Starting January 1, 2020, a new Illinois trade-in tax will take into effect taxing the trade-in value of your vehicle if it is more than $10,000. Currently, Illinois does not collect sales tax on a car’s trade-in value. This new law was signed on June 28, 2019, by Governor J.B. Pritzker under Senate Bill 690 and is just one of many new laws that will go towards “vertical infrastructure” such as state buildings and renovations.
How Does the New Illinois Car Trade-In Tax Change Work?
With the new 2020 Illinois trade-in tax, trade-in credit of $10,000 will be taxed in addition to the difference between the new and used car prices. As illustrated in the photo above if your current vehicle is valued at $20,000 and the new vehicle is valued at $35,000 the trade-in credit will always be $10,000. Therefore, you will pay a taxable amount towards the difference of the new car price and the trade-in credit which equals $25,000. The total taxable amount will cost you $2,185. The total taxable amount comes from the combined state and local average sales tax of 8.74%.
Keep in mind, if you are an Illinois resident and you travel to another state to trade in a car and purchase a new one, this new Illinois trade-in tax law still applies to you.
Why Trade-In Before the New Tax?
Due to the new Illinois car trade-in tax changes taking effect January 1, 2020, it’s important to trade in your car before January 1st so you can save hundreds in additional taxes. If you are even considering trading in your vehicle, it would be in your favor to see how much the difference would be if you waited to trade in your car and if you decided to trade in your car before the new year to avoid the Illinois State Trade-in Tax.
To get the best trade-in value for your car it would be in your best interest to start your trade-in process as soon as possible so you can evaluate your options and have more time to get the vehicle that fits your needs.
No matter if you are currently considering trading in your vehicle, stop by any of our Castle Buy Center locations to get a no-obligation appraisal and you can learn how much this new Illinois State Tax could cost you in the future. Our Castle locations in Illinois are located in Elk Grove Village, North Riverside, and Villa Park Illinois.