Tax break for trade in? Trading my car for used car?

I am about to trade in my truck for a used car. I owe $20,000 on my car and the dealer is going to give me $20,000 for it. The car I am buying is $16,000. The dealer said that I do not have to pay tax because I am trading in my truck. Is this true? He said it is one of the benefits of trading in a high value car for a lower priced car. Any insight into this would be greatly appreciated!Tax break for trade in? Trading my car for used car?
This depends on which state you live in. California, Hawaii, Maryland, and Michigan do NOT give tax credit on trade-in vehicles. Also, Alaska, Delaware, Montana, New Hampshire, and Oregon do not currently charge sales tax on vehicle purchases. I hope this helps to clarify.Tax break for trade in? Trading my car for used car?
No, You don't pay tax, specially since you will get more for your truck than what You buying... We trade in a lot and never had to pay tax.. If your trade in would be less, than the new car you buying, you would have to pay tax ONLY on the difference.. This is the only fun part of the trade-in..Tax break for trade in? Trading my car for used car?
The trade-in value is subtracted from the sales price of the vehicle you are buying and you only pay sales tax on the difference. If your trade has a value higher than the car you are buying there would be no sales tax.



If the dealer is willing to give you $20K for a trade, you should be able to get more if you sold it yourself. If your sales tax rate is 6%, you would only need to sell it for $960 more to cover the tax, $800 at 5%, and so forth.



What option cost you the least amount of money overall?