Kentucky Vehicle Sales Tax: Taxable Value, Trade-Ins, and Credits

The Kentucky vehicle sales tax is a flat 6% motor vehicle usage tax collected by the county clerk when you title or register a vehicle, whether you bought it new, used, from a dealer, or from a private seller.¹ It matches the general sales tax rate but is a separate levy under KRS 138.460, with its own rules for valuation and exemptions. There is no reduced rate for older or cheaper vehicles.

The tax applies both when a vehicle first enters Kentucky and every time an already-titled Kentucky vehicle changes hands. You cannot get plates or a title without paying it.²

How the Taxable Value Is Set

The 6% is applied to what the statute calls the “retail price.” How that figure is determined depends on whether the vehicle is new or used.

New Vehicles

For a brand-new vehicle, the taxable value starts with the manufacturer’s suggested retail price, including all factory-installed options and the destination charge, minus any manufacturer’s discount. Dealer-installed accessories with their own MSRP are added on top.³ Bring the window sticker or other manufacturer documentation showing the full MSRP breakdown when you go to the county clerk.⁴

Used Vehicles

Used vehicles are valued at the average retail price listed in the NADA Official Used Car Guide.⁴ Not clean trade-in value, which is a common misconception. Average retail is higher. This is the default figure the clerk will use unless you take steps to document a lower actual purchase price.

Paying Tax on What You Actually Paid

If you paid less than the MSRP or NADA book value, Kentucky lets you pay the 6% on the actual sale price instead. This is called the total consideration method, and it requires the Affidavit of Total Consideration Given for a Motor Vehicle, Form 71A100.²

Both the buyer and seller must sign the affidavit, and both signatures must be notarized. The form asks for the VIN, make, model, year, and the sworn sale amount. Without the notarized affidavit, the clerk has no choice but to use the standard valuation, no matter what you actually paid.

For used vehicles bought from another private party in Kentucky, there is a floor on the declared price. It cannot be less than 50% of the difference between the NADA trade-in value of the vehicle you’re buying and the trade-in value of anything you’re trading in. Take the NADA trade-in value of the vehicle you’re buying, subtract the trade-in value of the vehicle you’re offering in trade, and divide the result by two. That’s the lowest sale price the state will accept.³

Trade-In Credit

Kentucky reduces the taxable value of a vehicle purchase by the value of any motor vehicle you trade in at the time of the transaction. This is often the single biggest lever for lowering the usage tax bill.³ A few conditions apply:

The trade-in must be a motor vehicle. Cars, trucks, motorhomes, and certain recreational vehicles qualify.
The trade-in must be registered in your name. A vehicle titled to someone else does not count.
Leased vehicles not titled in your individual name do not qualify.
You can trade in more than one vehicle on a single purchase.
The trade must happen at the point of sale. Selling a vehicle separately and then coming back later doesn’t work.

The credit is set at the NADA value for the trade-in, not whatever the dealer offered you for it.³

Transfers That Owe No Tax

Certain vehicle transfers are exempt under KRS 138.470.⁵ The most commonly used ones are:³

Transfers between spouses, from parent (or stepparent) to child (or stepchild), and from grandparent to grandchild.
Transfers of a vehicle to a corporation, sole proprietorship, or LLC that you own.
Active-duty military exemptions under KRS 138.470(4).
Transfers directly to qualifying charitable or educational nonprofits under KRS 138.470(2).
Local, state, and federal government vehicles.

The family exemption is broader than most people expect. Passing a vehicle from a grandparent to a grandchild, for example, is fully exempt.

Credit for Tax Paid to Another State

If you are moving to Kentucky and already paid a sales or usage tax on your vehicle in another state, KRS 138.460(6) allows a dollar-for-dollar credit against the Kentucky 6%, as long as the other state extends a similar credit to Kentuckians.¹ If you paid 4% elsewhere, you owe Kentucky the remaining 2%. If you paid 6% or more, you owe nothing further, but Kentucky will not refund the difference. Bring proof of payment; without documentation, the clerk will charge the full 6%.

What You Pay at the County Clerk

The county clerk in your county of residence handles the whole transaction. Bring the vehicle title, Form 71A100 if you’re using the total consideration method, and payment. The clerk calculates the tax, collects it, and issues your plates and new title.²

Separate fees apply on top of the 6%. The standard title fee is $9, or $25 for an expedited speed title. Annual registration for a standard automobile is $21 or less depending on vehicle type. If the vehicle is financed, there is also a lien recording fee. Modest compared to the usage tax, but worth budgeting for.

The Annual Vehicle Property Tax

The 6% is a one-time cost, but Kentucky also charges an annual ad valorem property tax on vehicles that many first-time buyers don’t expect. The state rate is 45 cents per $100 of assessed value for non-historic vehicles.⁶ Your county, city, school district, and any special taxing districts add their own rates on top, and those vary widely by location. The combined rate is what you owe each year at registration renewal. As the vehicle depreciates, the assessed value falls and the annual bill shrinks.

1
Kentucky Legislative Research Commission. Kentucky Revised Statutes 138.460 – Motor Vehicle Usage Tax
2
Kentucky Department of Revenue. Motor Vehicle Usage Tax
3
Kentucky Department of Revenue. Motor Vehicle Usage Tax
4
Legal Information Institute. Kentucky Code 103 KAR 44:060 – Motor Vehicle Usage Tax Valuation
5
Kentucky Legislative Research Commission. Kentucky Revised Statutes 138.470 – Exemptions From Tax
6
Kentucky Department of Revenue. Motor Vehicle Property Tax Rates 2025