Drivers in US state hit with ‘surprising’ car tax bills as July law changes mean 90% higher costs

DRIVERS in a US state have been hit with a surprising car tax bill as part of a law change this month.

The new ruling sees car taxes no longer calculated based on a vehicle’s market value.

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Drivers in a US state are facing unexpected car tax hikes due to a new law that bases taxes on the car’s original MSRP instead of its current market value[/caption]

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Under the new system, even drivers of older cars are taxed at higher values[/caption]

Instead, the car’s original Manufacturer’s Suggested Retail Price (MSRP) and a fixed depreciation schedule are now taken into account.

Drivers in a major US state are facing unexpected car tax hikes due to a new law that bases taxes on the car’s original MSRP instead of its current market value.

According to Patch, the change was made to make car taxes more predictable and less impacted by fluctuations in the used car market.

Previously, areas would use something like the Kelly Blue Book to determine a car’s market value.

But now towns are required to use the car’s original MSRP – which is the price the car was sold for when it was brand new.

Then, they apply a fixed depreciation schedule to determine its taxable value.

The old system saw taxes based on how much a car is worth in the current market, with older cars worth less – meaning people paid lower taxes as their cars aged.

However, the new system sees cars taxed based on the MSRP of the car when it was new, regardless of its current market value.

In turn, the state uses a depreciation schedule to lower the taxable value each year.

This means a one-year-old car is taxed at 85 to 90% of its original MSRP, with the percentage dropping by 5% each year until it reaches 20% of the MSRP.

The car’s taxable value can never go below $500, meaning if a car had an MSRP of $30,000 when it was new, it will be taxed as if it’s worth $25,500 – 90% of MSRP – in its first year, even if the actual market value is less.

Connecticut, where this law has taken effect, wanted to make car taxes more predictable and less a result of swings in the used car market – such as during the shortages brought about by COVID when car values skyrocketed.

In general, using MSRP ensures towns have a stable way to calculate taxes – according to the lawmakers.

One issue for residents, though, is that some towns in the state decided to use the 90% starting point instead of 85% to avoid losing tax revenue.

This means many are seeing higher tax bills – even though their cars are older and worth less in the market.

This comes as drivers in Connecticut also risk hefty fines of up to $1,000 if they are found guilty of reckless driving as part of a new crackdown.

And, financial penalties are not the only sanction offenders could face as the most frequent could end up having to spend time behind bars.

The new legislation is designed to punish “extreme reckless drivers” caught traveling at more than 100 mph on public roads.

If the bill is signed into law, perpetrators face increased fines of between $200 and $600.

However, severe violations could even lead to a 30-day prison sentence, while repeat offenders face fines of up to $1,000.

They could even have their vehicle impounded for up to 48 hours until fines are paid – along with towing and storage costs.