How Is the Illinois Tax on a Car Purchase Calculated?

Purchasing a vehicle in Illinois carries a state tax obligation that every buyer must satisfy. The specific tax amount and the process for payment are not uniform across all transactions. How a vehicle is acquired—whether from a licensed dealership or a private individual—fundamentally changes the tax calculation and the required administrative steps. Understanding the correct procedure based on the purchase scenario is important for legal compliance and proper vehicle registration.

Tax on Vehicles Purchased from a Dealer

When you buy a vehicle from a licensed Illinois dealer, the tax is based on the state’s general sales tax rate of 6.25%. The final rate is often higher because most locations have additional, mandatory local taxes imposed by municipalities, counties, or transit authorities. The tax is calculated on the “net purchase price,” which is the final selling price after any applicable trade-in value has been subtracted. The dealership is responsible for calculating the exact tax owed, collecting it from the buyer, and remitting the payment to the Illinois Department of Revenue on the buyer’s behalf.

This trade-in allowance is a feature of dealer sales. For example, if you purchase a car for $25,000 and the dealer gives you $5,000 for your trade-in, the sales tax is calculated on the reduced amount of $20,000. Manufacturer rebates or cash incentives do not reduce the taxable price. If you buy a $25,000 car and receive a $2,000 rebate, the tax is still calculated on the full $25,000.

Tax on Vehicles Purchased from a Private Seller

Acquiring a vehicle from a private individual in Illinois involves a different tax structure known as the Private Party Vehicle Use Tax. This is not a sales tax based on a percentage but a tax determined by the vehicle’s age or its purchase price. The calculation method depends entirely on whether the purchase price is above or below $15,000.

For vehicles purchased for less than $15,000, the tax is based on the model year of the car. The tax amounts are set on a sliding scale published by the Illinois Department of Revenue. For 2025, these taxes range from $100 for vehicles 11 years or older to $465 for vehicles one year old or newer.

If the vehicle’s purchase price is $15,000 or more, the tax is calculated based on the price itself using a rate table. Unlike dealer transactions, the value of a trade-in vehicle cannot be used to reduce the taxable amount in a private party sale. The tax is owed on the full purchase price agreed upon between the buyer and seller.

Required Forms and Information for Tax Payment

To properly pay the vehicle tax in Illinois, a buyer must gather specific information and complete the correct forms. The following information is required for all transactions:

• Full names and addresses of both the buyer and seller
• The Vehicle Identification Number (VIN)
• The vehicle’s make, model, and year
• The purchase price and the date of the sale

The specific form used depends on the nature of the transaction. For vehicles bought from a licensed dealer, Form ST-556 (Sales Tax Transaction Return) is required, and the dealer provides and completes this form. For private party sales, the buyer is responsible for securing and filling out Form RUT-50 (Private Party Vehicle Use Tax Transaction Return).

A third form, RUT-25 (Use Tax Transaction Return), is used for vehicles purchased out-of-state and subsequently brought into Illinois to be titled. This form calculates the difference between the sales tax paid in another state and the amount that would have been due in Illinois.

Submitting Forms and Paying the Tax

Once the correct tax form has been completed, the final step is to submit it and pay the tax due. For nearly all vehicle purchases, this process is handled at a local Illinois Secretary of State Driver and Vehicle Services facility. The tax payment is integrated into the vehicle’s titling and registration process, making it a single, consolidated transaction for the buyer.

When visiting the facility, the buyer must present the completed tax form along with all other required titling documents, such as the signed vehicle title and an application for title and registration. The payment for the calculated tax is made directly to the Secretary of State’s office at this time.

The Secretary of State’s office will not issue a new title or registration for the vehicle until the tax liability has been satisfied and the proper forms are submitted. This ensures that the state’s tax requirements are met before the vehicle is legally recognized in the new owner’s name.

Tax Exemptions and Special Circumstances

Certain situations allow for an exemption from or reduction of the standard vehicle tax rules in Illinois. One of the most common involves the transfer of a vehicle between immediate family members, including a spouse, parent, child, stepparent, stepchild, or sibling. These transactions are subject to a reduced tax of $15, and to claim this rate, the recipient must file Form RUT-50. A vehicle given to a surviving spouse as part of an estate administration is fully tax-exempt.

An exemption also applies to vehicles purchased out of state that were used outside of Illinois for at least three months before being brought into the state. In this case, no Illinois tax is due. However, the owner must still file Form RUT-50 to document the transaction when titling the vehicle in Illinois.

Active-duty military members may also qualify for an exemption under specific conditions. If the service member’s official home of record is a state other than Illinois, they are not required to pay Illinois vehicle tax. Proper military identification and documentation of their home of record are required when titling the vehicle to secure this exemption.