What Is Deductible as a Registration Renewal Fee?

Your car's tabs can be partially tax deductible.
Your car's tabs can be partially tax deductible. (Image: Jupiterimages/Photos.com/Getty Images)

In general, the Internal Revenue Service allows you to deduct your state and local taxes against your federally taxable income. State and local taxes go well above and beyond just income taxes, though, and also include property taxes. In many states, your vehicle registration renewal contains a tax tied to the value of your car, which is, after all, your property. As such, you may be able to deduct this.

Deductible Registration Renewal Fees

Any portion of your car's registration renewal fee that is tied to its value can be deducted from your taxable income. Different states and even different counties and cities have different names for this tax, so you should look carefully at your registration bill to break it out. Look for terms like "vehicle license fee," "ad valorem tax," "excise tax" or even "registration tax." Flat fees, on the other hand, are not deductible.

How to Deduct Your Renewal Taxes

To deduct your taxes, you must itemize your deductions on Schedule A. On your schedule A, put the total amount that you spent on renewal taxes in that year on line 8 of the schedule. Save your registration bills and any receipts so that if you are audited you can substantiate that the amount you deducted was accurate and legitimate.

Other Car Deductions

You can take other deductions for your car in addition to the personal property tax. If you buy a new car and pay sales tax on it, you may choose to write off the sales tax instead of writing off your state income tax for that year. In addition, if you buy an electric or plug-in hybrid vehicle, you may also be eligible to claim a $7,500 credit. Vehicles that qualify for this credit include the Chevy Volt, Tesla Roadster and Nissan Leaf.

Standard Deduction Filers

If you claim the standard deduction, you cannot write off your vehicle registration taxes. However, if you use your car for business purposes and choose to depreciate it instead of claiming the mileage rate, you can claim a pro rata share of your vehicle's registration tax as an expense on your Schedule E form.

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