Could the auto loan interest tax deduction be coming back?

liberal N proud

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Mon Feb-02-09 07:09 PM
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Could the auto loan interest tax deduction be coming back?

Edited on Mon Feb-02-09 07:15 PM by liberal N proud

Uncle Sam wants you to buy a car
A few plans floating through Capitol Hill are trying to get consumers back in the driver's seat.

By Peter Valdes-Dapena, CNNMoney.com senior writer
Last Updated: February 2, 2009: 5:06 PM ET

NEW YORK (CNNMoney.com) -- With auto sales at crisis levels, Washington is trying to figure out how to get Americans buying cars again.

Several ideas are on the table, but two of them are really making the industry pay attention. One plan is to make new car costs tax deductible. The other is to give rebates to Americans with old cars so they can better afford to buy new ones, a program otherwise known as "cash for clunkers."

Tax deductions
It would be an "above the line" deduction, meaning even tax filers who don't itemize deductions could still get the benefit, according to the bill introduced by Sen. Barbara Mikulski, D-Md., and Rep. Bill Pascrell, D.-N.J.

Auto loans of up to $49,500 would qualify. Car buyers borrowing more would still be able to deduct the interest and sales tax for the first $49,500. The benefit wouldn't apply to individuals making more than $150,000 or families making more than $250,000.

The deductions would save a car buyer about $1,300 on the purchase of a $25,000 car, according to a statement by Pascrell's office.

Cash for clunkers
The second plan is more politely known as "fleet modernization." It combines economic as well as environmental goals in one package.

Under a bill introduced by Sen. Dianne Feinstein, D.-Calif., owners of older cars would get vouchers worth thousands of dollars toward the purchase of newer, more fuel-efficient vehicle.

To qualify for a voucher, a car buyer would have to trade in a vehicle with EPA-rated fuel economy lower than 18 miles per gallon. The vehicle being purchased would have to exceed, by at least 25%, certain mileage standards set by the Department of Transportation. Those standards would vary by the type of vehicle and model year. Vouchers for smaller amounts could be used to purchase a used car or consumers could get public transit credits.

For the customer to get that cash, the car dealer would have to certify that the trade-in was getting scrapped and not resold. The car's vehicle identification number (VIN) would be tracked to make sure it never shows up on a vehicle registration again.

Crushing the old car has two benefits. First, it ensures that the consumer's purchase of a more efficient vehicle actually has a net environmental benefit. Second, it prevents a glut of used cars on the market, which would reduce trade-in values for new car buyers, which would cut into the sales incentive effect.

In addition to boosting car sales, the plan could save an estimated 80,000 barrels of oil a day, a spokesman for Feinstein's office said. Because it holds appeal for both environmentalists and the auto industry, the cash-for-clunkers idea seems to be generating the most discussion.

More at link... http://money.cnn.com/2009/01/23/autos/government_car_incentives/?postversion=2009012909

It was the Reagan years the auto loan interest tax deduction was removed as one of his revenue enhancements.