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New car trade-in tax takes effect in Illinois in 2020

Courtesy: MGN
Courtesy: MGN(WIFR)
Published: Jan. 1, 2020 at 4:26 PM CST
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Trading in your car in Illinois just became a little more expensive.

Starting Wednesday, the state will officially tax the value of any trade-in vehicle worth at least $10,000.

Prior to 2020, Illinois did not collect a sales tax on a car’s trade-in value unless the vehicle was worth more than $20,000. Under the new law, only the first $10,000 in trade-in value can be used as a tax credit.

If you plan to trade in a car worth more than $10,000, your sales tax will be calculated this way:

(Price of purchased car) - $10,000 = taxable total

If your trade-in value is less than $10,000, you are exempt from the new tax and would use this formula:

(Price of purchased car) - (old car's trade in value) = taxable total

The state sales tax on vehicles is currently 6.25%, but if you're trading in a car, you will also have to account for local taxes into account on the taxable total.

The changes come on par with "Rebuild Illinois," a $45 billion plan to fund statewide construction and public works programs for roads, bridges, schools and mass transit.

The Illinois Auto Dealers Association lobbied against the tax in Springfield and are hoping to get it repealed next year. Car dealers previously pushed state lawmakers to replace the trade-in tax with a higher tax on private vehicle sales.