2020 Illinois Trade-In Sales Tax Law Change
What Does This Mean?
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 (See the example below).
Gov. J.B. Pritzker in June signed into law a proposal to apply state and local sales taxes to any trade-in value above $10,000. The new tax will generate $60 million a year, according to official estimates. Rather than using these vehicle taxes for roads, the revenue will go toward “vertical infrastructure” such as new state buildings and renovations.
For example, if you are trading-in a vehicle valued at $40,000 before January 1st 2020 for a vehicle priced at $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 is the best time to trade-in?
If you are looking to trade in a vehicle it would be ideal to trade in before the new tax law effective in 2020.