Buying a car in Illinois? Be prepared to pay sales tax. Figuring out the Illinois sales tax vehicle rules can be tricky, though.
There’s the standard sales tax you pay when buying from a dealership, but there’s also a separate vehicle use tax that applies to private party sales. What are the sales tax rates? How do you calculate what you owe? Are there any exemptions?
This guide breaks down everything you need to know about Illinois vehicle sales tax, from rates and calculations to exemptions and more.
Illinois Car Sales Tax: An Overview
When you buy a car in Illinois, sales tax is added to the purchase price. Here’s what you need to know about how that works.
State, County, and City Sales Tax Rates
The state of Illinois charges 7.25% sales tax on vehicle purchases. On top of that, counties can tack on additional sales taxes, usually between 0.25% and 0.75%. And if you’re buying in Chicago, there’s an extra 1.25% sales tax.
Sales tax rates can vary widely by city and county. For example, Naperville has a sales tax rate of 7.75%, while Joliet’s rate is 8.75%.
Additional Fees
Besides sales tax, you’ll also pay for vehicle registration, title, and license plates. Registration currently costs $151, transferring plates costs $25, and the title fee is $150.
Also, car dealers usually charge a documentation fee, which covers the cost of preparing and filing sales documents. As of January 2020, Illinois capped the maximum dealer documentation fee at $300—a big jump from the previous limit of $166.
Calculating Sales Tax on Vehicle Purchases
Illinois sales tax on a vehicle is calculated on the vehicle’s taxable value. Here’s how to figure out what you’ll owe.
Determining the Taxable Value
If you’re trading in a vehicle, the trade-in value can be deducted from the price of the vehicle you’re buying. However, there’s a $10,000 cap on the trade-in value that acts as a tax credit.
Rebates generally reduce the purchase price, but Illinois sales tax is usually calculated on the original price before the rebate. Rebates are applied to the vehicle price only after the sales tax is calculated.
Sales Tax Calculation Steps
- Subtract the trade-in value (up to the $10,000 limit) from the vehicle price to get the taxable value.
- Add the sales tax rates for your city, county, and the state.
- Multiply the total tax rate by the taxable value. This is the amount of sales tax you’ll owe.
- Add the sales tax to the vehicle price to determine your total purchase cost.
Private Party Vehicle Use Tax
When you buy a car from another individual rather than from a dealership, the transaction is subject to a Private Party Vehicle Use Tax. This tax is separate from the sales tax you’d pay when buying from a dealer.
To report the transaction and pay any tax due, you’ll need Illinois Form RUT-50. You can usually pick up the form at a driver’s license facility, or you can request that a copy be mailed to you. The RUT-50 form is due within 30 days of the purchase or transfer date.
You’ll submit the RUT-50 form, along with any tax due, to the Office of the Secretary of State when you apply for the vehicle’s title.
Keep in mind that some local governments may also tack on their own Private Party Vehicle Use Taxes, so it’s a good idea to check with local authorities to see if any additional taxes apply to your purchase.
There are also certain exemptions that may apply to the Private Party Vehicle Use Tax. Be sure to research and understand any exemptions that might apply to your situation before you file Form RUT-50.
Are there any Illinois car sales tax exemptions?
Yes, there are some situations in which you don’t have to pay sales tax on a vehicle in Illinois. For example:
- Farm vehicles
- Certain business transfers
- Gifts (in some situations)
- Vehicles already used in another state for at least three months (with documentation)
Keep in mind that you’ll need the correct paperwork to claim an exemption. Also, eligibility depends on the specifics of your situation.
For more details, you should check out the Illinois Department of Revenue website.
How Recent Laws Have Increased Vehicle Costs
Several recent laws have made owning a vehicle more expensive in Illinois. A major factor is the Rebuild Illinois initiative, a $45 billion capital plan designed to improve the state’s infrastructure. To fund this initiative, Illinois has increased several fees associated with vehicle ownership.
Here are some examples:
- Title fee increase (July 2019): Increased from $95 to $150
- Car registration fee increase (Jan 2020): Increased from $101 to $151
- Gas tax increase: Increased to $0.38 per gallon
To Conclude
Navigating Illinois vehicle sales tax involves understanding a combination of state, county, and sometimes even city taxes. The rules also differ depending on whether you’re buying from a dealership or another private party.
It’s essential to understand the relevant rules and regulations, including any exemptions, to ensure you calculate sales tax accurately and stay compliant. Legislative changes can also impact the amount you owe.
If you have questions or a complicated situation, consider consulting a tax professional. Firms like Pasquesi Sheppard specialize in Illinois tax calculations and can provide expert guidance.