Tax credit for trade-ins

[DMan]

Quick question:

I know in some states you can get a tax credit on your trade-in. If you decide not to trade the car in and sell it privately instead (or sell to Carmax), can you still claim that tax credit for selling the car (i.e. claim it on your tax return) or does the potential credit just disappear?

 

[Kermee]

AFAIK, no. Unless you're a business, when you sell to a private party, you don't collect sales tax to offset the tax credit. When you trade-in to a dealership, you get a tax credit because the dealer will collect sales tax when they turn it around to sell to someone else to offset the credit you received.

As for CarMax, I'm not sure but most States require it to be the "same" transaction for reporting purposes.

 

[Knightshade]

This might vary by state...but here at least it's not really a "tax credit"

It's that you reduce the sale price of your new car by the trade in amount, so you don't have to pay sales tax on the difference.

So if you get 10k for a trade in, that's sales tax on 10k of the new car price you don't get charged at time of sale.

Any sale otherwise gets no benefit from this since it doesn't directly change the price of the new car purchase.