tax break on trade in?

[im89]

is it true that if you trade in a car you pay only pay tax on the difference? i live in new york. only reason im asking is because another memeber states so in a post and i thought this was true for new york i spoke to a lady at a dealership and she had no clue what i was talking about. just want to know if anyone in new york ever traded in and paid tax for the difference. thanks


"Do you recommend that consumers trade in? Or should they sell on their own?

Weismann: It depends on what they've got. If you bought right in the first place, you might have something to trade in that will bring a good price.

Mills: Heck, yes. It is quick and doesn't cost you as much as you might think, especially if you drive the right kind of car. Also, many states (all the ones I have worked in) give you credit for your trade when figuring sales tax. For instance, let's say you are buying a $20,000 car, and have a $12,000 trade. The sales tax in my state is 6 percent on cars. You will pay taxes on $8,000 in most states, instead of $20,000, for a savings of $720."

http://www.edmunds.com/advice/buying...4/article.html

[wilsonp]

You were so close:
What Fees Should You Pay?

Looks like New York has a Y in the trade-in column for taxing trade-ins, so out of luck just like me!

Of course, the fact that the Virginia line appears completely wrong is a bit worrisome... maybe you should just check the NY DMV site.

Checking further, looks like they might be wrong for New York as well:
http://www.tax.state.ny.us/pubs_and_...le_receipt.htm

says no:

As a seller, when you accept something as a trade-in and reduce your selling price accordingly, sales tax is only due on the reduced price after subtracting the credit for the trade-in, as long as you plan to resell the trade-in item. This is most common with sales and purchases of motor vehicles.

Example: A customer comes into your car dealership and decides to buy a vehicle from you for $22,500. You agree to take the customer’s current vehicle as a trade-in and give him a $4,500 credit for his old vehicle. You would calculate the taxable amount of the sale as follows:

Original price $22,500
Trade-in -4,500
Sale price subject to tax 18,000

Again, this is only true as long as you plan to resell the vehicle being traded in, and the trade-in allowance is being applied as partial payment for the item being purchased.

[im89]

"If there is a "Y" in the "Trade-In Sales Tax" column of your state, you are only taxed on the difference between the new car and your trade-in. So, if your new car costs $20,000 and you are getting $7,000 for your trade-in, you will be taxed on the difference, or $13,000. If sales tax in your state is 8 percent, this will save you $560. "

accoriding to this a "y" means there is a tax break since you only pay the difference in on the purchase. i dont know am i reading wrong?

[Lee123]

The quote above from the NY state tax site (in the post by wilsonp) states that you only pay tax on the difference. I believe you can count on that site for accurate info.

[Mike]

thats the way it works in Georgia too, so if you are debating selling or trading in a car worth 25000, at 6% sales tax, thats a 1500 savings, which in many cases, makes it just as cost effective as selling yourself outright, and a lot less hassle.

[im89]

thanks guys. i just wonder why the lady at the dealer ship knew nothing about this. hopefully i could get this deal. if there is anyone from new york or knows for sure please let me know how trade in's are taxed.

[MC]

or you can get the best of both worlds... on my last car i had a private sale of my car lined up but i had the dealer handle it so i got the private sale price plus i saved on the tax difference between it and my new car...

[Juno]

Originally Posted by MC

or you can get the best of both worlds... on my last car i had a private sale of my car lined up but i had the dealer handle it so i got the private sale price plus i saved on the tax difference between it and my new car...

Less hassle for everyone that way.

[FuszNissan]

Every state is different.

[Jacky]

You are right assuming you own the car (no liens). You only pay taxes on the difference. I recently traded my car that worth more than what i brought. I didn't have to pay sales tax at all. I have asked multiple dealerships as I shopped around. Most of the time, i had to speak to a manager about it. So if you are going to sell your car privately, make sure you mark up atleast for the tax amount. Let's say you have a car that can be traded in for 10,000. (assuming ny tax is 8% (skip the change)). You would want to sell it for atleast 10,800.

[im89]

Thanks thats exactly what I wanted to know.