Are Cash for Clunkers Rebates Taxable?
Cash for Clunkers may be over, but its swath of confusion rolls on unabated. Keloland reports that South Dakotans are being told that their clunker rebates are taxable as income. “They didn’t realize that would be taxable. A lot of people don’t realize that. So they’re not happy and kind of surprised when they find that out,” says Minnehaha County Treasurer Pam Nelson. Omaha.com reports that clunker rebates are also liable for state income tax hits of $192.50 to $247.50 depending on the amount of the rebate. Nebraska city sales taxes also apply. Surely other states will be making announcements about local arrangements, but in the meantime, where is the confusion coming from? The cars.gov website’s FAQ holds the key. “Is the credit subject to being taxed as income to the consumers that participate in the program?” CARS asks itself. “NO,” is the answer. “The CARS Act expressly provides that the credit is not income for the consumer.” Unless it is. Have fun with that.
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That Omaha.com link you quoted says "state SALES tax" and city SALES tax it says NOTHING about state INCOME tax: LINCOLN — Beware, Nebraska taxpayers: You will be getting a final “clunk” on your tax bill after turning in your clunker vehicle for federal cash. Nebraska law requires including the value of such third-party rebates in the purchase price of a new vehicle for tax purposes. Thus, Nebraskans must pay sales tax on the value of the “cash for clunkers” voucher issued to car dealers in the federal incentive program, State Tax Commissioner Doug Ewald says. That means $192.50 in added state sales taxes if you got $3,500 for your clunker, and $247.50 if you got a $4,500 voucher. [emphasis mine]
Tax them! Gas, Grass, or @$$, no one rides for free.