Depends on how you use your car. You have always been able to deduct lease payments IF your car is used in buisness, but not just for personal use. That's why leasing is popular with real estate agents, pizza deliverers, traveling salespeople, etc.....who use their vehicles as part of their buisness.

 

Well, the way I see it, it's always better not to be in debt to start with, even if you can legally deduct certain things associated with the debt. Remember, when you deduct something, all that means is that it comes off of your taxable income.....so what you actually get back depends on your tax rate (or tax bracket). It does not mean that you will get the ENTIRE value of the deduction back.

There is, maybe, one exception to the rule. If you can invest the money you WOULD have spent on a new car and, by investing it, you get MORE interest than you would actually pay on the car loan, it might be worth it to then go ahead and finance the car instead. You will (in some cases) pocket the difference between what money the investments make (I've always liked tax-free municipal bonds myself) and the interest you pay for the car loan, especially considering that the car-loan interest and sales tax will be deductible if the bill becomes law.

But, even for people who don't do this, or who cant, and need a new car right away, even if they don't have the cash for it, the law will still have the benefit of lowering their car payments in the long run....so, IMO, it has merit.

But, of course, always remember (and this probably goes without saying)......when you go into debt to buy a car, no matter what the circumstances are (even if the sales tax and loan-interest is deductible), that the bank, dealership, or auto manufacturer actually owns the car until it is paid off, not you....you simply bought it with borrowed money). So, unless your job and economic situation is pretty stable (as mine is), there is always the possiblilty, however small, of a reposession if you lose your job or the payments can't be kept up.

That's where Hyundai has come out with a nice recent new rule. They make it easier for people who lose their jobs, or otherwise can't keep up the payments, to get out from the obligations of the remainder of their loan...but it still usually means giving up their car.


We may not know all of the retroactive details until the bill is passed in final form...and if/when Obama signs it.

 

Great points Mike

 

Thanks. I have to start being more careful with my spelling. Re-reading what I posted, I had to go back and correct a few typos.

 

that's ok, i can't fix an armored humvee.

i'd bet it's not retroactive.

 

I don't know about any retroactive dates (the legislation has not yet passed in final form), but, being in the military, you may (?) already be eligible for an extra discount on a new car that civilians don't get, depending on the company and model. Some auto manufacturers give the military, especially active-duty people, a discount. I know a Lieutenant Colonel who got one buying a new Hyundai Santa Fe.

(The military discount is something the manufacturers provide, not the government)