Texas Upgrades It's Tax Law for New or Used Cars

Effective October 1, 2006 Texas will have a new law fall into play upon purchasing new or used cars. Eighty percent of the blue book value will be paid in taxes by anyone purchasing from an individual. This includes purchasing from a family member or being given a car from a family member either out of love or inheritance.

The law is supposed to prevent cheating on taxes by reporting a lower price then actually paid for the vehicle. If you buy a car from a friend for $250 dollars when you go to pay for tax, title, and license you may end up paying more in taxes then you actually paid for the car. 

Blue book value is determined by the age of the car, what kind it is, and how many miles it has expended. The blue book value calculates how much the car is worth in good condition.

If you buy a car to fix up that’s not in its optimum condition the blue book value won’t account for that when paying taxes. In this case the taxes are worth more then the car.

This novel law makes it better to acquire cars from a dealership where taxes lower to 6.25 percent of the buying price. Dealers who purchase used cars have to be certified in order to make appraisals. An estimate of what the car is actually worth. Dealers refer to the blue book value like a tax assessor will do beginning October 1st. 

Insurance adjusters who check out cars that have been in accidents or storms are also certified appraisers. Instead of the dealer doing an appraisal they may use an insurance adjuster when buying used or new cars.

Anyone certified to make appraisals, insurance adjusters or dealers, can and will charge a fee that unbalances any savings made from the tax difference of buying from an individual. The fee won’t run beyond $500 dollars, but it could land at $500 or any number below.