The New 2020 Tax Rule
Currently in Illinois, when you utilize a trade-in toward a new vehicle purchase, sales tax only applies to the difference between the value of your trade-in and the new vehicle’s purchase price. All that is set to change on January 1, 2020. Governor J.B. Pritzker signed Senate Bill 690 on June 28th which now requires sales tax to be applied to any trade-in valued above $10,000. The cost to Illinoisans is expected to add up to about $60 million a year – which is earmarked for vertical infrastructure projects (state buildings, etc.).
Pete Sander, president of the Illinois Automobile Dealers Association, states that this tax change amounts to double taxation for anyone with a trade-in worth more than $10,000. “You already paid sales tax when you bought the vehicle the first time around,” he explains. While this new tax rule will affect everyone, Sander emphasizes that it will mostly hit those who prefer to trade in their vehicle every year or two.
What Will it Cost?
For example, if you are purchasing a new car that costs $40,000, and you have a trade-in that is worth $15,000, you would currently pay sales tax on the $25,000 difference. However, beginning January 1, sales tax will also be applied to any trade-in value above $10,000, which in this case would be $5,000 in taxable value. In other words, you will be charged sales tax on a total of $30,000.
Lastly, there will be no real way to avoid this new sales tax, as the trade-in tax applies to out-of-state purchases as well. So, if you are contemplating the purchase of a new car, and you are planning on using your current car as a trade-in, now might be a perfect time to visit our industry-leading dealership. Whether looking for a new or used Cadillac, New Lenox residents will always get the best value at Hawk Cadillac.