If I deduct taxes and registration fees on a business vehicle, do I still included those in its cost basis for depreciation?

[kamakula]

I've purchased a vehicle for business use. As part of that purchase, I pay taxes and registration fees. It is my understanding that those taxes and registration fees are deductible business expenses. However, from what I've read, I also need to include those in the cost basis of the vehicle.

If I do this, then those taxes and fees would be deducted twice, once when deducting general expenses and a second time as a depreciation expense. I'd like clarification on how to treat those taxes and fees. Are they a business expense that I can deduct directly? Or are they part of the cost basis of the vehicle and deducted indirectly via depreciation expense?

[Carl]

No, you can't double-dip. All vehicle expenses are reported in the Business Vehicle Use section of the program. Vehicular depreciation is handle in an entirely different manner than depreciation on other business assets. How it's handled depends on how you elect to claim your vehicle expenses too. Be it the actual expense method if you qualify, or the per-mile deduction. Then there's also the possibility the vehicle may qualify for other deductions and credits, depending on the type of vehicle. So all of that is handled in the Business Vehicle Use section.

[kamakula]

I understand you can't double dip which is why I asked the question. My question also implies I'm using the actual expenses method (and let's be clear, I am), otherwise it wouldn't matter what the cost basis of the vehicle is. I also understand vehicle depreciation is handled different but that doesn't change my question. If the vehicle gets fully depreciated, if the taxes and fees are part of the cost basis, they'd be expensed via vehicle depreciation. If I also deduct them as a business expense, that would be double dipping. So it seems clear that they should either be part of the cost basis and eventually expensed via depreciation OR be expensed as a business expense and the vehicle cost basis not increase by the amount of the tax and fees. The problem is that from what I've read, those taxes and fees are both a deductible business expense and should increase the cost basis of a vehicle asset.

So, I still have the same question. Tax time, I need to compute a cost basis against which I take depreciation expense (and then compute an adjusted cost basis for future tax year depreciation). Aside from depreciating my business assets, in this case the vehicle, I also can deduct business expenses and it is my understanding that taxes paid to acquire the vehicle as well as registration fees are deductible business expenses. However, it is also my understanding that they are to be added to the cost basis of the vehicle.

So, what is the correct way to handle this. Do the taxes and fees just go to the cost basis and get deducted via the vehicle depreciation expense or are they deducted as business expenses and not added to the cost basis of the vehicle? Or is it handled some other way?

I specifically selected "Not a Product Question" because I want to know the correct action. If I rely on the product, I still need to know what was done for my own accounting purposes. If I don't use turbotax one year, I definitely need to know what's going on. Not to mention correctly computing and accounting for adjusted cost basis for my own accounting records.