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5 Tips for Lower Taxes When Buying a Car

sales tax when buying a car

Lots of drivers want to know how to lower taxes when buying car or truck models. Buying a car or truck typically incurs sales tax according to the state that the buyer lives in, as well as property taxes collected by municipalities. Drivers can lower their tax burden by paying attention to what they are purchasing from a dealer or private party.

  1. Consider your new or used buying options – you might think that buying a new car would always include more taxes because of the higher value. Though this is usually the case, the government has recently offered to make interest on financing for new cars tax-deductible. What this means is that you should consider either a new car or used car purchase according to the financing that will be necessary. For a car that you plan to buy upfront with cash, a used car will be the better tax option. If you’re going to finance the car over a period of years, under current law, you may be better off going with a new car purchase.
  2. Buy with fewer features – additional features like advanced sound options, sunroofs, and a whole host of other extras tend to bulk up the price of a vehicle, and that means more sales and property tax. Pay attention to the features that may inflate the price of your vehicle while

    you are considering how to buy for a lower tax burden.

  3. Buy with more mileage – high mileage is another way to lower the tax burden on a vehicle. You can buy a late-model vehicle with high mileage and get the style and convenience of a newer vehicle without the high value that will trigger a larger sales tax. However, more mileage means more maintenance on the vehicle over the long-term.
  4. Purchase an older car – another way to get more for a lower value is to do the reverse of the high mileage purchase: by an older vehicle with less mileage for a lower maintenance risk and a moderate tax reduction.
  5. Find the price in a private party deal – one of the biggest strategies in alleviating auto sales tax goes back to the specific policies of each state. Many states originally did not fix prices for private party sales on vehicles, allowing buyers and sellers to report a lower sale price than what the buyer actually paid. When states realized that buyers were recording sale prices of only several hundred dollars, many established more stringent requirements tied to the blue book value of an automobile. However, dealing with a private party can still give a buyer more leverage in fixing the value of a vehicle and the sale price that will determine sales tax amounts.

Category: Taxes

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