Do you live in Illinois? Are you frustrated by the cornucopia of state taxes? Well, get ready to be a little more annoyed. Starting in 2020, the taxman will begin collecting fees on some trade-in vehicles. Who’s for it? Who against it? Let’s discuss.
Another Illinois Tax: Car Trade-In Tax
In a mere five months, Illinois residents must start paying a tax on trade-in vehicles worth over $10,000.
Technically, the law caps the vehicle trade-in tax credit at $10,000. So people who trade-in cars worth more than $10,000 will pay between 6.25% and 9.5% in sales tax, depending on county and region. For example, someone trading in a vehicle worth $30,000 for one worth $60,000 will pay about an extra $1,200 in taxes.
What Both Sides Are Saying About the New Tax
People who support the Illinois car trade-in tax argue that it won’t affect working- and middle-class people since the fee only applies to used-cars that still hold a value over $10,000 at the time of trade-in. That benchmark, they argue, will likely only include luxury vehicles.
Anti-tax proponents, however, point to the ever-rising inflation rate. In a few short years, middle-class taxpayers will likely feel the pinch of this increased fee, too. Detractors also highlight that cars will be taxed twice: once at the time of purchase and once when traded-in.
“A-ha!” you think. “I’ll trade-in my car out of state. Voila! Tax avoided!”
We hate to be the bearers of bad news, but that won’t work either. Lawmakers wrote the law so that people who buy vehicles out-of-state will have to pony up during the registration process.
If you’re planning on trading in your luxury car for an upgrade, do it before December 31, 2019, to avoid the new Illinois car trade-in tax.
Connect with a Chicago Tax Lawyer
The Gordon Law Group works with people in Chicago and across Illinois on various tax matters. We represent taxpayers under IRS or IDOR investigation and help businesses and individuals establish the best tax positions for their situations.
If you have a Chicago tax law matter that needs solving, give us a call!