Can foreign vehicle registration, license, and inspection fees/taxes be deducted (for personal vehicles operated outside the US)?

rclinville — Tue, 04 Jun 2019 22:39:55 GMT

The answer to your question is probably not, although the...

GeoffreyG — Tue, 04 Jun 2019 22:39:56 GMT

The answer to your question is probably not, although there may be at least some portion of your foreign vehicle registration / taxes that may be deductible on a United States tax return. Please allow us to explain.

Under US tax law (which covers Americans working and living overseas), only certain vehicle registration fees and taxes are deductible; and in order to be deductible they have to be based (or assessed) on the value of the vehicle, and not another factor. Thus, a sales tax paid on buying new car is tax-deductible, as are portions of registration fees in certain US states. The same tax rules apply to vehicles owned and operated by US taxpayers in foreign countries.

The legal reasoning is as follows. The IRS only allows that portion of a state registration fee that is based on the value of the vehicle to be included toward your other itemized deductions. Any flat fee portion doesn't count, nor does any amount that is based on vehicle factors other than that of valuation. This is why there are some 20+ states whose residents can potentially benefit from the deduction; but the remainder cannot: their states do not charge vehicle registration fees by value, and instead charge flat fees only

In the case of any given foreign country, the registration, license, inspection, and other fees could be based on engine size, vehicle weight, vehicle age, emissions standards, etc. The point here is that only the portion of these costs that are based purely on the (objective) market value of the vehicle are tax deductible on a US return.

So, for a definitive answer to your specific question, you would want to look at the paperwork and rules issued by your foreign country, and then determine what, if any, of that amount is tax deductible (in the US), because it is a fee, levy, charge, or otherwise based on the vehicle's market value. Anything else is not tax deductible on a US income tax return.

Thank you for asking this interesting question, even if the answer is something other than what you were hoping to hear.

topic Can foreign vehicle registration, license, and inspection fees/taxes be deducted (for personal vehicles operated outside the US)? in Deductions & credits

Can foreign vehicle registration, license, and inspection fees/taxes be deducted (for personal vehicles operated outside the US)?

The answer to your question is probably not, although the...