Today’s topic is one that we have addressed before, but not in the State of Virginia. It is a state tax that is assessed annually on vehicles already owned. Bummer, dude. This is called an ad valorem tax and it’s based on the vehicle's assessed value in some states. Other states in the general region, namely Georgia, also impose an annual, value-based tax, although Georgia calls it a Title Ad Valorem Tax, or TAVT for short. But it amounts to the same thing.
The typical Virginia countryside is a beautiful sight.
Let’s find out what in the world is going on in Virginia, how much you might have to fork over every year, and how Dirt Legal can help you out of this madness.
What’s up With Virginia Property Taxes?
It’s not so much a Virginia issue as it is a taxation issue in general. But this one seems a little more egregious than some.
Ok, everything is balanced.
See, Virginia’s sales tax rate is not all that bad, really. The base sales tax rate is only 4.3%, which is pretty good, all things considered. The average local sales tax rate is a hair over 1.3%, with the state average rate coming in at a little over five and a half.
So, the initial purchase sales tax isn’t terrible; it’s actually in the lowest ten states for combined average states plus local sales tax. So that’s a win.
No, the problem lies in the annual taxes. As the name implies, a percentage-based tax is imposed yearly on every vehicle you own. It is based on the standard market value of the vehicle, relying on commercially produced pricing guides to determine how much you must pay. Virginia State statutes do not specify which pricing guide to use, so the responsibility lies on the county to determine which one they will use.
Why Do They Have an Annual Tax on Vehicles?
There doesn’t seem to be any specific ‘why’ to answer this question. Because they collect taxes, and it’s just what they do? We don’t know. Personally, it seems to be another rung on the misery index, but that’s just an opinion. If your state or county imposes an ad valorem tax, the best thing you can do is sit in on county board meetings or state assemblies and listen in on the conversations. This is the only way you will get a feel for the reasons why. Although most likely, this is one of those things that “has always been this way.”
It’s like asking someone who has always lived in LA or NYC what they think about the extreme cost of living. Since they have always lived there, they have no other frame of reference, so you’ll mostly just get shrugs in response. Having lived in the dirt-cheap midwest my entire life, visiting places like Anchorage and Honolulu was always jaw-dropping, but the locals are used to it. The same probably goes for places like Virginia and Georgia that impose ad valorem taxes. It’s just another hand reaching into your pocket.
What Is the Tax Called?
We’ve already covered it, but the tax is widely known as ad valorem. However, Virginia does not appear to use that name regarding their tax. They just refer to it as an annual property tax, but it amounts to the same thing.
Call it what you want; it’s an annual vehicle tax. The best resource we can find is that the tax rate for most standard vehicles is about 4.5% or $4.57 per $100 of the assessed value. There is some conflict about this number, and it may be a Fairfax County figure, as other sources indicate a 4.05% state rate. Regardless, it is over four percent that you’ll owe annually.
Image by Perlinator from Pixabay
Are There Other States That Have Annual Taxes on Cars?
Several other states collect annual taxes on vehicles. Right, wrong, or indifferent.
Rhode Island seems quaint.
The other states that levy annual vehicle taxes include:
Connecticut
Georgia
Louisiana
Mississippi
Rhode Island
This list isn’t comprehensive, so there certainly could be more.
How Much Is the Tax?
Based on that source giving a 4.05% state value, this would be a baseline annual rate plus local add-on riders.
So, let’s go back to a few of our older articles for a calculation. Back in April, we spoke about how the average price of a new car had rocketed past $47,000. Well, that figure is now closer to $49,000. Used cars have also been insane; the average used car value is somewhere in the $28,000 ballpark.
So, let’s take that $28,000-assessed, totally average used car as a baseline. We’re talking about Honda Odyssey or Toyota Sienna levels of boring and average.
Well, you own your Sienna, and you live in Virginia. Every year, they decide to take a piece of the pie. So 4.05% of $28,000 is $1,134. That is a seriously hefty tax bill to pay every year! And most people own more than one car!
