Generally, the tax paid on purchase is a sales tax and may be
deductible under some circumstances. You can deduct sales tax on a new
or used purchased or leased vehicle or boat but, if you live in a state
with a state income tax, it probably isn't to your advantage to do so.
To claim sales taxes on a vehicle or boat you need to meet two
criteria. You must itemize deductions, and your sales tax deduction,
including the sales tax on the vehicle must exceed your state income
Realistically, in most states with a state income tax, the state income taxes would be higher than the state sales taxes, even with sales tax on a car added.
If you claim the standard deduction, you cannot deduct sales taxes.
The deduction for sales tax is under the deductions and credits tab. Go to:
Deductions and Credits
- Estimates and Other Taxes Paid
- Sales Tax.
- Click Update next to Sales Tax.
- Click Continue.
- Select Easy Guide
- Click Edit next to your sales tax rate.
- Click Continue twice and you will then be on the page where you enter your car or other major purchases.
Note: for an auto, the tax rate doesn't need to be the same as the general tax rate. For a boat, it does.
It is true that you could not deduct the sales tax on the federal return if you take the standard deduction. However, state laws vary a lot, and there are states that allow you to itemize on the state return even if you took the standard deduction on the federal return. This is why we often encourage taxpayers to enter their itemized deductions, because if they can be used at the state level, then TurboTax transfers the amounts from the federal return.
What state are you in?
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