Trying to discern if will get a tax benefit with positive equity for a trade in. I bought out my lease last year with an auto loan. I would like to trade in this car for a new car lease and I want to know if I would receive a tax benefit on the difference. How does this work with this particular trade in? ny #tradein #lease
Edit, nevermind, no.
However, when a customer trades in a
vehicle as partial payment for the lease of a new vehicle, the dealer will
determine the value of the vehicle being traded in, reduce the total lease
price of the vehicle (capitalized cost) by the value of the property the lessee
will trade in, and then re-compute the monthly lease payments based on the
reduced capitalized cost. Alternatively, the dealer may choose to reduce the
down payment or other charges due from the lessee in order to account for
the value of the trade in. The sales tax is then computed by multiplying the
total of the reduced amounts by the applicable tax rate. (See Example 6, on
page 13, regarding how the sales tax is computed when the vehicle being
traded in is subject to an outstanding loan.)
The trade-in allowance cannot be taken again as a credit against the total
amount of lease payments after the monthly lease payment amount has
already been reduced. To do so would result in the trade-in allowance being
given effect twice, once when the dealer uses the allowance to reduce the
capitalized cost of the vehicle and the monthly lease payments due based on
the reduced capitalized cost, and again when the dealer credits the trade-in
allowance against the total of the reduced monthly lease payments for
purposes of determining the taxable amount due to the dealer for the leased
vehicle. This is not allowable.
New York’s “logic” as usual is hilarious that it would be unfair to the state that you could benefit twice if they allowed this, even though equity and the treatment of taxes are two totally differnet things.
Obviously, however, if you end a lease 6 months into a 36 month term, you are not eligible for a penny back from the state, because that also would not be fair to the state
1 Like
Are You a 100% sure if this works in NY state?
I don’t understand why it wouldn’t be applicable. When I bought out the lease I had to pay the taxes - that was rolled into the amount I would have to pay to buy the car. I also do not want to use the total positive equity on the car towards reducing my monthly payments as I would have a total of 6k. so I wanted to put 2k towards the lease to reduce monthly payments as well as get the rest in a check. Don’t even know if that’s possible but it might make sense for me to just take a cash offer from carmax at this point because its like just giving money away to the dealer. The trade in is in excellent condition and I can make a good amount off the car.
You have no reason other than convenience to trade the car to a dealership. Take the carmax offer and make things easier on the salesperson (less paperwork lol)
2 Likes
It’s actually more of a headache not to be able to do it all at once. I just thought i would be eligible for that sales tax break since I already paid sales tax when I bought out the car. I figured if I can get the money from the tax break and plus have the 6k equity I could use a portion of that to lower my monthly lease amount and come home with cash as well. That was the ultimate goal. Because I never put money down on a lease because if you drive off the lot and something happens you just lost your money. I could probably negotiate with a car dealership further away to see what they would say and that would give me an idea if I could get what I want. Just flat out say this is what I want and wait to see how they react.
Yes you will get the sales tax credit. Period. However please get offers from multiple sources, the cash offers could be more than what you gain from sales tax credit.
3 Likes
Hit the nail on the head
1 Like
thank you for confirming. I am aware of the cash offers from carmax carvana, etc. I am waiting till do more research because those offer only last for 3 to 7 days. I don’t want the offers to run out, Also when I am ready, I want to actually take my car in to carmax this way the dealer can’t say that they only gave me that offer due to what I typed online. I can say that’s not true because I confirmed the offer. I have done a ton of research but there is still more to do.
I already did two cash offers and they were considerably above blue book. So I would definitely negotiate using those offers however once I negotiate the case offers then I will throw in the further discount for the tax benefit to get even more money for my trade in. that is how you do it but. wanted to confirm that I had that leverage when I am leasing the new car instead of buying. That’s why I asked that specific question, Thx for your feed back though.
Unfortunately i was dealing with that tax situation last month.
What we can do is to write a letter to Albany. Good luck.
as in having it applied to the tax on a lease?
Yes, Trading a in a bought car for a new leased car.
while trying to negotiate a new lease the sales person said that I am not eligible for this tax benefit because I am leasing a new car not buying a new car. I tried to sear the ny state law and there is simple explaination for buying a new car but the laws explaining leasing are very complex so I can’t make out if the dealer is lying or telling the truth. Here is the link to the basic law you must scroll down to trade ins and then right beneath that there are references to other laws which talk about leasing but are much more complex. I still don’t have my answer with a reference to the law that I can receive this tax benefit if I lease a new car. Also I wanted the difference of the cash to be paid to me instead of using it to decrease the price of the new lease so my inquiry is a lot more involved and not so straight forward. I am really bummed that I can’t figure this out. Here are the other referenced laws: References and other useful information
Tax Law: Section 1101(b)(3)
Regulations: Sections 526.5 and 526.7
Memoranda: TSB-M-92(2)S, Delivery Charge Added to Taxable Receipt Effective September 1, 1991. Any tax attorneys that can decipher this for me?
Sell your car for the highest price then lease the new car.
Looks like I don’t have much of a choice. but I will be pissed off if down the road I find out this guy was lying.
Does it matter? Ask him what the trade value is. lets say its 20000. 20000*1.08625=21725
As long as you get 21725 its the same as the trade in with tax credit
1 Like