Sales Tax on new Car/Truck (Houston, Marshall: buying, depreciation, deductible)

[dudelove99501]

I may be moving to Houston toward the end of the year and will likely need to purchase a car or truck. I had inintally planned on buying a new or fairly new vehicle. I googled "vehicle sales tax". Based on the various websites I found, including the Texas DOT government site, the sales tax is 6 1/4 percent. So, on a $40,000 truck/SUV, the sales tax is a whopping $2500. Is this correct? I guess I am fortunate because the last vehicle I purchased I paid all of $12.50 in sales tax. The community had a sales tax of 2.5 percent but it was capped and the final tax bill was just $12.50.

If the 6.25% amount is correct, looks like I'll be buying a used honda or toyota with 150,000 mile on it.

Is this correct? If so, are there tax exemptions if the vehicle purchase is for a commercial purpose, i.e. business?

Any information would be appreciated.

[KerrTown]

I think the sales tax in Texas is universal. The rate you pay for household items at Target is taxed at the same rate you pay for the car. The 6.25 % you described is the (base) sales tax rate the State of Texas charges exclusive of City, County, or other taxing authority (in Houston's case: METRO) rates.

When I bought my used car in a West Houston dealership, I think I got charged Houston's tax rate of 8.25 %. If you buy outside of those City, County, or other authority, the price is much cheaper. It will be the standard 6.25 % if you can find a dealership located outside of any other taxing authority. Laurence Marshall's TV commericals notably brag about its country location probably because of that fact. (We're out in the country outside of BIG City prices!)

That's the great windfall of being a sales tax only state. The state gets alot of sales tax revenue from the purchase of automobiles. (We didn't say that its a low-tax state; it is a no-income tax state! )

As for tax-breaks, I'm not sure about that though. Can anybody else answer that question?

[edupad]

[SIZE=3]I am going through a similar situation. I live in Delaware where there is a small fee when we buy a car. Isn’t it better to buy the cut in DE and then have it transport to Houston? [/SIZE]

[Mustang1]

Actually, I think vehicle purchases are just the state sales tax of 6.25%.

[chris_ut]

Originally Posted by dudelove99501

I may be moving to Houston toward the end of the year and will likely need to purchase a car or truck. I had inintally planned on buying a new or fairly new vehicle. I googled "vehicle sales tax". Based on the various websites I found, including the Texas DOT government site, the sales tax is 6 1/4 percent. So, on a $40,000 truck/SUV, the sales tax is a whopping $2500. Is this correct? I guess I am fortunate because the last vehicle I purchased I paid all of $12.50 in sales tax. The community had a sales tax of 2.5 percent but it was capped and the final tax bill was just $12.50.

If the 6.25% amount is correct, looks like I'll be buying a used honda or toyota with 150,000 mile on it.

Is this correct? If so, are there tax exemptions if the vehicle purchase is for a commercial purpose, i.e. business?

Any information would be appreciated.

The tax is 6.25%. If you can afford a 40k SUV then 2500 tax isn't going to bother you.

Buying last years model will usually save you 10-20% on the price of a car so you come out ahead versus buying new with no tax so you can look at it that way.

[InsaneP]

Don't forget that since we don't have income tax in Texas that sales tax is deductible from your federal taxes. Could save you 30+% on that $2500, depending on your bracket.

Sales Tax Deduction Option (http://www.irs.gov/newsroom/article/0,,id=133209,00.html - broken link)

[travelguy_73]

And remember, if you buy a vehicle outside the state, you will have to pay tax on its value when you register it in the state.

[HoustonRonnie]

Originally Posted by dudelove99501

I may be moving to Houston toward the end of the year and will likely need to purchase a car or truck. I had inintally planned on buying a new or fairly new vehicle. I googled "vehicle sales tax". Based on the various websites I found, including the Texas DOT government site, the sales tax is 6 1/4 percent. So, on a $40,000 truck/SUV, the sales tax is a whopping $2500. Is this correct? I guess I am fortunate because the last vehicle I purchased I paid all of $12.50 in sales tax. The community had a sales tax of 2.5 percent but it was capped and the final tax bill was just $12.50.

If the 6.25% amount is correct, looks like I'll be buying a used honda or toyota with 150,000 mile on it.

Is this correct? If so, are there tax exemptions if the vehicle purchase is for a commercial purpose, i.e. business?

Any information would be appreciated.

No tax exemption, per se, but if the vehicle is used for business then you can depreciate it over it's useful life.

Passenger automobiles
The maximum depreciation limits for passenger automobiles fist placed in service during the 2009 calendar year are:

• [SIZE=2]$2,960 for the first year;[/SIZE]
• [SIZE=2]$4,800 for the second year;[/SIZE]
• [SIZE=2]$2,850 for the third year; and[/SIZE]
• [SIZE=2]$1,775 for each tax year thereafter.[/SIZE]

[SIZE=2]Trucks and vans
The maximum depreciation limits for truck and vans first placed in service during the 2009 calendar year are:[/SIZE]

• [SIZE=2]$3,060 for the first tax year;[/SIZE]
• [SIZE=2]$4,900 for the second tax year;[/SIZE]
• [SIZE=2]$2,950 for the third tax year; and[/SIZE]
• [SIZE=2]$1,775 for each tax year thereafter.[/SIZE]

[chris_ut]

Old post bumped by a spammer.

On a side note, they deduct the value of your trade in from the price of the car that you pay tax on so that can save you a couple bucks.