Trade in a car and paying sales taxes?

What do you pay taxes on when you trade in a car at the dealership? for instance, the sale price of the new car is $20,000 and my trade-in will be $12,000, am I paying taxes for the entire $20K or just the difference $8,000?

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  • 1 decade ago
    Favorite Answer

    Every state is different. For instance Indiana and Illinois would consider that tax credit, while Michigan would tax the full $20,000. If you are planning on leasing however, you will get no sales tax credit. I hope this helps.

    Source(s): Lead Programmer for "The Auto Evaluator"
  • 1 decade ago

    Not sure about other states, but Georgia now pays only the difference - $8,000

  • kroner
    Lv 4
    4 years ago

    In FL, once you provide somebody a automobile, there's a latest tax on the cost of the article. it would desire to be greater effective for her to 'sell' it to you, for a beneficial inexpensive fee, so any taxes could be negligible. It varies states to state.

  • Anonymous
    1 decade ago

    Just the difference. You've already paid taxes on the trade-in.

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  • CP
    Lv 4
    1 decade ago

    It depends on your state. The dealership will likely know, otherwise check with your states Department of Motor Vehicle (DMV)

  • gr
    Lv 5
    1 decade ago

    just the cash difference between the sale price and the trade allowance.

    20,000

    8,000 -

    ------------

    12,000 =taxable

    +dealer fees=taxable

    license and registraion=non-taxable

  • 1 decade ago

    you pay taxes only on the difference..however if a rebate is involved, you do pay taxes on the rebate as well

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