Many South Carolinians know that when people buy or lease a car here in the Palmetto State they can save money on taxes by transferring the license plate from an older car they are selling or trading in.
However, many people don’t know quite how that works, and how the timing of a car purchase can mean hundreds of dollars in savings.
For those unfamiliar with the way South Carolina taxes vehicles — probably a big surprise to all those folks moving here from states that don’t have a property tax on cars — I’ll explain.
Local governments in South Carolina collect annual property tax on vehicles, just as they do on homes, and those taxes are based on what the state thinks the vehicle is worth. It’s an imperfect system, as I reported earlier this year, and vehicle owners should always check to see if the state has overvalued their cars or trucks.
While the property tax is based on the vehicle’s value, the tax essentially follows the license plate rather than the car. That means, if you sell an old car that’s not worth much and buy one that’s more valuable, you can transfer the license plate, and tax won’t be due on the newer car’s value until the license tag’s renewal date.
This can be a big deal.
The property tax bill for a car worth $25,000 ranges from roughly $400 to $550 in the tri-county, depending on county, school district and local tax rates. For a $40,000 vehicle, you’re looking at between $630 and $900 in most parts of the Metro area — far more than the maximum $300 sales tax you’ll pay on a car purchase.
In contrast, the property tax bill for a 15-year-old car or truck would be less than $20.
The timing of a license tag transfer is important, because vehicle property taxes aren’t collected at the same time for everyone. They’re based upon when the car was registered. Time it just right, and you could avoid nearly a year’s worth of property tax on your new (or newer) vehicle.
Let’s say you’ve got an old car with a low property tax bill.
If you were to buy a new car shortly after renewing the tag on the old one, and transfer the tag, then you wouldn’t owe tax on the new car’s value for about a full year.
And — here’s a bonus — every year, the taxable value of your new car will drop as it ages, so you could skip the highest-tax year of ownership entirely.
In contrast, if you transfer a tag that’s about due for renewal, you could end up not only bearing the full property tax hit on a new car, but also having to pay it sooner than if you hadn’t transferred the tag.
When you buy a car from a dealership, if you get a new tag, you’ll get a property tax bill that’s due within 120 days of the vehicle’s purchase date.
So, if you transfer a tag that’s due for renewal less than 120 days after the purchase date, you bill could be due sooner rather than later.
If you buy from a private seller, you can’t register the car until you pay the property tax, and must register the car within 45 days. Transfer a tag, and the tax is due when the tag comes up for renew- al.
Transferring a tag is a simple matter if you’re trading in a car. If you’re selling a car yourself, transferring the tag means keeping the tag from the car you’re selling and having it available to transfer to the car you’re buying, so it’s a little more complicated, but selling a car typically nets more money than trading one in.