Question on sales tax and car trade-ins...

Texas bros and sistas

Have a sales tax question for ya. My bro lives in Austin and I'm thinking of buying his Rav4. We are trying to figure out a fair price. Here in WA, you deduct the trade-in value from a new car purchase price before the sales tax hit. I know not all states are like this, so curious how it works there.

This stuff is not in my brothers wheelhouse, so I appreciate your help!

 

It’s the same in Texas, and if your trade in is worth more than the new car then no taxes

 

Thank you sir!

 

In Texas if you trade in when you buy at a dealer then the value of the trade is deducted for the sales tax calculation on purchased vehicle. I wish Texas offered the same on private party sales like some states. I also think in Texas it has to be one transaction. Again in other states to can sell to any dealer and buy within a certain time period and get deduction.

 

As far as the state is concerned (WA) your brother is very kind and offered you an extremely “fair” price. Of course, that kind of deal is easier when paying cash.

 

LOL...if the DOL doesn't believe the sale price, I'll get taxed at market rate. They get their pound of flesh no matter what.

 

My dad gave me a Chevy 1500 a while back. When I went to transfer the title, they tried to tell me it couldn’t be a gift, which is not true. It’s also not their job to be an appraiser. It really was a gift and I provided them with a copy of nada low market value to use.

 

From past experiences, an older higher mileage vehicle can get away with this.

I was gifted a 95 Buick a few years ago, paid zero tax. Just rumor but I heard a vehicle can be gifted one time, tax free.

 

You should have been around years ago when I got gifted a '66 Chevy. Went the rounds with DOL just to figure out the truck's weight so they could "properly" tax it.

 

That sounds like fun.
Nice truck for a gift, better than my wore out Buick.

 

In Texas you can gift a vehicle to an immediate family member and just pay a $40 transfer fee. I am about to transfer second one to my daughter. Texas went to book value several years ago for used vehicle sales by individuals. It took them a while to figure out that people were writing up bill of sales for a lower price and then telling the tax office that it was junk.

 

Similar to what Stumpjumper wrote, in many states a sale from one family member to another is tax exempt. Not sure if Washington has this practice. Worth looking into though.

 

In Texas (just a price example):
Sale price is $5,000
6.25% tax
You pay $312.50 in taxes

If you pay $5,000 for a vehicle worth $20,000 then:
6.25% tax = $1,250

They go off market value now, unless bought from a dealer.
You can give an auto to a direct family member but not to anyone else, which is absolute BS. My dad gave a buddy of mine, that was in need, a car. GAVE him the car & the state demanded taxes on market balue. Vehicle tax, @ least in Texas, is straight theft after the first time that auto is sold. Is 100% Grade A bullshit. Think how much money the state gets if a $75K auto gets sold 5 times in the first 10 years.
$75K sale price @ $4,688 taxes
$60K @ $3,750
$45K @ $2,812
$35K @ $2,188
$20K @ $1,250
That's $10K for the state, from the sale of one $75K vehicle. Total crock of shit & needs to be changed!

 

High property taxes and stupid sales tax laws offset no income taxes. All that matters is your total tax bill. I saw an article years ago on this subject. They gave several examples of the total tax impact. If you add up the impact of all taxes it has doubled since the 60s. The author was saying that the impact was highest on the middle class and the reason that more housewives have to work. Why are property taxes calculated on the current market value of a house. Worst case they should be based on last sales price + COLA.

 

Don’t get me started on property taxes! You never really own your home and property, even if it’s paid off. You’re merely renting it, for life, from the state!