5 Ways to Pay No Car Tax

January 27, 2012

Paying no car tax when purchasing a car is actually possible though it can be difficult. There are some loop holes in the laws and some not very well known that you can use to eliminate the car tax on your vehicle purchase. You can save money now without having to wait until the end of the year to use them as deductibles on your taxes.

  1. States with No Sales Tax: If you really want to avoid paying sales tax, then there are several states that do not charge any. You can travel to that state and make your purchase there. Depending on how much you will save on paying for the car and the proximity to where you currently live, this may or may not be a feasible option. It is possible to completely set up the purchase over the phone and just go pick up your car. States that do not charge a sales tax include New Hampshire, Oregon, Delaware, Montana and Alaska.
  2. Where You Register the Vehicle: You can only avoid this tax if you purchase the car in a no sales tax state and then register the vehicle in that state as well. If you purchase a car in Oregon and then register it in CA then you will have to pay the sales tax that applies to CA car sales. This is very difficult, as you will need to have an address in that state and proof of this address. You cannot use a dummy address, as most states have cracked down on this type of tax evasion and individuals do not only have to pay the tax but also a tax evasion fine.
  3. Buy Before Moving: If you currently live in a state with no sales tax but are moving to one that does not, you need to purchase your car a minimum of 90 days prior to your move if not more. You are not evading the tax when you register the car in the new state, and this is a very good idea if you are considering moving in the near future and want to get a new car.
  4. Exemptions to the Sales Tax: There are some situations in which you do have free car tax no matter where you live. If you are disabled, then you do not have to pay. Historic vehicles that were built before 1973 are exempt. An electric vehicle has a different tax applied to it, and any vehicle that is used for forestry, agriculture or horticulture is exempt.  If you are exempt then you will need to display the free tax disc on your vehicle at all times.
  5. Tax Credits When Filing: There are several tax credits available for those that purchase hybrid, low emission or no emission vehicles. Depending on the price of the car, this credit may be able to completely cover the sales tax you paid. There is also a tax deduction for individuals that bought a new vehicle in 2009 even if you do not itemize your return. This was to help stimulate growth in the automotive industry.
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