Trade in tax credits

Hi! I want to trade in my taco to a dealership and get cheaper replacement car. I think i can get 23k for the truck, minus the 5700 i still owe on the loan.

Ifi am trading for a vehicle that costs 17k, but i want to FINANCE that vehicle and put 2k down (and pocket the remaining trade in cash) will i still get the full tax break on the new car since the trade in value is larger than the new car value?

Thanks!

 

Do you just not like the truck? I ask because you’re exchanging $5700 of debt for 15k in debt.

 

If you crunch the numbers it still ends up being cheaper. Yes its more interest paid, but getting a car with double the gas mileage plus inflation negating some of the interest over 4 years is worth it for now. My wife is pregnant so i am looking for the cheapest point A point B car i can find, so i can put her in something nicer/newer. Plus more cash in hand right now is valuable for us because we are saving for a house down payment in the near future. Now im just trying to understand how this tax credit works

 

My guess is no. Since you’re not applying the trade to the vehicle.

 

I have another question. On KBB you can choose buy from a private seller, and it gives me a value of 24.6k. But doing the car value option (selling privately) it only says 22.8k. Why are these values different? Buying and selling privately should be the same number, no?

 

Hmm. That’s weird. I’ve never noticed that when I’ve done values on kbb.

 

I just did my truck and the value ranges were the same.

 

maybe. probably depends on your state. my state limits that loop hole to the first 10k of the trade in value.

my pocketbook limits me to not paying interest.

 

You want cash and A to B and good gas mileage? Zero reason to buy a car newer than 2010, zero reason for more debt. Buy an old corolla that gets 30mpg

 

Ha, just traded my taco for a 14 corolla. Sad but was the right move at the moment. Thanks!

 

Tax laws vary by state so it may depend. Things get complicated with what you're trying to do, you'll just have to ask the salesman. They can be pretty good at making the math work any way they want. I've never been able to sell outright, then buy a new truck and come out ahead. I'd need to sell my current vehicle for at least 10% more than they allow on trade just to break even. Closer to 20% more to be worth the trouble. The only time that has ever worked for me is with a beater selling for $1K-$2K.

But I do know this. Creative salesmen in the past have found ways to show my trade worth more on paper than they actually allowed me making the sales tax difference even greater.

The only time I've done anything like this was when I bought my current Tacoma. The Tacoma was $28K. They allowed me $15K on my old truck, but I got $700 in cash back in order to buy the cap on it. But that was 16 + years ago and I wasn't trading down. I don't remember exactly how they handled it.

 

I know you already made a deal but here to educate others on it. Most states will give a sales tax credit.
Example:
You buy a car for $30,000 and your trade is worth $15,000 and your sales tax is 10% (just to make numbers simple). Regardless of what you owe, if you receive sales tax credit you pay tax on $15,000 ($1,500). If you don’t trade you need to sell it for $16,501 to come out ahead on the deal (since tax on the full $30,000 would be $3,000.

There are various states with weird regulations.