Is Car Property Tax Deductible?
United States taxpayers can claim tax deductions to lower the amount of money they owe to the U.S. government. The Internal Revenue Service (IRS) allows tax filers to deduct personal property taxes paid to local and state governments on their annual tax returns. To deduct car property tax, a taxpayer must pay a vehicle tax assessed at the local or state level.
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Considerations
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The state, county or city must assess the property based upon a set percentage of the assessed value of the automobile, known as a uniform tax rate. For example, a county may set a vehicle tax at $1 in tax per $100 of vehicle value. Vehicle owners can deduct car tax paid on an unlimited amount of vehicles on their personal income tax return.
Time Frame
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The IRS only allows vehicle owners to deduct car property taxes if the state or county assesses such taxes on a yearly basis, regardless of whether payments are made monthly or annually. Vehicle owners must claim any personal property taxes paid in the year in which payments were made. For example, tax filers must claim the tax deduction for property tax paid in 2010 by April 18, 2011. Tax filers may claim two years of car property tax within the same year if they were delinquent in paying their taxes to a local or state government.
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Restrictions
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Some states charge licensing fees at a set rate for each vehicle the tax payer owns while others charge an additional fee per hundred weight of the vehicle. Tax filers cannot claim uniform flat vehicle taxes on their tax returns. Tax filers cannot deduct other vehicle expenses, such as license registration or inspection fees, unless such fees are paid on vehicles used for business purposes.
Filing
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To claim a car tax deduction, individuals must itemize their expense on Schedule A line 8 of Form 1040. Filers must list the type of tax and the amount. If total deductions, including home mortgage interest, state taxes, real estate tax and car tax do not exceed the standard deduction amount of $5,700 for 2010 and $5,800 for 2011, single filers can save money and time by claiming a standard deduction, which does not require an individual to list or prove his deductions.
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