I think part of the confusion comes when people think they are being taxed on their trade. Essentially you are just losing tax savings on any amount above $10,000. The state isn’t charging extra taxes on the trade in if it is worth more.
Also there are not tax savings for leases in Illinois, even if the car you are trading in was not leased. Only way you can get a tax savings for a trade-in is cash, finance, or owners choice.
Slipped my mind, my mistake - you are correct sir! Thank you!
Does anyone know what the tax rate would be if I live in IL but obtain my leased vehicle from out of state? Do they use the rate of my home county?
It’s based on your registration address.
Got it, thanks!
I came across this in the context of the following offer I got. Am I correct in my reading of this thread that something with the quoted $5119 “Tax on Collected Items” is off there.
You live in Chicago, where you get taxed upfront and monthly. Home of the 20% lease tax rate.
Dont lease if you live in Chicago.
But why is the 9% Chicago tax applied to the full Vehicle Selling Price + Fees, not just the lease payments?
The total tax payments upfront and over the 36 month term comes out to $6593 on total payments of $29361 without tax. That’s an effective 29% tax rate.
In the City there is state tax of 9.5% (I think, could be more now) of the initial lease payment as a monthly tax…and then another additional 9% of that lease payment adding to the monthly payment…so it is like tax on tax…a non starter but plenty of people in Chicago are clueless or don’t care and just pay it.
| MOTOR VEHICLE LEASES–CHICAGO LEASE TAX | |
|---|---|
| The Illinois Department of Revenue has clarified the proper calculation of the Chicago Personal Property Lease Transaction Tax (Chicago Lease Tax). Dealers who are responsible for collecting the Chicago Lease Tax from lease customers are not required to apply the Tax Reimbursement Calculation formula to the Chicago Lease Tax. A Chicago Dealer that leases a vehicle to a Chicago resident at a lease contract amount of $20,000 would calculate State and City of Chicago taxes as follows: The State Tax (including Cook County Tax) is calculated by applying the Tax Reimbursement Calculation Formula as follows: (1) 1.00 (2) 0.095 (State: 0.0725, Chicago: 0.0125, Cook County: 0.01) (3) 0.905 (4) 1.105 (5) $20,000 (6) $22,100 (7) $2,100 State Tax After the State tax is calculated and added to the payment, the Chicago Lease Tax of 9% is applied to the lease payment. Because the Chicago Lease Tax is a tax on the customer rather than on the dealer, no additional tax calculations are necessary. The State will not tax any reimbursement to the dealer for the Chicago Lease Tax. |
Sorry if I’m being dense, but I still don’t follow. To start, not sure what (1), (3), and (4) are supposed to represent. I understand (2) 0.095 is the sum of state + chicago + county tax which is 9.5%
Isn’t 9.5% State Tax on $20,000 = $1,900?
I do see (4)'s value of 1.105 * $20,000 equals $22,100 but where does 1.105 come from?
Would appreciate any clarification. Thanks!
I forget where I got that but bottom line is if you lease in the city you pay 9.5% tax on monthly lease payment amount plus another 9% use tax on top of that payment per the below.
The State Tax (including Cook County Tax) is calculated by applying the Tax Reimbursement Calculation Formula as follows:
(1) 1.00
(2) 0.095 (State: 0.0725, Chicago: 0.0125, Cook County: 0.01)
(3) 0.905
(4) 1.105
(5) $20,000
(6) $22,100
(7) $2,100 State Tax
After the State tax is calculated and added to the payment, the Chicago Lease Tax of 9% is applied to the lease payment.
That’s a huge mess and can be somewhat confusing or hard to follow. Here is a much easier way to compute the total sales tax…
I have no idea what the clown bureaucrat meant when they wrote “added to the payment”. What does that mean? It’s obvious that whoever wrote it knows very little about leasing. Although not mentioned, this calculation assumes that the tax is capitalized (financed) in the lease. Perhaps that’s what they meant when they stated, “added to the payment”. You don’t add tax to the payment… makes no sense.
Rambling aside, I hope this clarifies.
I found an old quote I received several years ago when living in the city to show what they did…nobody at dealers really know what is going on as they just punch numbers into a screen and state/city ‘certified’ software outputs the payment.
Years ago, Chicago levied tax (3756.23) on the sell price. Today, they compute tax on the sum of the lease payments plus DAS. Never ask a dealer how to calculate anything. I would be embarrassed if I worked for a dealership and didn’t know how to make the calculations. Looks like several different tax rates are used… 9.50% on the cap reduction, 9.00% Chicagoland tax levied on the payment that already includes a hefty Ill tax. Chicago is one of the most corrupt cities in the nation. I spent almost 5 years living in Evanston and got out after leaving Northwestern 47 years ago!
Yeah, the summation stinks because it includes MSD’s too! Leasing is a total non starter if living in the city. Outside of taxation we did love living in the city…I’m a big sports fan and the ease of access to lake beaches river restaurants/bars shows was awesome!
Unless things have changed, MSD’s are not part of the lease price and, therefore, not taxed. GO CUBS!
? I was specifically told back then by dealer that MSDs were considered part of DAS and therefore hit with the 9% city tax. I ended up not leasing in the city because nobody had straight answers.
The dealer could be correct. I know of no states that tax MSD’s… that doesn’t mean there aren’t any. If there are, it’s only a few and Ill may be among them.
You should look into a balloon in the future. I typically do a balloon lease on my cars if offered since you avoid the double tax and keep the tax credits if you want to use it as a future trade-in.
Don’t live there anymore and was only considering lease then due to ultra low MF. We just wrote checks living in the city instead. BMW offers Owner’s Choice in IL tho which is similar to balloon. Downside is higher interest rate and tax is paid on full value of car.
