5 Tips for Reducing Illinois Used Car Tax

July 2, 2012

If you purchase a used car in Illinois, used car tax could increase the overall cost of ownership for the car by a considerable amount. Used car tax in Illinois can be assessed in several different ways. For example, state sales and use tax, smog tests and even license plate renewals are all forms of used car taxes in the state that can costs car owners hundreds of dollars every year. So, here are a few tips on how to reduce your Illinois State tax burden.

Use a Trade In to Save on Used Car Tax

With sales and use tax rates that often approach 10%, Illinois demands a lot from car buyers at the time of purchase. Buy a $20,000 used car and do the math - that's about $2000 in local and state sales taxes. So, reduce the amount of sales tax you will be required to pay by offering your older vehicle to the dealership as a trade in. When you trade in your old car, the dealer will subtract the allowance amount for the vehicle from the sales price of the car you are buying. This results in you only having to pay sales tax on the balance and not on the entire sticker price amount of the newer car. If your trade in is worth a considerable amount, the sales tax savings can be huge.

Keep Up with Illinois State Tax Laws

An easy way to avoid paying too much in Illinois state taxes is to be aware of the laws and rules that govern them. You should occasionally visit the Illinois Department of Revenue website (http://www.revenue.state.il.us/) to stay abreast of new tax laws and developments that can affect you and the use of your vehicle. Check the site to learn of new deductions, state credits or other means of saving on your taxes. Even if you can't find money saving deduction ideas on the site, you can learn how to avoid mistakes that could lead to costly fines and penalties.

Keep a Mileage Book or Journal

Start a mileage journal and begin recording your odometer readings before and after driving your car. In your journal, enter beginning and ending mileage, purpose of the trip and any destinations to which you drive. When it's time to file your state income tax return, this information could help to save you extra money in the form of additional mileage deductions for certain tax deductible activities and expenses.

Save Receipts and Records for Your Vehicle

Keeping all of your receipts for your gas and oil purchases, as well as any repair or service related purchases, may allow you to claim additional deductions on your state income taxes. For certain activities, the state allows you to deduct normal travel related expenses from your taxable income. However, you need to make sure that you keep all of your receipts and records on hand for at least three years as you will need them in the event you are ever audited.

Save on Emissions Taxes by Keeping Your Vehicle Green

Illinois requires that most vehicles that use state roads and highways be able to pass smog or emissions tests. These tests are not cheap and can add considerably to the overall cost of ownership for your vehicle. So, keep your vehicle Green and well maintained to help save on needless retest costs. Besides, a properly tuned vehicle also helps our environment.