So, let’s assume you bought the van for the same $28,000. The average sales tax rate in Virginia is 5.627%. Your initial payment is $1,575.56, but then tack on another $1,134 yearly! That is a lot of taxes. Multiply that by two cars, and you’re looking at over two grand per year in tax on top of the three grand or so you initially paid out in sales tax. This is highway robbery – a decade down the road and you’ve just about paid another car’s worth in taxes on vehicles you already own.
Dirt Legal is here to help. We can get your car tagged and titled in Montana through our Montana LLC program, which has no sales tax. If you’re concerned about how to renew it without ever going to Montana, we’ve got that covered, too.
There is one caveat to be aware of. The State of Virginia, or at least Fairfax County, is aware of people tagging their cars out of state to avoid their exorbitant fees, and they have warned residents of additional fees they have introduced for vehicles with out-of-state plates. The total fees in that situation will be about $350. However, that is a steal considering what you could be paying in-state. Choosing between two evils, we’d choose the fee every time since it’s quite a bit less than the ad valorem tax.
Are There Any Exceptions to These Taxes?
There are a few exceptions to the vehicle ad valorem tax are listed on the Fairfax County website, including:
Privately-owned vans used for van pools
Vehicles belonging to volunteer fire and rescue squad members
Vehicles specifically equipped for the handicapped
Automobiles and pick-up trucks owned by certain qualifying seniors and people with disabilities
Vehicles owned by qualified disabled veterans
Vehicles owned by auxiliary police officers
Vehicles owned by auxiliary deputy sheriffs
Aircraft
Boats
Certain property owned by homeowners' associations
According to the county website, the tax rate is $0.01 per $100 for vehicles in these brackets.
How About Registering My Car Out of State?
An out-of-state registration is a good idea, even with the $350 annual fee. With our Montana LLC program, you pay one time upfront. Then it’s just regular annual registration afterward, which we can also facilitate, so you don’t have to worry about it. Oh, and did we mention that after 11 years, registration becomes permanent in Montana? It sure does. Now, you will have to maintain your LLC, but you never have to register the vehicle again – and we can handle the maintenance on your behalf.
The Dirt Legal Advantage
The values we shared are actually low. Start thinking about that late model pickup that’s valued at $75,000 or more and another $100,000 for the fifth wheel. Now you are looking at some serious annual tax bills. Like, to the order of over seven grand per year.
The cost of the LLC and ongoing renewals pale in comparison to what you’d be facing in Virginia. You will get your LLC set up with Dirt Legal, and the vehicle added. Got more than one to add? No problem. We can do that, too.
We take all of the guesswork out of the equation so you can get on with more important things. Also, you know you will get the service you need instead of kicking paperwork back and forth between you and the Montana DMV. When you use Dirt Legal, you know it will work.
Parting Thoughts
When we see things like the above statement about Virginia tacking on $350 in fees if your car wears an out-of-state plate, we know that they know their fees suck. They must know that Virginia cars are wearing Montana, Utah, Vermont, and South Dakota plates to get away from their awful annual taxes. We also know that the annual fees are their way of saying, “fine, do it, but we are taking our piece.” That’s fine. We will gladly help you out and put a Montana plate on your car. You can walk away knowing that you are saving thousands.
Also, make sure to check out our off-highway vehicle programs to get your dirt bike, ATV, or UTV street-legal! Got a Humvee or other surplus army truck you’d like to roll up to Virginia Beach in? We’ll tag that, too!
John McCoy is a lifelong car and truck enthusiast and has a strong mechanical background off the road. He spent over 13 years in the U.S. Air Force as a crew chief, assigned to the B-1B Lancer, affectionately known as the Bone to those in the community, and the KC-135R Stratotanker. He resides on a small farm in Eastern Kansas where he (sometimes) enjoys fixing ancient farm equipment.