Car Sales Tax in Illinois: How It Works
Understand how to properly calculate Illinois vehicle sales tax. The method and amount owed change based on the car's price and the nature of the transaction.
Purchasing a vehicle in Illinois carries a tax obligation that is calculated and collected differently depending on the source. Whether the vehicle is from a licensed dealership or a private individual determines the tax rules. The process involves specific forms and adherence to payment deadlines that are tied to the vehicle’s titling and registration.
Tax on Vehicles Purchased from a Dealer
When buying a vehicle from a licensed dealer in Illinois, the tax is a percentage of the purchase price. The statewide base sales tax rate is 6.25%, but this rate is a starting point. Most transactions will include additional local taxes imposed by municipalities, counties, and transit authorities, meaning the final rate can vary depending on where the vehicle is registered.
The full value of a trade-in vehicle is deducted from the new vehicle’s purchase price before sales tax is applied. For example, if a buyer purchases a car for $30,000 and receives a $10,000 trade-in allowance, the sales tax is calculated on the $20,000 difference. This policy, effective since January 1, 2022, removed a previous $10,000 cap on the trade-in credit.
The dealer handles the entire tax process for the buyer. They are responsible for calculating the total tax due, collecting the amount from the buyer, and remitting the funds to the Illinois Department of Revenue. This is documented on Form ST-556, the Sales Tax Transaction Return, which the dealer completes. The buyer’s responsibility is to review the bill of sale to verify the tax calculation is correct.
Tax on Vehicles Purchased from a Private Seller
The tax for a vehicle purchased from a private party is different from a dealer sale. The state imposes a Private Party Vehicle Use Tax, which is a fixed amount based on a tiered schedule. The tax owed depends on the vehicle’s age or its purchase price, and trade-in values are not considered in this calculation.
For vehicles with a purchase price under $15,000, the tax is determined by the vehicle’s age. The amount is highest for the newest vehicles and decreases as the vehicle gets older. For instance, a vehicle from model year 2024 or newer incurs a tax of $465, while a car from model year 2014 or older has a tax of $100.
When the purchase price is $15,000 or more, the tax is based on the price itself, not the vehicle’s age. This schedule sets specific tax amounts for different price brackets. A vehicle purchased for a price between $15,000 and $19,999.99 is taxed $850, while a vehicle costing $30,000 or more is taxed $1,650.
Some local governments also impose their own private party vehicle use tax based on the vehicle’s age. These local taxes are in addition to the state tax and must be paid at the same time. The buyer must determine if their municipality or county imposes such a tax and include it in their payment.
Required Forms and Payment Process
For a private party transaction, the buyer must complete and file Form RUT-50, the Private Party Vehicle Use Tax Transaction Return. Before filling out the form, the buyer must gather key information, including:
- The full names and addresses of both the buyer and seller
- The Vehicle Identification Number (VIN)
- The date of sale
- The final purchase price
The form guides the user to determine the correct tax amount using the tiered schedules and has sections for reporting applicable local use taxes. These forms have unique transaction numbers and should not be photocopied. Official versions can be obtained from a Secretary of State facility or the Department of Revenue.
The completed Form RUT-50 and the full tax payment must be submitted together to an Illinois Secretary of State facility. This step is integrated into the vehicle’s titling and registration process. A buyer cannot receive a new title or license plates for the vehicle until the form is filed and the tax liability is paid in full. The payment must be made within 30 days of the vehicle’s purchase date to avoid penalties.
Tax Exemptions and Special Circumstances
Gifts to Family
When a vehicle is sold or gifted between immediate family members like a spouse, parent, child, or sibling, the standard use tax is waived. However, a nominal tax payment of $15 is still required. The transfer must be reported on Form RUT-50 to be properly processed.
New Residents
Individuals moving to Illinois with a vehicle they already own can be exempt from the state’s use tax. To qualify, the new resident must have owned and used the vehicle outside of Illinois for at least three months before establishing residency. Proof of out-of-state ownership and use is required, and Form RUT-50 must be filed to claim the exempt status.
Inheritance
Vehicles transferred to a beneficiary as part of an estate are exempt from the use tax. If a vehicle is an estate gift to a surviving spouse, the tax is $0. For a vehicle inherited by a beneficiary other than a surviving spouse, a $15 tax applies. The transfer must be documented through the estate settlement process.