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Senate approves tax break for auto loan interest

Wed, 04 Feb 2009

The U.S. Senate voted on Monday to make loan interest and sales taxes on vehicle purchases deductible from federal income taxes.

The proposal, championed by the National Automobile Dealers Association, was added to an economic stimulus bill under debate in the Senate. The vote was 71-26.

The provision was not in a House-passed version of the more than $800 billion package of spending increases and tax cuts.

A conference committee will decide whether the provision stays in. The bill is a top priority of President Barack Obama.

If the measure passes, taxes on auto loans will be deductible for the first time since 1986.

The provision on deductibility of loan interest is the first significant measure aimed at getting consumers back into showrooms and buying vehicles to get action from Congress. NADA says the measure will save consumers about $1,500 on a $25,000 vehicle.

Some experts have criticized the provision for not having enough up-front punch. Too many worried would-be buyers aren't thinking ahead to cutting future tax bills, they argue.

But the measure is a significant incentive and NADA had to focus on what could be accomplished politically, an organization spokesman said.

By Harry Stoffer- Automotive News