Senate votes to give a tax break to new car buyers

[tsg1391]

i cant seem to find the amount that could be taken off, is it just me?

[The_Beast_]

Does this mean that my moms soon to be new car will be a deduction???

[Mr_Draco]

Originally Posted by tsg1391

i cant seem to find the amount that could be taken off, is it just me?

Because they didn't give an amount but you can figure out the amount though.

[Mr_Draco]

Originally Posted by The_Beast_

Does this mean that my moms soon to be new car will be a deduction???

Not the whole car. Just the sales tax paid on the car up to the first $49,500 and the interest paid on a car loan made that year. If your car costs more then $49,500, you can only deduct the sales tax on $49,500.

Here's something else I found interesting. The way it is worded, it appears that if you finance though your dealer, you will not qualify for the deduction of interest as it has to be a car loan from a bank or credit union.

[Croathlete]

Do any of the tax experts here know if one would still be able to claim this deduction if they take the standard deduction? In other words, can this be used in addition with the standard deduction to lower your taxable income?

[Inspector 17]

Originally Posted by Croathlete

Do any of the tax experts here know if one would still be able to claim this deduction if they take the standard deduction? In other words, can this be used in addition with the standard deduction to lower your taxable income?

I believe the article said that it applied even if you don't itemize.

[Mr_Draco]

Originally Posted by Croathlete

Do any of the tax experts here know if one would still be able to claim this deduction if they take the standard deduction? In other words, can this be used in addition with the standard deduction to lower your taxable income?

including those who do not itemize their deductions.

So my guess is on top of it.

[Croathlete]

Originally Posted by camaropete

I believe the article said that it applied even if you don't itemize.

I liked the original $7500 deduction proposed originally, but I guess this is better than nothing. Unfortunately, I don't see this working as effectively.

[GothamCamaro]

Originally Posted by Croathlete

I liked the original $7500 deduction proposed originally, but I guess this is better than nothing. Unfortunately, I don't see this working as effectively.

Yeah, I liked the original proposal better but I will take what I can. Good thing I'm buying in 2009!

[EllwynX]

A couple comments have conflicted with what I would have though.

It sounds like some are saying the loan interest would only be deductible for the months of the year you purchase the car? So if someone purchased a car in July they could claim the interest from August - December of that year and never again?

That doesn't sound right.

Didn't it used to be that you could claim the interest every year that you paid on the car loan (just like a mortgage)? I believe that is how it will be with this as well. Finance a vehicle for 5 years and you get an interest deduction for 5 years 'til it's paid off.

The tax, of course, is only able to be claimed the first year. But the interest is every year you pay on it.

Otherwise it would benefit everyone to purchase in January if you only got to claim one years worth of interest.

[ZYAL8R]

That's good news I don't care how you look at it. BUT, and there's always a but! It would be even better if the government would STOP taxing the rebates and discounts that you get when you buy a new car. They always tax you on the money that you had nothing to do with instead of taxing the actual price of the car that you will be paying. That's never been fair.

[Mr_Draco]

Originally Posted by EllwynX

A couple comments have conflicted with what I would have thought.

It sounds like some are saying the loan interest would only be deductible for the months of the year you purchase the car? So if someone purchased a car in July they could claim the interest from August - December of that year and never again?

That doesn't sound right.

Didn't it used to be that you could claim the interest every year that you paid on the car loan (just like a mortgage)? I believe that is how it will be with this as well. Finance a vehicle for 5 years and you get an interest deduction for 5 years 'til it's paid off.

The tax, of course, is only able to be claimed the first year. But the interest is every year you pay on it.

Otherwise it would benefit everyone to purchase in January if you only got to claim one years worth of interest.

Everything I've found says that it was just added and they are working on the details like whether you can deduct the interest every year you pay the loan or just the first.

[trm0002]

Originally Posted by Mr_Draco

Everything I've found says that it was just added and they are working on the details like whether you can deduct the interest every year you pay the loan or just the first.

Look at the bright side. In almost every amoritized loan, interest is front loaded i.e. $480 interest/ $20 principle to start, gradually reversing through the term to where your last payment would be the opposite, $480 principle/ $20 interest as an example.

[Grape Ape]

Originally Posted by trm0002

Look at the bright side. In almost every amoritized loan, interest is front loaded i.e. $480 interest/ $20 principle to start, gradually reversing through the term to where your last payment would be the opposite, $480 principle/ $20 interest as an example.

The high front loading is driven by the length of the loan. On a five year, $30k, 7.02% note your first payment would be $718.67 which includes $175.50 of interest and $543.17 of principal.