What makes Indiana preferable for drivers? It is perhaps the cheapest state to buy a used car in the US. Though the car buying price may be low, there are some costs you cannot eliminate – like the car sales tax cost! But how much is the Indiana sales tax on cars?
Unlike some states, no county or local taxes apply to your purchase. So, whether buying a new or used car, you must consider the statewide sales tax rate alone. So how much is the Indiana car sales tax, and when must you pay that? Keep reading our article to know in-depth about it!
How much is the sales tax on a car in Indiana?
Indiana sales tax on cars is 7%. Whether you’re purchasing a used or a new car, the tax rate applies to all 281 local tax jurisdictions across the state.
Does trade-in reduce car sales tax in Indiana?
Yes. In most states, many dealerships will accept your old car in exchange for a credit toward buying a new one. So, you may trade in your old car and get a $5,000 credit toward the buying price of a new car worth $30,000, decreasing your out-of-pocket expense to $25,000. Since the value of your trade-in doesn’t subject to sales tax in the state, the taxable price of your new car will be $5,000. So, you save the sales taxes you will have paid on the $5,000 value of your trade-in.
How are rebates and incentives taxed?
Dealers also offer monetary incentives or manufacturer rebates on the buying price of a car. For instance, if you get a rebate of $1,000 on a $15,000 car, you’ll only have to pay $14,000 from your wallet. The state taxes car purchases before the dealers apply rebates or incentives to the price. So, the customer will pay Indiana car sales tax as if it costs the full $15,000.
Here’s the info on penalties for driving without auto insurance in Indiana!
What other fees must you pay while buying a car in Indiana?
In addition to the the taxes, you must pay the following fees while buying a car in the state.
- Title: $4-$25
- Plate transfer: $9.50
- Registration: $21.35 + $15 infrastructure fee
- EV supplemental fee: $150
- Hybrid vehicle supplemental fee: $50
- Documentation fee: $199
Documentation fee covers the dealership’s costs in creating and filing sales tax forms, sales contracts, and others. Be mindful that the law doesn’t limit the documentation fee a dealer can collect. Since the dealers fix this fee, they might differ from one dealership to the next or from one car model to another.
Do I have to pay sales tax on a used car in Indiana?
Yes. The statewide sales tax of 7% applies to all car purchases, whether new or old.
Do you pay sales tax on a used car from a private seller in Indiana?
Yes. If you purchase a car in the state from a private seller, you must pay the sales tax at a branch when you apply for the title certificate. The residents who bought a car from another state, including non-Indiana dealers, will get reimbursement for the sales tax paid in that state.
Know about how to obtain a driver’s license in Indiana
Do I have to pay sales tax on a car that was gifted to me in Indiana?
No. Gifted cars get sales tax exemption in the state. Currently, you can only gift up to around $17,000 per recipient without having to disclose the gift on your taxes as a single individual. If you gift a car to your family member, the transaction may be free from sales tax, and you must fill out and submit BMV form 48841.
When you’re exempt from paying Indiana sales tax on cars?
Sales tax on cars in Indiana is exempt if you fulfill any of the following conditions.
- You own a tax-exempt organization.
- The vehicle you own is a truck used to directly produce mining, refining, manufacturing, harvesting, or agricultural supplies.
- You are an out-of-state resident who bought the car from another state.
- The vehicle you own is a ready-mix concrete truck that qualifies for manufacturing machinery and equipment exemption.
Refer to the info on the ST-108E Form by the Indiana Department of Revenue for additional details on eligible sales tax exemptions.
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