How are vehicle sales taxed in Illinois?
Illinois Sales Tax on Car Purchases:
Vehicles purchases are some of the largest sales commonly made in Illinois, which means that they can lead to a hefty sales tax bill. This page covers the most important aspects of Illinois' sales tax with respects to vehicle purchases. For vehicles that are being rented or leased, see see taxation of leases and rentals.
Illinois collects a 7.25% state sales tax rate on the purchase of all vehicles. There is also between a 0.25% and 0.75% when it comes to county tax. In addition to state and county tax, the City of Chicago has a 1.25% sales tax. There also may be a documentary fee of 166 dollars at some dealerships. The taxes can be different in the case of a vehicle being purchased by a private party.
In addition to taxes, car purchases in Illinois may be subject to other fees like registration, title, and plate fees. You can find these fees further down on the page.
Do Illinois vehicle taxes apply to trade-ins and rebates?
How are trade-ins taxed?
Many dealerships allow you to trade-in your old car in exchange for a credit applied to the price of a new vehicle. For example, you could trade-in your old car and receive a $5,000 credit against the price of a $10,000 new vehicle, making your out-of-pocket cost only $5,000.
In Illinois, the taxable price of your new vehicle will be considered to be $5,000, as the value of your trade-in is not subject to sales tax. This means that you save the sales taxes you would otherwise have paid on the $5,000 value of your trade-in.
How are rebates and dealer incentives taxed?
Many dealers offer cash incentives or manufacturer rebates on the sticker price of a vehicle in order to encourage sales. For example, a $1,000 cash rebate may be offered on a $10,000 car, meaning that the out of pocket cost to the buyer is $9,000.
Illinois taxes vehicle purchases before rebates or incentives are applied to the price, which means that the buyer in this scenario will pay taxes on the vehicle as if it cost the full $10,000.
Other taxes and fees applicable to Illinois car purchases
In addition to state and local sales taxes, there are a number of additional taxes and fees Illinois car buyers may encounter. These fees are separate from the sales tax, and will likely be collected by the Illinois Department of Motor Vehicles and not the Illinois Revenue Department.
Average DMV fees in Illinois on a new-car purchase add up to $991, which includes the title, registration, and plate fees shown above.
Illinois Documentation Fees
Dealerships may also charge a documentation fee or "doc fee", which covers the costs incurred by the dealership preparing and filing the sales contract, sales tax documents, etc. These fees are separate from the taxes and DMV fees listed above.
The average doc fee in Illinois is $1601, and Illinois law caps dealer's doc fees at 166. Because these fees are set by the dealerships and not the government, they can vary dealership to dealership or even vehicle to vehicle.
1 - Average DMV and Documentation Fees for Illinois calculated by Edmunds.com
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