Trade in tax credits - Illinois

Ask the Hackrs
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I’m a little confused on how the trade-in tax benefits work for a leased car. My X5 has the following lease payoff info:

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KBB values place it in the $49k-$52k range. I’m planning to either turn it in, or trade it in, and then purchasing a new X7. Let’s say the dealer offers $50k for the trade-in. Am I still responsible for the $3,318 sales tax on the lease payoff? Or is the trade-in tax benefit literally just reducing my tax liability on the X7 by, say, the $1k in “equity” from trading in the X5?

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That sales tax is due if you buy out the lease.

If youre just trading it in, youre not buying it out, so that sales tax doesnt exist.

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Thanks… So trading it in means my equity would be the (hypothetically) $50k trade-in value minus $45,770 (residual + outstanding balance) = $4,229?

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Minus any addtl fees that would be due correct.

Your trade in tax credit would then follow the state law of the state you are registering the car in.

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Awesome, thanks for the info guys

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Realistically it’s quite hard to find anyone willing to pay KBB so unfortunately your equity may be closer to zero

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Yeah I’m prepared for that as well… I suppose it’s wishful thinking but hoping to at least get $1k-$2k if not $4k out of it.

And if it’s zero, I’ll just turn it in to BMWFS… I think they still give a small credit for being under mileage on the lease (I’m about 10k miles below).

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Was this a KBB Instant Offer to purchase the vehicle from you?

If no, the “KBB value” is like the free kredit skores you get from Kredit Karma. Or the Zillow algorithm’z eztimate for what your home iz worth.

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It was the “value”. I did get a quote from CarMax for $47k for it, which if the dealer can match, would still net me a little under $2k in equity. But with BMWFS making 3rd party buyouts a complicated mess, I’m prepared for very little if any equity.

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If CarMax offered $47k, you won’t have “very little if any equity”… you would be underwater at the $49,xxx. I don’t believe BMWFS would be a complicated mess, they’ve simply stopped third party buyouts.

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Perhaps… and if that’s the case I’ll just do a lease return. Just trying to weigh my options before heading to the dealer. Beauty of leasing right?

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