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So it probably sounds to good to be true but you really can get $4,500.00 for that piece of junk in your driveway. The President has signed a new congressional bill that will provide a cash credit for the purchase of a new vehicle.

Why?

The main objective of the “Cash for Clunkers” program is to stimulate the auto industry by encouraging consumers to buy new vehicles. The new vehicles will also be more gas efficient than the old gas guzzlers of the past. This will help lower our nation’s need for more fuel consumption.

How to Qualify?

The first and most important part of this program is that you are purchasing a brand new vehicle. The vehicle you are trading in for the cash credit must be considered driveable and use more than five miles per gallon than the vehicle you are purchasing.

The new vehicle must get at least 18 miles per gallon or less. The rebate amount will be directly given to the dealership who will in turn offer it to you for your trade-in.

There are no income limits to qualify so no need to worry if you are considered high income. This could be a great unexpected credit that high income level taxpayers usually don’t qualify for.

The vehicle must be purchased before November 1^st, 2009.

Will I Have to Pay Income Tax on the Credit Amount?

The answer is no. You will not have to pay income tax on the $4,500.00 received for your trade in. This amount is totally exempt from your gross income amount.

If you have recently purchased a new vehicle, don’t forget about all the other great tax incentives available for your purchase.