Senate approves tax break for auto loan interest

[dennyrex]

WASHINGTON -- The U.S. Senate voted today to make loan interest and sales taxes on vehicle purchases deductible from federal income taxes.
The proposal, championed by the National Automobile Dealers Association, was added to an economic stimulus bill under debate in the Senate. The vote was 71-26.
The provision was not in a House-passed version of the more than $800 billion package of spending increases and tax cuts.
A conference committee will decide whether the provision stays in. The bill is a top priority of President Barack Obama.
If the measure passes, taxes on auto loans will be deductible for the first time since 1986.
The provision on deductibility of loan interest is the first significant measure aimed at getting consumers back into showrooms and buying vehicles to get action from Congress. NADA says the measure will save consumers about $1,500 on a $25,000 vehicle.
Some experts have criticized the provision for not having enough up-front punch. Too many worried would-be buyers aren't thinking ahead to cutting future tax bills, they argue.
But the measure is a significant incentive and NADA had to focus on what could be accomplished politically, an organization spokesman said today.

[gbryers]

Ah, but would it apply to this year's (2008) taxes, or next? It's a bit late for this tax year - there are already lots of people who have submitted theirs. Granted, a majority seem to hold out until the deadline...

[dennyrex]

aren't the hybrid tax breaks good for previous years or ?? and even if it were the case, don't you pay interest for the life of the loan?

[jwight]

More on proposed tax breaks:

The amendment, brainchild of Sen. Barbara Mikulski (D-Md.), would allow buyers to claim an income tax deduction for the sales tax they pay on a vehicle purchase and for the interest on their loan. The tax break would be available to individuals making up to $125,000 a year and to couples making up to $250,000.

The tax break apparently would be retroactive, covering new vehicles purchased between Nov. 12, 2008, and Dec. 31, 2009, according to Mikulski’s office.

“My amendment is simple,” the senator said in a statement. “If you buy a new passenger car, minivan, or light truck by December 31st of 2009, you will get a tax deduction for your sales or excise tax and the interest on your loan.

“A family would save about $1,500 on a $25,000 car, not counting the additional incentives from dealers.”

Of course, nothing is really simple in our nation’s capital, where even used car dealers are advised to keep a hand on their wallets at all times. As its nomenclature implies, Mikulski’s amendment simply amends the economic stimulus bill now being debated — heatedly, it should be noted — in the Senate.

Even if that bill makes it through the Senate, the vehicle tax deduction isn’t in the House version of the stimulus package, so a conference committee would have to decide whether it stays or goes.

Buy a car, get a (tax) break | Up to Speed | Los Angeles Times

[Woody14619]

Well that sucks... so it's not if you're currently paying interest. It's only good if you buy a new car in the next year and pay interest. So those of us who bought our car last year to help boost the economy get the shaft. Figures...

[Suze]

It sucks here too. Oregon doesn't have a sales tax, we are taxed higher in other areas. Doesn't seem fair that because a state has a different tax structure the residents are penalized.

This should have been wrapped into federal income tax - the same rules for everybody.

[kwajman]

I hope it sticks though, my car is due in a few months and would fit in nicely with my plans!

[CWCjr]

did this make it into the stimulus package Obama signed into law?

[The Rigger]

Originally Posted by Woody14619

Well that sucks... so it's not if you're currently paying interest. It's only good if you buy a new car in the next year and pay interest. So those of us who bought our car last year to help boost the economy get the shaft. Figures...

Last year? How d'ya think *I* feel?? I picked my Cabrio up January 16th!

[VillageGreen]

Originally Posted by CWCjr

did this make it into the stimulus package Obama signed into law?

From Boston.com:

Car buyers – Any taxpayer that purchases a new car in 2009 can take a deduction for the sales tax paid on the vehicle. This does not apply to used car sales. For taxpayers that itemize, the taxes can be taken in as an itemized deduction. For those that do not itemize, a taxpayer may increase their standard deduction by the amount of sales and excise taxes paid. Income limits apply to the deductibility.