Trailer tax to decrease, vehicle trade-in cap to be lifted Jan. 1

[August 19, 2021]  By Greg Bishop

(The Center Square) – Consumers in Illinois looking to trade in vehicles will continue to be double taxed for a few more months, but come Jan. 1, the $10,000 tax cap on such transactions will be removed with a law recently enacted by the governor.

Also starting next year, drivers wanting to get tags for their small trailers in Illinois will be paying less, but not as low as they paid in 2019.

As part of the governor’s multi-year $45 billion infrastructure plan enacted in the summer of 2019 that doubled the gas tax and pegged annual increase to inflation also increased a variety of other fees. One measure increased the tax for some classes of trailers from $18 to $118.

Lawmakers recognized it was an error. This past spring they passed a measure in Senate Bill 54 to drop the fee from $118 to $36. Without any fanfare, the governor signed the bill earlier this month.

ABATE of Illinois’ Josh Witkowski said it’s a win for motorcyclists and other drivers.

“Not only the trailer that you would tow a motorcycle on, but this affected the itty bitty little 300-pound trailers that you tow behind a motorcycle as well,” Witkowski told WMAY. “It was something that a lot of my off-road riders and motorcycle riders were both yelling about and a lot of people were angry all over the state.”

The measure also removed the $10,000 tax cap on trade-in vehicles, something implemented as part of the 2019 infrastructure plan.

Illinois Automobile Dealers Association President Pete Sander said the trade-in tax cap meant consumers were double taxed.

“The customers had paid tax on that vehicle when they originally purchased it and then they were losing that credit when they went to trade it in, so it was really a fairness issue for the consumers,” Sander said.

He said the extra tax is the equivalent to around $625, enough to cover at least one month's payment on a new car. But, the measure isn’t in place yet. Consumers will have to wait until the new year.

“Of course, used cars are much more valuable right now in the last few months because of the lack of new cars available due to the chip shortage,” Sander said.

The law also drops the tax on some trailers from $118 to $36 and increases the title transfer fee from $150 to $155 to offset some of the lost infrastructure revenue.