Does anybody know what the tax implications are when you do an even trade, one car for another?
Here in Connecticut, we have to pay sales tax any time we register a car, new or used. If you trade in a car at a dealer, you only pay tax on the difference between cars. I'm wondering about what happens if two owners agree to simply swap cars with no exchange of cash. Has anyone here ever done this?
Every state will have it's own rules. Your DMV site provides this:
http://www.ct.gov/dmv/cwp/view.asp?a=814&q=245250
Bartered Vehicles:
The taxable price is based on the total considerations (cash, property, services, assumption of seller's debt, etc.) in the transaction. Hence if a vehicle is purchased through other considerations besides money alone (such as through service provided to the transferor), the transferee is taxed on the book value of the vehicle.
Swapped Vehicles:
When the book values of swapped vehicles are nearly equal, tax is due for both parties based on the average trade-in value. If there is a significant difference in book values, it is assumed some other considerations (cash, service, assumption of debt, etc.) were involved. If parties cannot provide a reasonable explanation for the inequitable exchange, the tax for both is based on the higher book value.
Looks like you are both paying sales tax.
So "sell" them to each other for $500.
Then pay taxes on that amount.
Storz
Dork
11/5/13 11:50 a.m.
Here in NC its based off of some formula for value that the DMV has, I've done several one for one car trades and have to pay the same amount of taxes on it as I would should I have just paid cash for the car.
everytime I think of trading a car here in Texas, I imagine I will be greeted by a cowboy at the DMV and will get a "high 5 brotha!!" as a response instead of paying tax.
z31maniac wrote:
So "sell" them to each other for $500.
Then pay taxes on that amount.
That might be tricky with these cars.
As a bonus, we also get to pay property tax on cars every year.
NGTD
Dork
11/5/13 2:40 p.m.
In Ontario both would have to pay based on Canadian Black Book value unless you get an appraisal from a recognized appraiser that shows a lower value.
I had to pay tax on my WRX based on $3200 CAD, even though I paid $750 for it. This was put in place by the Govt due to the obviously fraudulent claims of buying 3 year old cars for $1000.
It's funny how everyone bags on CA for our vehicle taxes, laws, etc. We only pay tax on stated purchase price. I've bought a lot of "$200" cars this way. This also makes the yearly fees much cheaper too.
Maybe that's why we pay higher taxes on everything else...
z31maniac wrote:
So "sell" them to each other for $500.
Then pay taxes on that amount.
Regardless of the sales price, CT charges tax on NADA value on older cars. If you buy something cheap, you get royally screwed as NADA value is based solely on make and model, and doesn't take into account condition, mileage, etc. You can appeal it after paying the tax, but it's a huge hassle. Here's the form if you're interested: http://www.ct.gov/drs/lib/drs/forms/2010forms/salesandusetax/cert-106.pdf
On yearly property taxes on vehicles, you can get your vehicle's value written down based on mileage, but you have to submit a document from a qualified business showing the mileage of the vehicle in order to qualify. Your own oil change records or simply bringing in the vehicle and showing them the odometer won't work, but emissions test results will actually work for this proof. Unfortunately, you have to submit an appeal per vehicle, per year. At least that's how it works in my town, but I would suspect each town has variations on the theme.
Geez, no property tax on vehicles in OK.
3.5% excise tax on the purchase price of the vehicle, no Blue Book shenanigans.
In VT we pay tax on the purchase price of the car, or its NADA book value (I think they use average trade-in?). So when I've traded we just wrote out bills of sale for $1, then paid taxes on the book value.
in MN we just pay whatever the title transfer fee is... after 9 years (i think) it goes down to a flat rate and you walk out of the DMV or deputy registrar with $42 less in your pocket than when you walked in..