Does a last-minute car trade-in save sales tax?

The correct answer is that a last-minute car trade-in saves sales tax. When you trade in a vehicle towards the purchase of a new one, the value of the trade-in is typically subtracted from the purchase price of the new vehicle before sales tax is calculated. This means you only pay sales tax on the difference between the purchase price and the trade-in value.

For example, if you're buying a new car priced at $30,000 and you trade in your old car worth $10,000, you would only pay sales tax on $20,000. This provision is beneficial in reducing the overall tax liability.

State laws can vary in terms of how trade-ins are treated regarding sales tax, but most states do offer this tax break. Therefore, understanding your specific state's regulations is important but generally, a trade-in positively impacts the sales tax calculation by effectively lowering your taxable amount.