Trade in tax savings complication

First lease and need a little help. My used car trade in has about $6k in equity above what I owe. I informed the dealer that I wanted to trade in and get the associates tax savings, but that I didn’t want to apply the full amount to a down payment. Instead I’d get a check back and do a true zero down. I was told that they can do this, but I will forgo all the tax savings for whatever they cut the check for.

Is that right? Is there another path to take here? Many thanks for the help!

Should have mentioned that I’m located in Minnesota.

Don’t know if I’m right. But if you want to be paid on your trade in equity in the form of cash, You won’t be applying that money towards the lease payments so you will not get the tax savings.

I think that’s how it works in ny as well. you pay tax on the difference when you trade in, but if you cash out, you’ll pay on entire car, so 390 extra.

From what I read about MN tax law, it’s the gross trade-in allowance that lowers the taxable portion of the lease, not the net trade-in allowance. Nothing called out about cash back though.

From MN Dept of Rev site:
“Trade-in allowance
The trade-in allowance reduces the vehicle value when a lessor accepts a used vehicle as part of the lease transaction. The customer must own (not lease) the trade-in vehicle and must trade it in to the lessor named on the lease agreement.

If the customer owes money on the trade-in vehicle, the payoff amount to a lender does not reduce the trade-in allowance, even if the payoff amount is included in the new lease transaction.”

Why couldn’t they just treat the payment to me as they would the loan payoff, thus keeping the gross trade-in allowance at the full amount of the trade and reducing the net trade-in allowance to $0? This seems to maintain the integrity of the law while still helping me to avoid being taxed twice on that amount that I’d get back.