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What if I pay my car registration fees once a year (2016) another in 2015 do I report just the one paid in 2016?

the one paid in 2015 covered for the registration in 2016, the one paid for 2016 covers for 2017.
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GeoffreyG
New Member

What if I pay my car registration fees once a year (2016) another in 2015 do I report just the one paid in 2016?

The answer to your question is that you only take into account (for purposes of a potential tax deduction) those amounts that were actually paid by you during the January 1 to December 31 calendar year.  It doesn't matter what year the tax, or fee, is technically for, but rather when you pay it.

For example, local property taxes on your home that are paid in November, 2016 (but meant for a November 1, 2016 to October 31, 2017 tax year), are deductible on your 2016 tax return.  Similarly, a fee paid in 2015, that covers a charge for the year 2016, is a 2015 tax deduction (not 2016), because it was actually paid in 2015.  Does that reasoning make sense?

Although it's a bit more of an advanced concept, this analysis does point out the main difference between cash accounting and accrual accounting.  Cash accounting is the process that was just described (where you "recognize" the payment when it is made); whereas under accrual accounting, we take into consideration the whole period for which the payment is intended to cover.  Cash accounting is much easier, conceptually, to think about and to handle, and it is them method that the IRS (fortunately) tells us to use as individual taxpayers.

That said, there is something else (highly relevant to your original question) that we should also discuss here.

There is no direct tax deduction for vehicle registration fees on a personal tax return.  Although if you live in a state that imposes an excise tax amount, based in some way on the market value of the vehicle, and that is part of the registration process, then the excise tax can be deducted, but not the whole amount of the cost of registration.

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; but the remainder cannot:  their states do not charge vehicle registration fees by value, and instead charge flat fees only.

There is a list of these qualifying states built-into the TurboTax software.  A graphical image of this chart of states is also shown in the screen-capture image at the bottom of this answer (simply click to enlarge).

If your state is on the list, then you can enter the vehicle excise tax amount in TurboTax.  To do so, you will want to have your tax return open and locate the Search / Find box on your screen.  Next, type in the exact search string "vehicle registration fees" and then click on the Jump To link that should appear beneath.  This will take you to the appropriate data entry place in the program.

Thank you for asking this question.

View solution in original post

1 Reply
GeoffreyG
New Member

What if I pay my car registration fees once a year (2016) another in 2015 do I report just the one paid in 2016?

The answer to your question is that you only take into account (for purposes of a potential tax deduction) those amounts that were actually paid by you during the January 1 to December 31 calendar year.  It doesn't matter what year the tax, or fee, is technically for, but rather when you pay it.

For example, local property taxes on your home that are paid in November, 2016 (but meant for a November 1, 2016 to October 31, 2017 tax year), are deductible on your 2016 tax return.  Similarly, a fee paid in 2015, that covers a charge for the year 2016, is a 2015 tax deduction (not 2016), because it was actually paid in 2015.  Does that reasoning make sense?

Although it's a bit more of an advanced concept, this analysis does point out the main difference between cash accounting and accrual accounting.  Cash accounting is the process that was just described (where you "recognize" the payment when it is made); whereas under accrual accounting, we take into consideration the whole period for which the payment is intended to cover.  Cash accounting is much easier, conceptually, to think about and to handle, and it is them method that the IRS (fortunately) tells us to use as individual taxpayers.

That said, there is something else (highly relevant to your original question) that we should also discuss here.

There is no direct tax deduction for vehicle registration fees on a personal tax return.  Although if you live in a state that imposes an excise tax amount, based in some way on the market value of the vehicle, and that is part of the registration process, then the excise tax can be deducted, but not the whole amount of the cost of registration.

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; but the remainder cannot:  their states do not charge vehicle registration fees by value, and instead charge flat fees only.

There is a list of these qualifying states built-into the TurboTax software.  A graphical image of this chart of states is also shown in the screen-capture image at the bottom of this answer (simply click to enlarge).

If your state is on the list, then you can enter the vehicle excise tax amount in TurboTax.  To do so, you will want to have your tax return open and locate the Search / Find box on your screen.  Next, type in the exact search string "vehicle registration fees" and then click on the Jump To link that should appear beneath.  This will take you to the appropriate data entry place in the program.

Thank you for asking this question.

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