Trade-in tax credit (Massachusetts)

Trade-in tax credit (Massachusetts)

Hi. I apologize if this has been answered previously but I could not find my answer through google.

Scenario: i have a car trade-in value $10k, but i still owe $5,000. I want to buy the M3 at $35k. Does tesla apply $10k towards my purchase and I effectively pay the taxes for $25k (and i pay the $5k loan balance) or does Tesla consider only the positive balance and i would have to pay the taxes for $30k?

To be concise, should i pay off my car before trade in to take advantage of the tax benefits or is it not necessary?

EVRider | 4 marzo 2019

The trade-in is worth the same regardless of the financing. You’ll pay off the loan and only pay sales tax on $25k.

kcheng | 4 marzo 2019

Tesla buys your trade-in, for its appraised amount, if $10k, then $10k. It pays your finance company $5k, if that's the payoff amount. The net, $5k, is a credit in your account.

Your balance is now $30k. Your state sales tax is based upon $25k.

Typically, you're better off, if the trade-in amount is fair, to trade it to Tesla, rather than a 3rd party, so you reduce your sales tax.

reed_lewis | 9 marzo 2019

I just did this in Mass because I had a car that I owed $2k more than it was worth.

These are approximate numbers.

The trade in car was worth $18K, but we owed $20K.

The Tesla cost $55K
They deducted $18K from the cost of the Tesla to result in a purchase price of $37K
Then added Tax on the $37K of $2312
Then added $2k for what we owed on the old car
Then added $1200 for delivery fee, etc.
So we had to pay a total of $37k+$2K+$1200 = 40200 for the new car