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The new Illinois trade-in tax law became effective as of January 1st, 2020. This new trade-in tax eliminates the tax benefit of trading in your vehicle.
Before January 1st, 2020, Illinois collected no sales tax on the car’s trade-in value. Before, your car acted as an untaxed credit towards your new vehicle purchase. Starting on January 1st 2020, sales tax will be charged on any trade-in valued over $10,000.
|Before January 1st, 2020||After January 1st, 2020|
|New Car Price:||$65,000||New Car Price:||$65,000|
|Your Current Vehicle Value:||$38,000||Your Current Vehicle Value:||$38,000|
|Trade-In Tax Credit:||$38,000||Trade-In Tax Credit:||$10,000|
|Taxable Amount:||$27,000||Taxable Amount:||$55,000|
|Tax Paid:||$2,430||Tax Paid:||$4,950|
|Total Cost:||$29,430||Total Cost:||$31,950|
For instance, if you traded-in a vehicle valued at $38,000, before January 1st 2020, for a new vehicle valued $65,000, you would receive a credit worth your current vehicle value, and only be taxed on the difference.
Starting January 1st, 2020, you will only receive a trade-in credit of $10,000, instead of the value of your vehicle, making the taxable amount of your vehicle $28,000. Plus you will still be paying tax on the cost of your trade ($27,000), making the total taxable amount $55,000.
You can get the best estimated value for your vehicle right now at Patrick Cadillac