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New Member

Is the Virginia Title Tax for NEW Vehicles deductible or NOT?

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New Member

Is the Virginia Title Tax for NEW Vehicles deductible or NOT?

According to the Virginia Department of Motor Vehicles, the state's title transfer tax is 4.15%, and based on either the vehicle's gross sales price or $75, whichever is greater.

Thus it is a tax that can be deducted, because it is based on the value of the vehicle, and not on some other factor.

The legal reasoning is as follows.  The IRS only allows that portion of a state registration or title fee that is based on the value of the vehicle to be included toward your other itemized deductions.  Any portion determined by other factors 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.

Rather than enter this item as a vehicle registration fee, however, you can instead enter it as a sales tax cost of the car, which is separately added to the rest of your sales taxes paid, in order to calculate your allowable sales tax deduction.

You would find this section, in TurboTax, among the Deductions & Credits portion of the interview.  Please see the attached screen-capture image for an illustration.  You can also type the words "sales tax car" into the Find / Search box on your TurboTax screen, and then click the Jump To link that should appear beneath -- that will take you to the appropriate TurboTax page

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 these items 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, the TurboTax software will make that determination for you.

Thank you for asking this question.
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