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Some twists in upcoming $10K trade-in cap law

November 29, 2019
Little mentioned in the impending $10,000 credit cap on traded-in vehicles in Illinois: It only applies to First Division vehicles, meaning traded-in pickups are exempt from the cap.
Under Section 1-146 of the Illinois Vehicle Code, motor vehicles are classified either as First or Second Division motor vehicles. The manner in which a vehicle is classified generally reflects the purpose for which it is primarily used. A motor vehicle subsequently will be issued a license plate reflecting that division.
The Code defines a First Division motor vehicle as one which is designed to carry not more than 10 persons. Most standard passenger vehicles are First Division vehicles.
Conversely, Second Division Vehicles "are designed for carrying more than 10 persons, those designed or used for living quarters and those vehicles which are designed for pulling or carrying property, freight or cargo, those motor vehicles of the First Division remodelled (sic) for use and used as motor vehicles of the Second Division, and those motor vehicles of the First Division used and registered as school buses."
A pickup truck is registered as a Second Division vehicle because it is designed for pulling or carrying freight.
Under the cap, a person in northeast Illinois who buys a $35,000 vehicle and trades in a First Division vehicle worth $20,000 still can buy the next car for $15,000, but will see the sales tax based on a $25,000 transaction, meaning the consumer will pay about $700-$920 more in sales tax compared to today’s computations.
Trade-in credits from multiple traded-in vehicles still can be combined, so long as the credit does not exceed $10,000. Likewise, any trade-in credits up to $10,000 still can be split among multiple purchases.
Important, if a customer enters into an advance trade-in agreement for tax credits of, say, $20,000 before 2020, the total credit that can be claimed after Jan. 1 cannot exceed $10,000.
The CATA and others will petition lawmakers again beginning in January to repeal the new cap. The association had garnered the support of key legislators going into the General Assembly’s fall veto session, but House Speaker Mike Madigan did not call the matter for a vote.
If there is uncertainty about which division a vehicle is registered under, call the secretary of state’s Taxpayer Assistance Division at (217) 782-3336.