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VERIFY: Can you be charged twice for ad valorem taxes on the same car?

One man had to pay his ad valorem tax twice; once when he started leasing his Honda Civic, and again when he decided to buy it.
Credit: WMAZ Staff

UPDATE: A law that went into effect on January 1, 2018, is designed to tax people who lease automobiles more fairly. 

House Bill 340 gives people two ad velorum tax options when they lease a vehicle. 

Under the first option, you can choose the old system where you're taxed on the full value of the vehicle you are leasing. 

You may ask yourself, why you would want to do that when you are only going to be driving the vehicle for two or three years? 

Well, using this method allows you to subtract the value of your trade-in and any rebates from that full price so it may actually end up saving you money.

With the second option, you are taxed only on the value of the payments you're making during the lease period. 

As David Komaee, the general manager of Walsh Honda puts it, you are only being taxed on the two or three years you are using the car. 

If you chose this method, you can't deduct any trade-in value or rebates from the taxed amount, though. 

You are taxed on the remaining value of the car if you shift it from a lease into a purchase, but under the new law, you aren't taxed the full value at both lease and purchase. 

If it sounds like you have to be a math wizard or tax genius to sort all of this out, don't worry. Komaee says most dealers have a computer system where they can plug in the numbers and show you which way saves you the most money. 

While the new system helps people going forward, it doesn't help people like Lee Wilkes, who started leasing before the change, and then converted to a purchase after the change. People who fall within that notch still double-taxed. But since the average lease runs about three years, most of those people should cycle through by January 2021.

Komaee says dealers actually pushed for the change in the law for several years because they felt the double taxation system was unfair, and he says it hurt the leasing market in Georgia while it was in place. 

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In 2016, Lee Wilkes started leasing a Honda Civic. 

"It was a good deal. $259 for a brand new 2016," Wilkes said.

When he signed the lease, Wilkes paid nearly $1,500 in ad valorem taxes. 

He expected this. 

However, when he decided to buy the car a few years later, the bill was shocking.

"So it's like $16 to $17,000 and I'm like, 'whoa, why is it so high?' And they said, 'well you're paying ad valorem taxes.' And I said, 'hey, I've already paid those,'" Wilkes said.

Another ad valorem charge for around $1,100 was tacked on to his bill. 

Wilkes says Robins Financial Credit Union told him this is state law. 

So we set out to verify, if by law, the state can charge someone twice for ad valorem taxes.

In 2013, House Bill 386 passed through the Georgia Senate. The bill took away the annual 'birthday tax,' changing it to a 'title ad valorem tax.'

"Just because I'm leasing and then buying? This isn't right. It's the same car," Wilkes said.

So why did Wilkes pay the tax twice on the same car? 

This is how it works. 

Wilkes wasn't the legal owner of the car when he started leasing it. The legal owner was the car dealership and leasing company. 

When he decided to turn around and buy the car, he became the legal owner.

According to state law, when the title changes on the car, that's when the ad valorem tax pops back up, hence the word 'title' listed in the state law and billing paperwork. 

Wilkes says if he knew this information before he got into leasing, he might've reconsidered. 

"I could've saved $1,100 and something dollars and made it towards the payments, I guess," he said.

Unfortunately, Wilkes has no choice but to pay off the tax.

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