For the budget geeks with winter birthdays among us, the car title ad valorem tax is no doubt making it onto the spreadsheet.
Maybe for the last time.
The so-called “birthday tax” is going away for those with recently purchased cars. Any vehicles bought – from the dealer or in private sales -- after March 1 will pay a one-time sales tax instead of the annual title fee. Those who purchased cars after Dec. 31, 2011 will be eligible to opt-in to the one-time fee (or opt-out of the annual fee, depending on your point of view).
Those who purchased cars between Jan. 1, 2012 and Feb. 28, 2013 can either pay the up-front fee or continue to pay the annual tax. Cars purchased prior to Jan. 1, 2012 will continue to be subject to the annual ad valorem tax.
As the purchaser of a used car last September, I will have a choice. But it won’t be an easy one, according to my research at the Georgia Department of Revenue’s website.
The website includes a “title ad valorem tax calculator” that revealed I would owe $141.30 if I opted for the one-time fee. The same calculator put my estimated annual taxes at $32.
Do the math and it makes sense to pay the one-time fee only if I plan to drive the car at least five years.
Given that I drove my last car for 16 years, paying upfront would seem a wise choice. Except that the car I drove for 16 years was new when I bought it. The one I’m driving now was 14 years old with 185,000 miles on it when I bought it.
That said, it’s in good shape. I hope to drive it for more than five years (seven or eight would be great). But then I wouldn’t be surprised if it doesn’t make it past 2015. Any car with a decade under its wheels is on borrowed time.
So what to do?
My conundrum aside, the tax change is an interesting one. For new car buyers (or buyers of used cars from commercial dealers), the title tax is a good deal. The tax replaces not only the annual ad valorem fee but also the normal sales tax you pay at the time of purchase. The title tax begins at 6.5 percent this year and increased to 7 percent by 2015.
Yet the tax could be considered a raw deal for private sale buyers. Previously, if you bought a car off your cousin or through a classified ad, you didn’t pay sales tax. All you paid was the ad valorem tax. So the law significantly increases the upfront costs (although you could make them up in the long run because of the elimination of the ad valorem tax).
The elimination of the birthday tax is part of a tax reform bill passed by the Georgia General Assembly last year. The law’s main focus was on the elimination of a state sales tax on energy used in manufacturing, a long-despised fee seen as an impediment to economic development. The bill also included language that eliminated the marriage penalty in state income taxes.
So as a married guy, I got that going for me … which is nice.
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