2020 Trade-In Tax Cap:
Who does this tax affect?
It affects everyone trading in a Class 1 vehicle towards the
purchase of a new or pre-owned vehicle.
What has changed?
Under current law, your trade allowance (vehicle value) reduces the overall
amount of sales tax you pay on the vehicle purchase. However, under new law
your trade allowance is capped at $10,000.
How much will this new law cost
me?
In 2019, there was no sales
tax on your car's trade value since the allowance reduces your overall taxable
amount. As of January 1, 2020, your vehicle trade allowance over $10,000 will
not count as a credit and you will be taxed on the purchase price minus
$10,000. Examples are below.
|
Current Tax Credit |
New Tax Credit |
||
|
Vehicle Sale Price |
$60,000 |
Vehicle Sale Price |
$60,000 |
|
Trade-In Allowance |
$35,000 |
Trade-In Allowance |
$35,000 |
|
Trade-In Tax Credit |
$35,000 |
Trade-In Tax Credit |
$10,000 |
|
Taxable Amount |
$25,000 |
Taxable Amount |
$50,000 |
|
Tax Paid |
$1,812 |
Tax Paid |
$3,625 |
Car registration:
The fee for vehicle registration has increased
from $101 to $151
Dealer documentation fee:
This fee has increased from $174.94 to $300. The Secretary of State sets the limit for this fee every year.
