Auto Tax Rates by State (2024) – Policygenius (2024)

Buying a car can be expensive, but the car sales tax can potentially add hundreds (or even thousands) of dollars to the purchase price of a new car. Combined with other expenses, like car insurance and financing costs, what started as a good deal may turn out not to be much of a deal at all once you factor in the car tax rate in your state.

Because car sales tax rates vary by state, some people will pay a significant amount in taxes while other people may not have to pay a car tax at all.

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Car tax rate by state

The auto tax rate ranges anywhere from 0% to 8.25% depending on the state, with some states having different tax rates based on the type of vehicle you purchase or the county where you purchased your car.

The chart below shows the car tax rates by state according to each state’s department of insurance.

Keep in mind that state laws vary, so you may be subject to a different tax rate than what is listed above. For example, Connecticut has an average car sales tax rate of 6.35%, but vehicles that cost more than $50,000 or weigh more than 12,500 pounds may have to pay a 7.75% sales tax.

Nevada also has a unique approach to car sales taxes. The sales tax on a vehicle is set based on the county where it was purchased, so the tax on a vehicle in Nevada could be anywhere from 4% to 8.25%.

North Carolina refers to their 3% tax as a highway-use tax rather than a sales tax, though it’s a distinction without a difference.

Which states have the highest car tax?

Nevada is the only state in the nation that charges more than 8% sales tax when you purchase a vehicle, but there are six other states (Tennessee, Rhode Island, Illinois, Indiana, California, and Kansas) that charge 7% or more.

These are the ten states with the most expensive sales tax for new and used vehicles:

1. Georgia: 6.60%

2. New Jersey: 6.63%

3. Utah: 6.85%

4. Tennessee: 7.00%

5. Rhode Island: 7.00%

6. Indiana: 7.00%

7. Illinois: 7.25%

8. California: 7.25%

9. Kansas: 7.50%

10. Nevada: 8.25%

What states have the cheapest tax on cars?

There are five states (Alaska, Delaware, Montana, New Hampshire, and Oregon) that don't pay any sales tax at all when purchasing a car. Four other states (Oklahoma, North Carolina, Colorado, and Alabama) pay less than 3.5% in sales tax when they buy a car.

These are the ten states with the cheapest sales tax for new and used vehicles:

1. South Dakota: 4.00%

2. Oklahoma: 3.25%

3. North Carolina: 3.00%

4. Colorado: 2.90%

5. Alabama: 2.00%

6. Alaska: 0.00%

7. Delaware: 0.00%

8. Montana: 0.00%

9. New Hampshire: 0.00%

10. Oregon: 0.00%

What tax breaks are available when you purchase a car?

You may be able to deduct operating costs for your vehicle if you use your car for certain things, like business, charitable work, or medical purposes. These things are usually deductible on either federal or state taxes, but not both, so check with your accountant to see how you should file for these deductions.

There are also tax credits available for purchasing certain electric vehicles, but the IRS limits the total amount of credit per vehicle to $7,500 or less.

Other costs when buying a car

There are a lot of extra costs beyond the sticker price when you’re buying a car. Things like financing expenses, sales tax, gas, and maintenance should all be considered when you buy a new or used car.

One of the costs many people don’t consider when buying a car is car insurance. You are legally required to carry a minimum amount of liability coverage in almost every state, but most drivers need significantly more coverage than that.

Things like comprehensive coverage, collision coverage, and gap insurance are all things you may want to consider when buying a car and, even though the required amount of coverage is usually low, most drivers should choose liability limits of 100/300 or higher to make sure they are financially protected in an accident.

→ Learn more about the hidden costs of buying a car