Will Car Loan Tax Deduction Be In or Out of Final Stimulus Package?
By Michelle Krebs February 11, 2009The proposed tax deduction for interest on a new-vehicle loan could wind up on the cutting room floor once the U.S. Senate and U.S. House of Representatives come up with a compromise economic stimulus package.
At the moment, the tax credit is in the just-approved Senate bill but not in the House package. Experts are divided on whether it will make it into the final stimulus package agreed upon by both the Senate and House.
The tax credit proposal was put forth by U.S. Sen. Barbara Mikulski, D-Md., and made its way into the Senate's bill. The provision would allow some new car buyers the ability to deduct interest on their new-car loan. It would apply to new cars and trucks purchased between November 12, 2007 and January 1, 2010, on 2009 taxes. It would go only to families making less than $250,000 a year, and would only apply to interest on loans up to $49,500.
Mikulski's intent is not only to help the consumer but also to spur new car sales. "Everyone wants to save auto manufacturers, but no matter how much government aid we give to the Big Three auto makers, they can't survive if consumers don't start buying cars," Mikulski was quoted as saying.
Indeed, auto manufacturers and dealers support the tax credit. They note that some people finance their new cars using home equity loans so that they can deduct the interest.
However, the tax break is not included in the House bill. And now the Senate and House are negotiating to develop a compromise economic stimulus package. Experts are split as to whether the tax credit will make it into the final bill.
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