Beat the 2020 Tax Law
Have you heard the news? The Internal Revenue Society announced this month the 2020 annual inflation adjustments, and car buyers should take notice! Here’s what our Volkswagen dealer in Joliet wants you to know about these increases and how it will impact your car buying process next year.
The Current Law
Under current law, the state of Illinois currently does not collect sales tax on a car’s trade-in value that acts as a credit toward a new vehicle purchase. The current law states that sales tax is only applicable to the price difference between the price of the new vehicle and the trade-in value.
What to Expect in 2020
Starting on January 1st, 2020, both state and local taxes will be applied to any trade-in vehicle that has a value above $10,000. This means that if a driver is trading in their vehicle above $10,000, they will face sales tax at 6.25 percent. Statewide, the average combined state and local tax is 8.74 percent, but in the city of Chicago, taxes can be as high as 10.35 percent. This new sales tax is expected to cost Illinois residents alone roughly $60 million a year.
For example, if you are buying a new vehicle that costs $35,000 and trading in a vehicle that is worth $20,000, this means that your trade-in value will not be taxed on the initial $10,000 value, but the remaining $10,000 in addition to the $15,000 difference will be taxed. A total of $25,000 will be taxed, costing approximately $2,185.
Save Thousands Before 2020
If you’ve been considering trading in your vehicle, now is your time to do it! This will help you save a significant amount of money and head into the new year feeling good about your timely trade-in. Visit or contact us at Hawk Volkswagen of Joliet with any questions.