Car dealers may have a busy New Year’s Eve if Illinoisans try to beat a significant sales tax expansion on vehicle trade-ins that starts in 2020.
The state currently collects no sales tax on a car’s trade-in value, which acts as credit toward a new vehicle purchase. By law, sales tax only applies to the difference between trade-in value and the new vehicle’s purchase price.
That changes Jan. 1. Under Senate Bill 690, signed June 28 by Gov. J.B. Pritzker, state and local sales tax will be applied to any trade-in value above $10,000. The new tax is expected to cost Illinoisans $60 million a year – which was earmarked not for roads, but for vertical infrastructure such as new state buildings and renovations.
The least a driver looking to trade-in will face is 6.25% in sales tax, the state’s rate. Municipalities often add their own sales tax, averaging 2.49%. Statewide the average combined state and local sales tax is 8.74%, but it ranges as high as 10.25% in Chicago.
