CHICAGO (CBS) — Maybe you’ve seen ads from car dealers warning people to avoid double taxation; they want buyers to trade in their cars now, because a new state law could cost them more in sales taxes in 2020.
CBS 2 Morning Insider Tim McNicholas dug into the new tax law taking effect on Jan. 1.READ MORE: One Dead, Another Critical After A Fiery Car Crash On Lake Shore Drive
Kirk Ziemann recently sold his GMC Acadia. He traded it in at a Villa Park dealership and upgraded to a four-wheel-drive model.
Ziemann said he traded in his old GMC before the new year, because “I heard the tax laws were going to change Jan. 1. You only get a tax credit on $10,000.”
Starting next year, the state of Illinois will collect sales tax on the trade-in value of cars worth more than $10,000.
Currently, the state doesn’t collect any sales tax on trade-in values.
Buyers currently get a tax credit for their old car’s value, and are only taxed on the differences in value between their trade-in and the new car.
“We probably take in trade-ins on 40% of our cars,” car dealer Bill Haggerty said.READ MORE: Two Chicago Police Officers Shot On South Lawndale Released From Hospital
Haggerty is an optimist, and hopes the new law will make for a busy December.
“People are going to be double-taxed. So that’s one of the things the dealers are upset about, and we want to let the customers know to take advantage. You have hard-earned money, so take advantage of it,” he said.
If you trade in a car worth $20,000 and buy an SUV worth $35,000, in Chicago the sales tax currently would come to $1,425.
Starting Jan. 1, that sales tax would jump to $2,312.50, an increase of nearly $900.
“It’s going to be tough on dealers,” said David Sloan, president of the Chicago Automobile Trade Association.
Sloan said the new tax could result in people hanging on to their cars longer, while the trade-in value goes down.
“January is usually a slow month for auto sales, but this January is going to be particularly tough,” he said.MORE NEWS: Chicago Weather: Warming Trend Continues, 80s By End Of Week
State officials said the extra tax revenue will go toward funding roads and other infrastructure projects in the Rebuild Illinois capital plan.