the $3500/$4500 cash for clunkers counts as “income”
Q: Will the “Cash for Clunkers” credits be taxed as income for consumers who participated in the program?
A: The act establishing the program prohibits the credit from being treated as income for federal income tax purposes. The credits, however, may be subject to a state or local income tax depending on the laws of the state or locality where the consumer resides.
And language in the Consumer Assistance to Recycle and Save Act of 2009 says that “[a] voucher issued under the program or any payment made for such a voucher pursuant to subsection (a)(3) shall not be considered as gross income of the purchaser of a vehicle for purposes of the Internal Revenue Code of 1986.”