08-10-2012, 10:56 AM | #1 |
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question for anyone with leasing experience in IL
So last night when I ordered my 335 xdrive I was talking to my CA about potentially trading in my current car. I have about $13K equity in it if I trade it in but said I would want to pull that out (use it towards a new house down payment). He told me that "new" IL laws that just went into place a few years ago state that if cash is pulled out of a trade in, that part of the transaction is not tax deductable! that doesn't make sense to me.
He said if my trade in is say $40K and the dealership writes me a check for $13K that the trade in amount is only $27K for tax purposes and I don't get the tax benefit on that $13K... That also means someone trading in their car for a lease who has their car 100% paid off and doesn't want to put all the equity into the lease would get $0 tax benefit... So I started thinking, what is to stop me from going to my bank, refinancing for the full $40K again (since thats still below blue book trade value which is what they base their loan decisions on for value of the car). Then trading it into the dealership? it would cost me about $100 to refinance with my bank and according to my dealers logic I could then use the full $40K as trade in tax credit which for me that $13K difference would mean $940 less in taxes. When I was looking at Audi's last month and asked the CA about this, he said sure you can pull cash out and still get the full trade credit for tax reasons... can anyone with recent experience similar to this give any advice, I would assume the rule/law is state specific just like our insane "tax on full value of the car on a lease", which I believe only Texas and Illinois have. |
08-10-2012, 11:58 AM | #2 |
woof
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This is why you don't lease in IL / TX. I have bought multiple cars in IL and just end up paying cash cause it's just not worth the hassle of financing/leasing/etc.
Sounds like you may have found a loophole?? I would run the legal first by a lawyer, or at least try posting on one of those state-specific law forums.
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08-11-2012, 12:37 AM | #3 | |
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I can't help as I don't know what IL does with their odd tax codes. The idea that the leasing customer has to pay tax on the full purchase price of the car is silly to begin with. In a lease you're only buying the car for the amount it depreciates over the lease term. So why should you have to pay for the full amount? When the car is returned and then sold as used, it can then be taxed. At least that's how it's done in other states. But, in Illinois, do you pay sales tax when you buy a used car? You do in Indiana. That's double taxation in my view. The car gets taxed when new, and then it gets taxed again when it's sold used. There is no "new" product manufactured, so why tax it again? Because they can. Our vehicle registration costs more than IL. We pay for our vehicle registration based on the value of the car. When new, it's not based on the actual price paid, but on the MSRP. On a lease, we still pay for registration based on the value of the car, not the actual cost of the lease for the year. Yearly registration for my 135i is around $350 per year. Taxation without proper representation. The state will get their money one way or the other. I think you should speak to a bank loan professional, they should know and give you the correct answer. |
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