2020 Illinois Trade-In Sales Tax Law Change
What is the New Trade-In Tax
A new Illinois law becomes effective on January 1st 2020 that increases the taxable difference amount on your purchase of a vehicle.
Currently in Illinois, sales tax only applies to the difference between your trade-in value and the vehicle’s purchase price. But that all changes after January 1st when the new law goes into effect.
What Does This Mean?
Since you have already paid tax on your vehicle in Illinois, you currently get the full tax value of your trade-in. However, starting January 1st 2020, the maximum trade-in sales tax credit will only be up to $10,000 (See the example below).
For example, if you are trading-in a vehicle valued at $40,000 before January 1st 2020 for a vehicle valued $55,000, you would be taxed on the difference of $15,000.
At the start of the new year, you will only receive a maximum trade tax credit of $10,000. Instead of your vehicle being based on a taxable difference of $15,000, your taxable amount would now be based on $45,000.
This will cost you thousands of dollars in additional tax.
When Should I Trade-In?
If you are considering trading-in your vehicle, you should do so before January 1st 2020. Ideally, you should begin the trade-in process as soon as possible, to make sure you have time to evaluate your options and find a vehicle that is a good fit for your needs.
You can get the best estimated value for your vehicle right now at Bill Jacobs Volkswagen.