A portion of Indiana's vehicle registration fees are tax deductible; but this amount is actually called an "excise" tax, and not a "property" tax. It is based on the value of vehicle. Please continue reading for a detailed answer; also you can refer to the screen-capture images at the bottom for a visual aid on how to enter this item into TurboTax (simply click to open).
According to the IRS, you cannot deduct the total amount of your vehicle registration fee, but just the portion
that the state charged you for taxes
based on the value of your vehicle (i.e., the excise tax). 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
(including Indiana), but the remainder cannot: their states do not charge
vehicle registration fees by value, and instead charge flat fees only.
If you need help finding the correct number on your
bill, please contact your state's Department of Motor Vehicles.
In other words, you do
need to break out the Indiana registration fee from the Indiana state
excise tax and treat them separately; but it is only the latter than can
be deducted, the former cannot be deducted.
Once you have that number, you can enter the exact search term "
car registration fees" into the
Find / Search box in your TurboTax program. Then click the
Jump To link that should appear beneath. That will take to the correct data entry interview screen in TurboTax (please see the screen-captures).
Now then, 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, including the Indiana vehicle excise tax,
however, the TurboTax software will make that determination for you.
Thank you for asking your question, and hopefully you will find this answer helpful.
