Iowa Vehicle Sales Tax & Fees

Iowa Car Sales Tax

It’s exciting to buy a new (or new for you) car, but it’s also far from cheap.

Things like sales tax and other fees are often forgotten about in the excitement of making a new car purchase. But in Iowa, you’ll need to be prepared to spend additional money on these extra costs.

Here’s what to expect when it comes to taxes and fees in the state of Iowa.

How Much Is the Car Sales Tax in Iowa?

How Much Is Iowa Sales Tax

The state sales tax on a car purchase in Iowa is 5%. Therefore, you will be required to pay an additional 5% on top of the purchase price of the vehicle.

Iowa considers the 5% sales tax as a "One-Time Registration Fee".

This is different than the standard 6% sales tax rate for other goods and services in Iowa.

How to Calculate Iowa Sales Tax on a Car

You can calculate the sales tax in Iowa by multiplying the final purchase price by .05%.

For example, let’s say that you want to purchase a new car for $30,000, you would use the following formula to calculate the sales tax:

$30,000 x .05= $1,500

This means that your sales tax is $1,500 on a $30,000 purchase price.

Calculate Car Sales Tax in Iowa Example:

  • Initial Car Price: $30,000
  • Sales Tax Rate: 5%
  • Trade-In Amount: $5,000
  • Manufacturer/Dealer Rebate: $3,000

Sales Tax = ($30,000 - $5,000 - $3,000) * .05
Sales Tax = $1,100

Remember that the total amount you pay for a car (out the door price) not only includes sales tax, but also registration, and dealership fees.

Do I Have to Pay Sales Tax on a Used Car?

Yes, in Iowa you must pay the car sales tax on a used vehicle. The sales tax rules remain the same whether the car is new or used.

Still, purchasing a used car is a wise choice for many. The overall price will be lower, which means you will pay less in sales tax than with a new vehicle.

Car Sales Tax for Trade-Ins in Iowa

Trade In IowaYou don’t have to pay sales tax on trade-ins in Iowa. In other words, be sure to subtract the trade-in amount from the car price before calculating sales tax.

As an example, let’s say you are purchasing a new SUV for $35,000 and your trade-in is worth $10,000. You will subtract the trade-in value by the purchase price and get $25,000. Therefore, your car sales tax will be based on the $25,000 amount.

Car Sales Tax on Private Sales in Iowa

A sales tax is required on all private vehicle sales in Iowa. It is the same 5% you would pay at a dealership, but you are responsible for paying the DMV when registering the vehicle.

Tax on Rebates & Dealer Incentives

Tax Dealer Incentive Iowa

You do not have to pay tax on dealer and manufacturer rebates in Iowa. In other words, be sure to subtract the dealer rebate amount from the car price before calculating sales tax.

As an example, if you are purchasing a new car for $30,000 with a $5,000 rebate, you will pay sales tax on the $25,000 cost of the car.

Iowa DMV/State Fees

There are some other state and DMV fees associated with the purchase of a vehicle in Iowa.

A few of these fees include:

  • Registration Fee: 1% of car price
  • Title Fee: $25
  • Plate Transfer Fee: $5

Iowa Dealership Fees

Dealerships apply extra fees, sometimes referred to as “doc fees,” with the sale of the car.

Though these fees vary based on the dealership, the average fee in Iowa is $135, with a $180 limit on how much dealerships can charge.

When Sales Tax Is Exempt in Iowa

Iowa Tax Exemptions

Much like every state, Iowa has some sales tax exemptions for vehicle sales. Exemptions include:

  • You receive the vehicle as a gift from a spouse, parent, child, grandparent, or grandchild.
  • You receive the vehicle in a divorce.
  • If you inherited the vehicle.
  • You receive the vehicle from an individual’s revocable trust.

Iowa EV Rebates & Incentives

Iowa offers a $500 tax credit on the purchase of a new EV. This is on top of the $7,500 Federal tax rebate offered on the purchase of new electric vehicles.

 

Tax information and rates are subject to change, please be sure to verify with your local DMV. 

Frequently Asked Questions

What is the sales tax on a car purchased in Iowa?

The sales tax on a car purchased in Iowa is 5%. This is a different rate from the 6% that is collected on other goods and services in Iowa.

Do I have to pay sales tax on a used car in Iowa?

There is a 5% sales tax on used vehicles, which is the same rate as new cars in Iowa.

Do I have to pay sales tax on a gifted car in Iowa?

You do not have to pay sales tax if the vehicle is gifted to you from a spouse, parent, child, grandparent, or grandchild.

How much is registration in Iowa?

There are some other state and DMV fees associated with the purchase of a vehicle in Iowa.

A few of these fees include:

  • Registration Fee: 1% of car price
  • Title Fee: $25
  • Plate Transfer Fee: $5

Does a trade-in reduce sales tax in Iowa?

You do not have to pay a sales tax on the trade-in value of your vehicle. As an example, if you purchase a new car for $50,000 and the value of your trade-in is worth $10,000, then you will only have to pay sales tax based on the $40,000.

How can I avoid paying sales tax in Iowa?

The following events are not taxable when it comes to vehicle transfers:

  • If you inherited the vehicle.
  • You receive the vehicle from an individual’s revocable trust.
  • You receive the vehicle as a gift from a spouse, parent, child, grandparent, or grandchild.
  • You receive the vehicle in a divorce.