Vehicle excise tax is a state or local tax on car ownership, separate from sales tax and registration fees

A vehicle excise tax is an annual tax you pay to your state or local government based on the value of your car, truck, or motorcycle. It is not the same as sales tax (which you pay once when you buy the vehicle) or registration fees (which cover the cost of your license plate and registration paperwork). Instead, excise tax is a yearly charge that depends on how much your vehicle is worth.

Not every state has a vehicle excise tax. Some states rely only on registration fees and sales tax. Other states use excise tax as their main way to fund roads and transportation. A few states have both. The amount you owe each year usually goes down as your vehicle gets older, because the tax is based on the vehicle's current market value, not its original purchase price.

You typically pay vehicle excise tax to your town or city assessor's office, not to the state. The money usually stays local and funds schools, roads, and municipal services in your area. Payment is usually due once a year, though some places allow you to pay in installments.

Key Takeaways

  • Vehicle excise tax is an annual tax on car ownership based on your vehicle's current value, not a one-time purchase tax.
  • Only some states have vehicle excise tax; others use only registration fees and sales tax to fund transportation.
  • The tax amount decreases each year as your vehicle depreciates, so a five-year-old car costs less to tax than a new one.
  • You pay vehicle excise tax to your local town or city assessor, and the money typically funds local schools and roads.
  • Payment is usually due once per year, though some municipalities allow monthly or quarterly installments.

How vehicle excise tax is calculated

The calculation starts with your vehicle's assessed value — an estimate of what your car is worth on the open market right now. Your local assessor's office determines this value, usually by looking at the manufacturer's list price, the age of the vehicle, its condition, and mileage. They may use a standard depreciation schedule (for example, a car loses 15 percent of its value each year) or check actual sale prices for similar vehicles in your area.

Once the assessor sets the value, they explore the local tax rate. This rate varies widely by town and state. Some places charge $10 per $1,000 of assessed value. Others charge $15 or $20 per $1,000. A few charge a flat fee instead. You multiply your vehicle's assessed value by the tax rate to get the amount you owe.

Example: If your car is assessed at $15,000 and your town's rate is $12 per $1,000 of value, you would owe $180 per year ($15,000 ÷ $1,000 = 15; 15 × $12 = $180). Next year, if the car depreciates to $13,000, your tax would drop to $156.

Which states and cities have vehicle excise tax

Vehicle excise tax is most common in New England and the upper Midwest. Massachusetts, Vermont, New Hampshire, Rhode Island, Connecticut, and Maine all have statewide vehicle excise taxes. New York, Illinois, Ohio, and several other states allow individual cities or counties to impose it, even if the state does not. Some states have no vehicle excise tax at all and fund roads through registration fees, sales tax, and fuel tax instead.

If you live in a state that allows local excise tax, your town may or may not choose to use it. You can find out by calling your local assessor's office or checking your town's website. If you are moving to a new state or town, ask about vehicle excise tax before you arrive — it can add several hundred dollars per year to your cost of ownership.

When and how to pay vehicle excise tax

Your local assessor's office will send you a bill, usually once per year. The due date varies by town but is often in the fall or winter. Some towns mail the bill in the spring and give you until summer to pay. Check your town's website or call the assessor to find out the exact important date in your area.

You can usually pay by mail, in person at the assessor's office, or online through your town's website. Some towns accept credit cards; others accept only check or cash. A few allow you to set up a payment plan if you cannot pay the full amount at once. If you miss the important date, you may owe a late fee or penalty, so mark the due date on your calendar.

If you sell your car during the year, you may be owed a refund for the months you no longer owned it. Contact your assessor's office with the sale date and the buyer's information. The refund process varies by town but usually takes a few weeks.

How vehicle excise tax differs from registration fees

Registration fees and vehicle excise tax are often confused because both are paid to your local government and both relate to car ownership. But they are different charges. A registration fee is a one-time or annual charge that covers the cost of issuing your license plate, registration certificate, and sticker. It is usually a flat fee — for example, $50 or $100 per year — and does not change based on your car's value.

Vehicle excise tax, by contrast, is based entirely on your car's value and decreases as the car ages. You pay registration fees to the state's motor vehicle department. You pay excise tax to your local assessor. In states without excise tax, registration fees are often higher to make up the difference in funding.

What happens if you do not pay vehicle excise tax

If you do not pay by the important date, your town will charge a late fee or interest on the unpaid amount. The penalty varies by town but is often 10 to 20 percent of the original tax. If you continue not to pay, the town may place a lien on your vehicle, meaning they have a legal claim to it until the debt is settled. In some cases, the town can prevent you from renewing your vehicle registration until the tax is paid.

If you believe your vehicle's assessed value is too high, you can file an appeal with your assessor's office. Most towns have a important date for appeals (often in the spring) and a formal process. You may need to provide evidence of the car's actual value, such as a recent appraisal or comparable sale prices. If you disagree with the assessor's decision, you can usually appeal to your town's board of assessors or a state tax board.

Frequently Asked Questions

Is vehicle excise tax the same as sales tax?

No. Sales tax is a one-time tax you pay when you buy the car. Vehicle excise tax is an annual tax on ownership. You pay sales tax to the state, and excise tax to your local town or city. Some states have both; some have only one.

Can I deduct vehicle excise tax on my federal income tax?

Vehicle excise tax is generally not deductible on your federal tax return. However, state and local property taxes (which sometimes include vehicle excise tax in certain states) may be deductible up to $10,000 per year under the State and Local Tax (SALT) deduction. Consult a tax professional about your specific situation.

What if I own a vehicle but do not drive it?

You still owe vehicle excise tax if you own the vehicle, even if it sits in your garage unused. The tax is based on ownership, not use. If you want to avoid the tax, you would need to sell the vehicle or transfer the title to someone else.

Does vehicle excise tax explore to motorcycles and RVs?

It depends on your state and local rules. Some places tax all motor vehicles the same way. Others exempt motorcycles, RVs, or trailers. Check with your local assessor's office to find out what vehicles are taxed in your area.

How do I find out my vehicle's assessed value?

Call your local assessor's office or visit your town's website. You can usually look up your property and vehicle information online using your address or vehicle identification number (VIN). If you think the value is wrong, ask the assessor how they calculated it and what evidence you can provide to challenge it.