ATLANTA (WXIA) -- For many years, a cost of owning a car included an annual "birthday" or ad valorem tax. Well, beginning March 1, 2013, that fee, as we know it, will go away.
Beginning on that date, a big change in Georgia's tax laws will eliminate that tax for motorists. In its place, a one-time title tax will come into being for purchases of new or used cars after that date.
The big question: will the new tax cost motorists more?
For most people, the answer is no.
Motorists who purchase a new or used car or truck now pays a sales tax on the vehicle, then a once-per-year tax based on the value of the vehicle. That fee is paid out when the vehicle's tags are renewed each year.
As a result of this change, the ad valorem tax deduction vehicle owners have been able to take will go away.
For purchases on or after March 1, 2013, owners will pay a title tax of 6.5 to 7 percent on the purchase of the vehicle.
Buy a car, truck or used vehicle right now and you will pay a sales tax and on top of that--on your birthday--you'll pay a once-a-year Ad-Valorem tax based on the value of the vehicle.
"The title fee takes off the sales tax. There is no sales tax and there is no ad valorem on the car--a one-time title fee until 2015 will be less than the sales tax you pay on your vehicle," said Rep. Tom Rice (R-Norcross).
For car owners who have been paying an ongoing ad valorem tax each year on their vehicle, they will continue to pay that tax as long as they own that vehicle.
But under the new tax law and rules, motorists will not have to pay more.
For example, a motorist purchasing a new vehicle for $40,000 today pays sales tax -- 7 percent in most Georgia counties -- which in most counties would come to $2,800. After that, motorists continue paying an annual ad valorem tax based on the value of the vehicle. In this example, the motorist would pay about $700 per year, which comes with the license plate renewal.
After the new tax law kicks in next March, that same motorist would end up paying a one-time title tax that would come out to about $2,800. That's it. No sales tax; no annual ad valorem tax.
That would allow the annual out-of-pocket fee for license plates to drop significantly.