trading cars

[vdubchick]

How does the dmv tax you when you trade cars with someone?

[Glick]

They can tax you on the value of the car, or you can do what most people do and just gift them the car.

[Angel]

You can do it two ways, actually. You can gift to each other, or you can trade and declare value.

If you trade straight up and declare value, you still don't pay sales tax. For instance, you declare value of $5,000 and so you are buying a car for $5,000 but you are getting $5,000 trade-in value for your car, so therefore $0.00 taxable purchase price. Whoever is getting your car does the same thing and also doesn't get taxed.

[vdubchick]

Originally Posted by Angel

You can do it two ways, actually. You can gift to each other, or you can trade and declare value.

If you trade straight up and declare value, you still don't pay sales tax. For instance, you declare value of $5,000 and so you are buying a car for $5,000 but you are getting $5,000 trade-in value for your car, so therefore $0.00 taxable purchase price. Whoever is getting your car does the same thing and also doesn't get taxed.

so it really doesnt matter either way you wont get taxed?

[Angel]

That is correct. The PROPER way to do it is to just let the notary know that you are trading vehicles and declare a value for them (but make sure you declare the same value for both so that neither of you gets taxed). Make sure you make the value high enough that it doesn't get questioned by revenue. Example, if you are trading a 2005 BMW for a Land Rover, don't declare value at $2,500. Remember, as long as you put the prices the same for both vehicles, there will not be any sales tax, even if you say $20,000. They just cancel each other out. And don't be afraid to let the notary know what you are trying to accomplish.

If you are trying to get out of sales tax from both parties involved, and the deal is really a trade+cash, then make sure you don't happen to mention the cash involved at the notary or else that has to be added to the sales price of the more valuable vehicle.

Hopefully I am explaining this well enough.