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abeyer916
New Member

Can i use the excise tax from my vehicle registration or do i only enter te state reg fee when filing taxes?

 
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GeoffreyG
New Member

Can i use the excise tax from my vehicle registration or do i only enter te state reg fee when filing taxes?

As long as your vehicle registration or license fee includes taxes based on the value of the vehicle, you're eligible for this deduction.  However, this tax deduction requires some explaining, so please bear with us while we do that.

First, taxpayers hoping take this deduction should understand that it applies only to the part of the registration / licensing fee that is based on the value of the vehicle itself, and not that part of the registration / licensing fee that is a flat rate for all such vehicles.

This "fee based on value" is called an excise tax, and that's what makes it tax deductible under federal law.  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.  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.

There is a list of these qualifying states built-into the TurboTax software.  A graphical image of this chart of states is also shown in one of the screen-capture images at the bottom of this answer (simply click to enlarge).

If your state is on the list, then you can enter the vehicle excise tax amount in TurboTax.  To do so mechanically in the software, you will want to have your tax return open and locate the Search / Find box on your screen.  Next, type in the exact search string "vehicle registration fees" and then click on the Jump To link that should appear beneath.  This will take you to the appropriate data entry place in the program.  Please see the screen-capture images below for a visual illustration of the process.

Finally, it is also important to keep in mind that you (or anyone claiming this deduction) may or may not actually see any net tax benefit from including this item on your tax return.  The reason for this is that you must have enough itemized deductions (in total) to exceed the standard deduction available to all taxpayers.  Since more than 2 in 3 taxpayers do not, most people end up taking the (more valuable) standard deduction, rather than itemizing deductions.  If you input all your data carefully, however, including a vehicle registration excise tax, the TurboTax software will make that determination for you.

Thank you for asking this question.
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