Recluse

I'm going to be relocating to the Houston area in about a month, and will be trading in my 2007 IS250 6MT.

If I understand it correctly, in Texas I can deduct the price of the new car from the price of my trade, and pay sales tax on the difference. However, what if the car I'm getting costs less than my car is worth? Do I then pay NO sales tax?

Thanks in advance.

4TehNguyen

iTrader: (1)

i would think that is correct, I thought this was done everywhere?

Recluse

Not sure, but it definitely isn't in California.

tex2670

That's an interesting Q. That's one of the selling points of trading. But, if a car dealership takes the price down to $0 b/c of your trade, they are inviting an audit of their records, whether or not it's legit. It just looks funny.

Evitzee

Not an issue. If you roll in to a Toyota dealership and want a brand new Camry that costs $25,000, and they offer you $25,000 for your IS, the taxable value is ZERO. It is a legit transaction and will not cause any problems with an audit. If there was a pattern of these sorts of deals it might raise a flag, but a one off example is nothing to worry about.

RamshakleZ

Here's a thought...... if the dealership owes YOU money (because your "new" car costs less than the trade-in value of your IS) get them to pay YOU "tax" hehehe...

Recluse

Thanks everyone for the replies. I was debating whether to sell it in CA or trade it in Texas, but it seems like the advantage is with trading it.

jchuang8

so it is a fact that in CA if you do a trade in that you would have to pay sales tax on the full amount of the new car? regardless of the value of your trade in?

Recluse

Yes, that is correct.