Can you deduct taxes on the purchase of a new car?

[DoninGA]

The sales taxes paid on the purchase of a vehicle in 2017 are deductible as an itemized deduction on Schedule A.  Using the TurboTax program you an enter the sales taxes for vehicle as a Major Purchase.

To enter your sales taxes

• Click on Federal Taxes (Personal using Home and Business)
• Click on Deductions and Credits
• Click on I'll choose what I work on (if shown)
• Scroll down to Estimates and Other Taxes Paid
• On Sales Taxes, click the start or update button

Or enter sales tax in the Search box located in the upper right of the program screen.  Click on Jump to sales tax

Note - On Schedule A only the greater amount of either state/local income taxes paid or sales taxes paid will be used as a deduction.  The total amount of all itemized deductions on Schedule A must be greater than the standard deduction for your filing status to have any tax benefit.

[Loxias1821]

So, I have two questions. I purchased a new car in 2021. I receive the paper-for from the dealer that says the percentage and amount that I paid for taxes. I put it in the section sales tax deduction and it didn’t affect at all my tax credit. Also, when I use the wizard that TurboTax suggest, it asks to add the total percentage of the the state and local; it’s not the 7.25% that my paper says?

[xmasbaby0]

@Loxias1821 Sales tax is an itemized deduction.   It will have no effect at all unless you have enough other itemized deductions to exceed your standard deduction.

STANDARD DEDUCTION

Many taxpayers are surprised because their itemized deductions are not having the same effect as they did on past tax returns.  The new higher standard deduction and the elimination of certain deductions, as well as the cap on state and local taxes have had a major impact since the new tax laws went into effect beginning with 2018 returns.

Your itemized deductions have to be more than your standard deduction before you will see a change in your tax owed or tax refund.  The deductions you enter do not necessarily count “dollar for dollar;” many of them are subject to meeting  tough thresholds—medical expenses, for example, must meet a threshold that is pretty hard to reach. (Only the amount that is MORE than 7.5% of your AGI counts)   The software program uses all the IRS rules that apply to the expenses you enter, and it tells you if you have enough to use your itemized deductions or if using the standard deduction is more advantageous for you.  Under the new tax laws, some deductions have been capped—there is a $10,000 limit to the itemized deductions for state, local, property and sales taxes.

Your standard deduction lowers your taxable income.  It is not a refund.  You will see your standard or itemized deduction amount on line 12a of your 2021 Form 1040.

2021 STANDARD DEDUCTION AMOUNTS

SINGLE $12,550  (65 or older + $1700)

MARRIED FILING SEPARATELY $12,550  (65 or older + $1350)

MARRIED FILING JOINTLY $25,100  (65 or older + $1350 per spouse)

HEAD OF HOUSEHOLD  $18,800  (65 or older +$1700)

Legally Blind + $1350