Cash For Clunkers Taxable Income Issue Resolved

I discussed the cash for clunkers program back when it was first introduced a few weeks ago. Since then I have received a few emails about the program. A popular question was in regards to the tax implications of the cash for clunkers program.

After reading around the official website I can tell you guys that the Cash for Clunkers income is not taxable.It doesn’t matter if you received $3,500 or $4,500. Thankfully his program is no an easy way for the government to collect tax revenue.

The good news from the official website (www.cars.gov) is:

Is the credit subject to being taxed as income to the consumers that participate in the program? NO. The CARS Act expressly provides that the credit is not income for the consumer.

The bad news on the cash for clunkers tax rules:

Do I have to pay State or local sales tax on the amount of the CARS program credit? MAYBE. The question of whether a consumer must pay State or local sales tax on the amount of the CARS program credit depends on the sales tax law of each State or locality. Consumers should review the law of their respective States or consult a tax advisor to answer this question.

States Charging Tax on the Cash For Clunkers:

• Arizona
• Idaho
• Nebraska
• New Jersey
• New York
• Ohio
• South Carolina
• South Dakota
• Virginia
• Washington

States Not Charging Taxes for Cash for Clunkers:

• California
• Connecticut
• Florida
• Georgia
• Illinois
• Indiana
• Kansas
• Kentucky
• Louisiana
• Massachusetts
• Mississippi
• Minnesota
• Texas
• Wisconsin

Please remember that if you purchased a new car with the voucher then you have already paid for the tax.

Further reading on the Cash For Clunkers Tax Rules:

Cash for Clunkers – Tax Rules

Is there a Cash for Clunkers tax?

Cash for Clunkers taxable income?

Cash for Clunkers taxable?

Cash for Clunkers Tax Rules

Cash For Clunkers Tax Rules- The Truth

Tax Rules & Consequences of the Cash For Clunkers Program

Cash For Clunkers Tax Rules

Cash For Clunkers- Tax Rules