Re: What is Taxable (long) - Saab 9-5 Bulletin Board - Saabnet.com
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Re: What is Taxable (long)
Posted by KP [Email] (more from KP) on Thu, 23 Aug 2001 10:20:40
In Reply to: Leasing, Purple, Thu, 23 Aug 2001 01:13:08
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Let me try to clarify. Taxes are due on the depreciation during the lease, i.e. (Capital Cost - Residual). Saab's $5K assistance reduces the Capital Cost to you and is not taxable as it is effectively a manufacturer's discount. Your initial $2,500 capital cost reduction is treated like a down payment on a purchase and will be taxable. Also, any Acquisition Fee (or Bank Fee) is taxable. For example, if your lease has a negotiated Capital Cost of $35,000 and a Residual of $20,000 with a $500 Acquisition Fee, you will pay taxes on only $15,500 for a $35,000 car. Here is another plus for leasing - you do not pay taxes on the Residual. If you buy the car, you will be assessed taxes on $35,000; then if you sell the car after 6 months for, say, $30,000, do you think you'll get a refund on the taxes you paid up front on this $30,000? This is one of life's great boondoggles - your State gets to collect taxes each time a car is sold, so a $35,000 car that has 4 owners in its lifetime who purchased at $35,000, $30,000, $20,000, and $10,000 respectively will generate taxes on $95,000!
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