Can sales tax be deducted on car loans?

[hoeffken]

sales tax on vehicle loan

[Hal_Al · Accepted solution]

No.

You paid the sales tax, the year you bought the car. You just paid it with borrowed money.  That's the only year you can claim a sales tax deduction (for the car).

You are now only paying back borrowed money. There's no breakdown (other than principal & interest) of what the money's being back for. 

[Carl]

Money you borrow from a bank or other lender for any reason, is not assessed a sales tax by that lender in any state.

The item you use that money to purchase, "may" be assessed a sales tax that you can deduct only in the tax year you purchased and paid for that item in full, with that borrowed money.

[xmasbaby0]

When did you purchase the car?  Did you buy it in 2019?  Are you really asking if you can use the sales tax paid in 2019 on your 2019 tax return?  If you purchased the car earlier than 2019, refer to the answers already provided above.

If you purchased the car in 2019:

SALES TAX

You can enter the sales tax you paid for the car you purchased in 2019 by going to Federal>Deductions and Credits>Estimates and Other Taxes Paid> Sales Tax.  You will be asked if you paid sales tax on a major purchase, and you will be able to enter the sales tax you paid for your new vehicle.

Sales tax is an itemized deduction.  If your state has a state income tax, you have to choose between using the deduction for your state tax paid OR the sales tax deduction, whichever is higher.  The TT process will suggest one or the other as you prepare your return.

“Major purchases” that you can enter for the sales tax deduction include:

Motor Vehicles (cars, trucks, motor homes, RV’s, sport utility vehicles and off-road vehicles

Aircraft or boats

Mobile homes

Manufactured housing

Building materials for major home improvements

You cannot deduct: furniture, jewelry, home electronics such as TV’s or computers

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