Used Car Auto Taxes In Texas

You May Need A Certified Auto Appraiser

 

I’ll tell you why this happened and how to get around it which the tax office won’t normally tell you.

Standard Presumptive Value (SPV)

What the State of Texas has done is write a law that says they can tell you what the value of your car is, no matter what you paid.

On top of that, the law also says that if you paid more, then you have to pay taxes on the higher amount!

To me, that is a little bit crazy….

They have set a minimum on the value of vehicles using what they call the Standard Presumptive Value (SPV). There are a few exceptions, but they don’t really help the bulk of private auto purchasers.

 Here are the nine exceptions:

  1.  Clearly, a new vehicle is not a used auto, so the law doesn’t apply to a new car.
  2.  Also, if you purchased a used car from a licensed dealer, then their price sticks, so you pay taxes on the actual purchase price in this instance.
  3.  If you buy a used vehicle from a government or “repo” auction, then they cut you a break and you only pay taxes on the actual purchase price.
  4.  If the vehicle is not actually an auto, like an all terrain vehicle or a dirt bike, then the law doesn’t apply.
  5.  If you buy the vehicle at a salvage auction and it is actually a salvage vehicle (with damage intact), then you get a break and just pay taxes on the purchase price.
  6.  Gift vehicles can slip through the cracks in some cases.
  7.  If you swap two vehicle even, then the SPV doesn’t apply.
  8.  If the vehicle you purchased is an antique, or more specifically, if it is 25 year old or older, then no SPV is required to be calculated.
  9.  A mechanic or storage lot can sell you a vehicle if they acquired it by way of lien and you only have to pay taxes on the amount paid.

So, if you find a vehicle in the classifieds and you want to buy it from the owner (who isn’t a dealer, salvage lot, mechanic, or lienholder/government official), it could cost you more than you think when you get to the tax office. If you want to know for sure what it will cost you, then you have to know what the Standard Presumptive Value is.

Here’s how you do it:

  1. You will need to get the VIN and mileage off of the subject vehicle. (call the owner and get it)
  2. Now, you need to go to the Texas Department of Transportation website and search for “Standard Presumptive Value Calculation”.
  3. Now enter the vehicle identification number and the mileage in the appropriate boxes and have it calculate the value.
  4. You need to figure 80% of the value it tells you and use that value for #5 below.
  5. Take the value and multiply it by the appropriate sales tax rate in Texas (6.25% as of the writing of this article).

Now you should have a figure, and this figure is the approximate amount you will be asked to pay, unless you say you paid more than what the SPV calculator said the vehicle was worth, and in that case, you will be asked to pay taxes on the higher purchase price.

But what if the vehicle you purchased was not in the best of shape and you didn’t pay as much as the tax office says you should have? What can you do about it?

The answer is in form 14-128 from the Texas Comptroller of Public Accounts office.

This form is used by insurance adjusters and dealerships to certify the value of a vehicle specifically for tax purposes. If the vehicle you purchased has body damage, unusually worn seats, bad paint, or any number of other issues that can affect its value, then this is the route to go.

An Example

If you purchase a 2000 Ford F-250 as a work truck and you find someone that has a beat up one with 250,000 miles on it, then the likely tax value will be around $4,360 (80% of the SPV as calculated on the TXDOT site), but because it had been used as a work truck, it is beat up, dirty inside and has some mechanical or maintenance issues so you were able to get the owner to sell it to you for $1,500.

The tax office will make you pay around $272 for taxes, but if you go and get a certified appraisal from and adjuster or dealer. You can get one from an adjuster for around $75 or less depending on the adjuster and vehicle, but a dealer has to charge at least $100 unless it’s a motorcycle – then it’s at least $40. With a certified appraisal, the value could come out to around your $1500 purchase price (or less), so you will only have to pay about $93 in taxes. If you add in the cost of a $75 appraisal, you still will have saved over $100 on your taxes based on the above scenario.

I think that savings is worth it, especially since most of the time, if you paid less than the SPV, there’s a reason and the appraisal will be much lower than what you actually paid. It could potentially save you much more on taxes than the example I have given. Individuals and businesses can take advantage of form 14-128.

Two special points to make sure you are aware of:

  1. If you get need a certified appraisal, it has to be completed within 20 days of the sale.
  2. You can get a refund if you didn’t read this article before you paid the tax office, but you are still bound by the 20 day rule.

That’s it! I hope this saves you some tax money someday!

Sometimes It’s Just In The Petty Details!

Posted in: Auto Taxes