If you're thinking about trading in your vehicle and you live in Illinois, you're going to want to take care of it before the new year. When 2020 hits, Illinoisans will have to suffer a massive sales tax increase for vehicle trade-ins which will end up costing them big.
Currently, the law states that you only have to pay the sales tax of the difference between the trade-in value and the new vehicles purchase price. So let's say you want to buy a vehicle for $35,000, and your trade-in valued at $20,000. You would only have to pay sales tax on the difference, which is $15,000. That amounts to about a $1,311 sales tax.
But in 2020, any valued trade-in credit above $10,000 will also be taxed...so because your trade-in is worth $20,000, you will have to pay the sales tax difference ($15,000), AND the additional $10,000 of your cars value, leaving you with the sales tax of $25,000.
That nearly doubles the sales tax you will have to pay from $1,311 to $2,185!
If your trade-in has a value of $22,500, you will be additionally taxed for $12,500 - if your trade-in has a value of $15,000, you will be additionally taxed for $5,000 - make sense?
If the details are still a little confusing, know this - come January 1st, 2020, this new tax is expected to cost Illinoisans $60 million per year, and it's all because of the Senate Bill 690 that was signed by Gov. J.B. Pritzker this past year. This can also leave those with a trade-in value of more than $10,000 dealing with double taxation. As the president of the Illinois Automobile Dealers Association said, "you already paid sales tax when you bought the vehicle first time around."
And don't get your hopes up thinking you can drive across state lines to avoid the trade-in tax because it also applies to out-of-state purchases.
So if you're thinking of trading in your vehicle, take advantage of the five-month window before 2020 to avoid any double taxation. Fill out the form, and one of our team members will contact you about your trade-in, ASAP