Vehicle Registration Fee and Form 1099-G

[Delmarlane]

Is the vehicle registration fee deductible? I live in New Mexico, which is not on the list of States with Deductible Vehicle Fees. I purchased a new car in 2023 and the registration fee paid was $1,304. There are 2 other vehicles that we own  with the registration fees paid of $36.40 and $70.90. Please advise if I can deduct the total amount fees paid or only the portion of the fee based on vehicles value. If the latter applies, how is the value of the vehicle determined?

I received a Form 1099-G with an amount of $1,000 ($500 x2) rebate received from NM in 2023 but according to the form it applies to tax year 2021. Don't quite understand the rationale of why I have to report it as Income because I used federal Schedule A to itemize our deductions in 2021. Am I required to report it as  income considering we did not receive a state refund in 2021 and paid $1,714 in taxes?

[KrisD15]

New Mexico uses an "Excise Tax" for motor vehicles and excise tax is not deductible on personal property. 

If the refund was for Tax Year 2021 and you did not Itemize deductions on your 2021 Federal return, the state refund for tax year 2021 is not taxable, you needn't report nor enter the 1099-G, however since you DID itemize on your 2021 Federal return, you need to look at that Schedule A. TurboTax can also do the calculations for you, but it is a bit cumbersome.

On the 2021 Schedule A, look at line 5a. Did you claim state sales tax rather than state income tax? If yes the refund is not taxable. 

On the 2021 Schedule A, look at line 5e. Was the sate tax deduction reduced to 10,000? If yes, the amount it was reduced would be the non-taxable portion of the refund.

On the 2021 Schedule A, look at line 17. Compare that to the Standard Deduction for tax year 2021 (page 5). If the difference between the Standard Deduction you could have taken and the Itemized Deductions you did take is less than the refund, you only claim the difference between the Standard Deduction you could have taken and the Itemized Deductions you did take.

If none of the above apply, you must claim the refund as income. The idea is- you claimed that as state tax paid in 2021, so now that part of the tax (you previously claim) if refunded, it's taxable income. 

[Delmarlane]

Thank you so much for your detailed response to my questions on the vehicle registration fees and the 1099-G. It seems like I would have to include as income the $1,000 reported on the 1099-G.
 
While I have to comply based on what I reported on line 5a on Schedule A on tax year 2021 for $2,732 which comprised of state taxes withheld from a previous state I lived in and state taxes due 

 for 2020 tax return but paid in 2021, I found it so unfair that I have to include as income the $1,000 rebate which I received from the State of New Mexico, which I NEVER asked for and thought of it like a stimulus. Had I known its tax implication, I would have returned it. 

[DianeW777]

It's understandable.  It's important to see if you state taxes were limited as indicated by our Tax Expert @KrisD15. You may not be required to report the full amount.  The maximum deductions for state and local taxes on itemized deductions is limited to $10,000. If your taxes were higher than that, you may have been limited.  Use the worksheet in the link below to make sure if you should include the full amount,

• Form 1040 Instructions (page 86)

@Delmarlane 

[Delmarlane]

Thank you for your response. Since my tax deductions were smaller than the limit of $10,000, I have to report the full amount.