 17, 2009, and before Jan. 1, 2010, to qualify for the deduction. Purchases before Feb. 17, 2009, are not eligible for this special deduction.

The deduction is available regardless of whether a taxpayer itemizes deductions on their return (Schedule A). The deduction cannot be taken on 2008 tax returns (even if they are amended or filed late). Also, unlike other tax credits in the economic stimulus package this tax break is not an offset to your federal taxes (i.e. a tax credit), it is a deduction against your taxable income.


To illustrate the above tax deduction, consider the following example from a commenter. The average new car purchase price the first 11 months of last year was $28,280, and the average used car trade-in value was $15,203, according to data from the National Automobile Dealers Association.

States typically tax the difference — $13,077 in this case. So a 5% sales tax rate would be $654, meaning the deduction would reduce taxable income that much. Each state has a different car sales tax, so the deduction will vary by state.

Hope that helps...

[haleyd]

Originally Posted by Teddydog

How much was a dealer going to charge you to do the paperwork?

Getting the sales tax credit is one of the advantages of trading in a car. For example, I'm trying to sell my Mazda3. If I can trade it in for $12,000, then I only have to pay sales tax on the Camaro for $28000 - 12000 = $16000. Here, that's about $1000 difference in tax. That means I need to sell to a private party for $13000 or more to make to worthwhile. Didn't know you could do that using a dealer as an agent between two private parties, though.

Rob

the dealer charges nothing to do a run-through. they make 0 dollars on it. so basically, if i had gotten the guy to do the run through, i would have saved 630 dollars on my sales tax. my car will be 28664 and the sales tax is 2006 i believe. i would have ended up only paying 1376 in sales tax. but now because this guy wouldn't agree to go to the dealer with me, i will be paying the full 2006. oh well i guess. i'm getting a NEW CAMARO!!!!!! WOOHOO!

[haleyd]

Originally Posted by SRVFAN

The taxes that are paid on the new car can be deducted on your 2009 income taxes...

New Car (up to $49,500) Sales Tax Deduction in Obama Economic Stimulus Package - Updated with IRS Eligibility Criteria
written by Andy on Wednesday, February 11, 2009

[Updated July 2009 with IRS rulings] In addition to the working tax rebates and home owner tax credits, the President has approved a scaled back version of the Auto Assistance Ownership amendment in the final economic stimulus package. This amendment provides tax breaks for new vehicle buyers by giving them a federal-income-tax deduction on local sales and excise taxes, but not on the interest on loans, as was originally proposed. It enables taxpayers to buy now and get cash back later on their 2009 tax returns. It is applicable to any new vehicle purchased after Feb 17th 2009 (the date the stimulus bill was signed into law). Here are all the eligibility criteria, based on recent IRS press releases:

The deduction is limited to the state and local sales and excise taxes paid on up to $49,500 of the purchase price of a qualified new foreign or domestic cars, SUV's, light trucks, motor homes or motorcycles that weigh no more than 8,500 pounds. You can still buy a qualifying vehicle for more than $49,500 (e.g a $80,000 BMW per a commenter's question below), but you will only get a tax deduction up to the specified limit.

The deduction is only available to families making less than $260,000 (or $135,000 for single filers). It is phased out for taxpayers whose modified adjusted gross income is between $125,000 and $135,000 for individual filers and between $250,000 and $260,000for joint filers.

The new vehicle must be purchased on or after Feb. 17, 2009, and before Jan. 1, 2010, to qualify for the deduction. Purchases before Feb. 17, 2009, are not eligible for this special deduction.

The deduction is available regardless of whether a taxpayer itemizes deductions on their return (Schedule A). The deduction cannot be taken on 2008 tax returns (even if they are amended or filed late). Also, unlike other tax credits in the economic stimulus package this tax break is not an offset to your federal taxes (i.e. a tax credit), it is a deduction against your taxable income.


To illustrate the above tax deduction, consider the following example from a commenter. The average new car purchase price the first 11 months of last year was $28,280, and the average used car trade-in value was $15,203, according to data from the National Automobile Dealers Association.

States typically tax the difference — $13,077 in this case. So a 5% sales tax rate would be $654, meaning the deduction would reduce taxable income that much. Each state has a different car sales tax, so the deduction will vary by state.

Hope that helps...

this actually is something completely separate and different. a run-through is something that dealers have been doing for years! but i'm super stoked that i'll get a tax deduction for buying my camaro!

[mmollo]

It's referred to as an "in and out". Here's how it works: I find Joe Blow to buy my car for 10,000. The dealer is selling me their car for 20,000. On the paperwork the dealer shows a trade in value of 10,000. The difference is 10,000, and that's the amount you will pay taxes on. In Texas it's 6.25% sales tax on a new car, so the "in and out" saves you 625.00 in taxes. It has no effect on Joe Blow who's buying your car. He is paying tax on the purchase price weather he buys the car from you or the dealer. The dealer will usually charge you 100-150 to do the paperwork. I have done this many many times. You should pick up the small charge for the paperwork and net the buyer out at 10,000. So, this example puts an extra 625.00 in your pocket. Hope this helps you

[haleyd]

Originally Posted by mmollo

It's referred to as an "in and out". Here's how it works: I find Joe Blow to buy my car for 10,000. The dealer is selling me their car for 20,000. On the paperwork the dealer shows a trade in value of 10,000. The difference is 10,000, and that's the amount you will pay taxes on. In Texas it's 6.25% sales tax on a new car, so the "in and out" saves you 625.00 in taxes. It has no effect on Joe Blow who's buying your car. He is paying tax on the purchase price weather he buys the car from you or the dealer. The dealer will usually charge you 100-150 to do the paperwork. I have done this many many times. You should pick up the small charge for the paperwork and net the buyer out at 10,000. So, this example puts an extra 625.00 in your pocket. Hope this helps you

correct! i finally talked to a dealer yesterday on the phone that made me understand it. however, there is no fee for doing this! at least not here with any of the dealers i talked to!! it's all a moot point though now because the guy interested in my car REFUSES to do the run-through (that's what it's called here lol). i'm really annoyed by this.

[mmollo]

The reason the buyer won't do it is because he wants to go down to the DMV and tell them he paid less than what he did to save himself of the tax. He knows if the sale goes through the dealer he can't fudge on the price he paid. Look for another buyer, or increase the price of your car to get you net net the same.

[haleyd]

Originally Posted by mmollo

The reason the buyer won't do it is because he wants to go down to the DMV and tell them he paid less than what he did to save himself of the tax. He knows if the sale goes through the dealer he can't fudge on the price he paid. Look for another buyer, or increase the price of your car to get you net net the same.

we've already agreed on the price and i actually got him to go up to 9000 from 8750. we are going to have a purchasers agreement and everything so i don't know how he will lie to the DMV. but i don't really understand all of this anyway so i'm sure there is a way!

[honeybucket99]

In Georgia (my home state), this would appear to be a terrible thing for the purchaser of your used car. Here, if I purchase from an individual who does not regularly sell cars, I pay no sales tax due to an exemption of "casual sales." If your state has that exemption, then that may be why the purchaser is balking. Just a thought...