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Auto tax rate by state

Nevada has the highest car tax rate in the nation (8.25%), but Alaska, Delaware, Montana, New Hampshire, and Oregon don’t charge any car tax at all.

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By

Rachael Brennan

Rachael Brennan

Senior Editor & Licensed Auto Insurance Expert

Rachael Brennan is a senior editor and a licensed auto insurance expert at Policygenius. Her work has also been featured in MoneyGeek, Clearsurance, Adweek, Boston Globe, The Ladders, and AutoInsurance.com.

Published|3 min read

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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.

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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. 

Key takeaways

  • 2022 car sales tax rates fall between 0% to 8.25% depending on the state, with a national average rate of 4.99%.

  • At 8.25%, Nevada has the highest car tax rate.

  • Because they don’t charge anything at all, Alaska, Delaware, Montana, New Hampshire, and Oregon have the lowest car tax rate at 0.0%.

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 2022 car tax rates by state according to each state’s department of insurance.

States - alphabetical

Car tax rate

States - highest to lowest

Car tax rate

Alabama

2.00%

Nevada

8.25%

Alaska

0.00%

Kansas

7.50%

Arizona

5.60%

California

7.25%

Arkansas

6.50%

Indiana

7.00%

California

7.25%

Rhode Island

7.00%

Colorado

2.90%

Tennessee

7.00%

Connecticut

6.35%

Utah

6.85%

Delaware

0.00%

New Jersey

6.63%

Florida

6.00%

Georgia

6.60%

Georgia

6.60%

Arkansas

6.50%

Hawaii

4.00%

Minnesota

6.50%

Idaho

6.00%

Washington

6.50%

Illinois

6.25%

Connecticut

6.35%

Indiana

7.00%

Illinois

6.25%

Iowa

5.00%

Massachusetts

6.25%

Kansas

7.50%

Texas

6.25%

Kentucky

6.00%

Florida

6.00%

Louisiana

4.45%

Idaho

6.00%

Maine

5.50%

Kentucky

6.00%

Maryland

6.00%

Maryland

6.00%

Massachusetts

6.25%

Michigan

6.00%

Michigan

6.00%

Pennsylvania

6.00%

Minnesota

6.50%

Vermont

6.00%

Mississippi

5.00%

West Virginia

6.00%

Missouri

4.23%

Wyoming

6.00%

Montana

0.00%

Ohio

5.75%

Nebraska

5.50%

Arizona

5.60%

Nevada

8.25%

Maine

5.50%

New Hampshire

0.00%

Nebraska

5.50%

New Jersey

6.63%

Iowa

5.00%

New Mexico

4.00%

Mississippi

5.00%

New York

4.00%

North Dakota

5.00%

North Carolina

3.00%

South Carolina

5.00%

North Dakota

5.00%

Wisconsin

5.00%

Ohio

5.75%

Missouri

4.23%

Oklahoma

3.25%

Virginia

4.15%

Oregon

0.00%

Hawaii

4.00%

Pennsylvania

6.00%

Louisiana

4.45%

Rhode Island

7.00%

New Mexico

4.00%

South Carolina

5.00%

New York

4.00%

South Dakota

4.00%

South Dakota

4.00%

Tennessee

7.00%

Oklahoma

3.25%

Texas

6.25%

North Carolina

3.00%

Utah

6.85%

Colorado

2.90%

Vermont

6.00%

Alabama

2.00%

Virginia

4.15%

Alaska

0.00%

Washington

6.50%

Delaware

0.00%

West Virginia

6.00%

Montana

0.00%

Wisconsin

5.00%

New Hampshire

0.00%

Wyoming

6.00%

Oregon

0.00%

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 five other states (Tennessee, Rhode Island, 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. Arkansas: 6.50%

  2. Georgia: 6.60%

  3. New Jersey: 6.63%

  4. Utah: 6.85%

  5. Tennessee: 7.00%

  6. Rhode Island: 7.00%

  7. Indiana: 7.00%

  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

Frequently asked questions

Do I have to pay taxes twice if I buy a car out of state?

In most situations, drivers will pay sales tax based on where they register the car, not where they buy it. However, each state has their own laws regarding sales tax on new and used cars, so make sure you research the laws in your state.

How can I avoid paying taxes on a car?

Drivers in Alaska, Delaware, Montana, New Hampshire, and Oregon don’t pay sales tax on the purchase of a new or used car. Also, some states have other laws that will allow you to avoid paying sales tax in certain circumstances. For example, new Connecticut residents don’t have to pay sales tax if their vehicle was registered in their name in another state for at least 30 days before moving to Connecticut.

Do you pay sales tax when purchasing a used car?

Drivers in most states pay sales tax on the purchase of a car, whether it is new or used. It also doesn’t matter if you buy the car from a dealership or a private seller, so be prepared to pay the sales tax on any used car you buy.

How much is sales tax on a $20,000 car?

How much you’ll pay for sales tax on a $20,000 car depends on which state you’re in when you buy and register the car. For example, a driver in Oregon won’t pay any sales tax while a driver in Kansas will pay 7.5%, which is $1,500.

Author

Senior Editor & Licensed Auto Insurance Expert

Rachael Brennan

Senior Editor & Licensed Auto Insurance Expert

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Rachael Brennan is a senior editor and a licensed auto insurance expert at Policygenius. Her work has also been featured in MoneyGeek, Clearsurance, Adweek, Boston Globe, The Ladders, and AutoInsurance.com.

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