How to claim a new car on your taxes

Answer

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See below to determine if your motor vehicle taxes qualify as "property tax." 

See below for a discussion of sales taxes imposed on motor vehicle sales

Updated as of 02/4/2016 

As states change their taxation, the list has changed over time.

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==>>> How to report Property Tax imposed on your personal use motor vehicle [note: personal use; and assuming the tax qualifies, see below]


Go to Personal Deductions and Credits - select "I'll Explore on my own!"   - see the lengthy list of Deductions & Credits

Scroll down to "Cars and other Things You Own" and select "Car Registration Fees" 

You must have knowledge of the amount of assessed fees and taxes that are in fact qualified [see below!] The popup list of states is incorrect as well as out of date relative to deductiblity of Property Tax.


Enter Make of Vehicle, Model, and even suggest you enter year; then amount of actual deductible property tax.

Read below to understand what is meant by a qualifying deductible property tax on your vehicle.  Registation fees in and of themselves are not.  The rules are spelled out below.

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There are typically two different taxes involved in buying and registering a motor vehicle.

If you are talking about the Sales Tax assessed by the state where you live or register the vehicle, see General Sales Tax below.  

If otherwise, and you are asking about taxes or fees built-in to the registration process which are not specifically a General Sales Tax, see Property Tax / Excie Tax below..


GENERAL SALES TAX ON MOTOR VEHICLES, BOATS, ETC.

If you live in a state with no or low income tax, then it is likely to be beneficial to choose to report and deduct General Sales Tax - whether using the standard sales tax deduction for your state or your own calculation - you can include as an addition the sales tax on motor vehicles (including a car, motorcycle, motor home, recreational vehicle, sport utility vehicle, truck, van, and off-road vehicle), an aircraft or boat (if the tax rate was the same as the general sales tax rate)


If you live in a state with income tax, then it is often better to report and deduct the income tax instead.

 OTHER TAXES MAY BE DEDUCTIBLE:

Relative to the taxes imposed on personal use motor vehicles at registration time and/or annually.


Excise Tax if it is actually a property tax [it is never a sales tax] may be deductible whether or not you use either of #1 or #2 above.  .

REGISTRATION FEES [per se - in and of themselves] are never deductible for a personal use vehicle


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For Motor Vehicle Excise Tax - a/k/a Property Tax in most cases:

THE IRS allows as a deduction on Schedule A Itemized Deductions "Other Taxes" Line 8 those taxes that are assessed on the value of property [so called "ad valorem"].  Some states have a registration fee that has no tax included in it; some states have a fee with both fixed components and variable components.  Of these states with variable registration fees, either assessed in one bill or assessed in several bills, IF one of the fees is based on the value of the vehicle and assessed annually, that specific portion of the registration fee, frequently called either a "property tax" or an "excise tax" is deductible.  It varies from state to state and in some state even within county.

IRS INFO: https://www.irs.gov/uac/Car-Sales-and-Excise-Tax-Deduction:-Questions-and-Answers


You need to look at the registration fees on the bill that you paid to know.

The "personal property tax" which may be assessed by the state, county or municipality imposing a fee which is based on the value of your vehicle - this is critical that it be a tax known as "ad valorem" - on value- Some such taxes are commonly called "excise tax." Registration fees may, state depending, incorporate such a tax. If you have such a value-based tax it is filed as Itemized Deductions Taxes - Personal Property Tax.  Moreover, the tax, excise or whatever it is called, must be assessed annually to be deductible.

See below if you live in a state where some or all of the "Excise Tax" or "Property Tax"  or a portion of the registration fees are deductible under Personal Property Tax

1. The fee is an ad valorem tax.  Ad valorem tax is a fee based on a percentage of the car's value.

2. The fee is imposed on an annual basis.

3. The fee is imposed on personal property.

4. These are the states where this is applicable and you may be able to deduct as an itemized deduction the personal property tax.

• Alabama

• Arizona

• California

• Colorado

• Connecticut

• Georgia [prior to March, 2013 only]*** GA see below!

Vehicles purchased on or after March 1, 2013 and titled in this state will be exempt from sales and use tax and the annual ad valorem tax. Instead, these vehicles will be subject to a new, one-time title ad valorem tax that is based on the value of the vehicle.  The new Title Ad valorem Tax (TAVT) is not deductible as personal property tax for Federal or Georgia purposes. In order to be deductible as a personal property tax, it must be imposed on an annual basis. 

• Indiana

• Iowa

http://www.iowa.gov/tax/1040EI/Line/13Line37.html#VRFD  scroll down to "Vehicle Registration Fee Deduction"

• Kansas

Dependent on each county example: Sedgwick Cty. - If county assesses an annual personal property tax based on value, then that portion of registration fees are deductible. It appears that a part of the fee is indeed a locally assessed property tax at the county level and varying by county, so you either have to look at the bill that you paid or contact the county treasurer of the county where you paid the bill.   

• Kentucky  ** See below

• Louisiana - possibly by county

• Maine   http://www.maine.gov/revenue/propertytax/sidebar/excisetax.htm

Maine communities are obligated to collect excise tax on all motor vehicles using the public roads. This is essentially a property tax on cars and trucks, but is figured a little differently than your property tax. The tax collector must determine the original sticker value (MSRP) of your vehicle. If it’s a brand new vehicle being registered, you are required by law to supply the tax collector with the Munroney Sticker (window sticker) given to you by the car dealer. This sets the basis for the excise tax collection. On used cars, the Tax Collector will look up the original MSRP in a book here at the town office. There is a sliding scale for the tax applied to the vehicle, starting at 24 mills for a current year vehicle, down to the lowest rate of 4 mills for a vehicle 6 years old and older. The excise tax is retained by the town, and is a major part of the funding for town services. Generally the excise tax is deductible from your federal income tax form, much like the property tax.

• Massachusetts

• Michigan    -  

• Minnesota

http://www.revenue.state.mn.us/individuals/individ_income/Pages/Deducting_Vehicle_License_Fees.aspx

• Mississippi

• Missouri    - possibly by county

• Montana

• Nebraska

• Nevada

• New Hampshire

NH is a state where a portion of the annual registration fees are deductible.

The personal property tax portion is indicated on the New Hampshire vehicle registration in a box clearly labeled “State Fees and Municipal Fees.” Fees contained within this box may be deducted on federal income taxes.

Because NH requires an annual motor vehicle registration with the fees dependent on the Fair Market Value of the vehicle, the total amount of the registration fee varies depending upon the year, make and model of the vehicle. A portion of the fee will be tax-deductible for federal tax purposes. The New Hampshire registration fee is comprised of two components: personal property tax and a permit fee.

The personal property tax is paid to the town of residency and is tax-deductible for federal income taxes. The tax is based on the list price of the vehicle when it was new; the list price is then depreciated to the current year of registration. This value will commonly approximate the current NADA blue book value for the vehicle.

• North Carolina

• South Carolina -   6% in 2007 and thereafter. SC Code §12-37-2645;

• Virginia - appears to be city/county election - yes for Fairfax and Arlington counties, probably others

• Wyoming

Where the county or local municipality may impose a tax based on value that may vary from county to county or city to city, you must look at the bill that you received or else contact the Tax Assessor's Office in your city, town, or county

Personal property tax is deductible if it is a state or local tax that is:

Charged on personal property,

Based only on the value of the personal property, and

Charged on a yearly basis, even if it is collected more or less than once a year.

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If you know of a change in this list, please post a note to that effect with citation, thank you!


Washington -  RTA Tax - assessed partly on weight not based on FMV, not assessed annually

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