Deducting Vehicle Registration Fees If You Itemize Your Tax Deductions

Not long ago I wrote about how your car is making you poor. It’s true, and your vehicle expenses can eat up a lot of your budget. One expense people rarely consider is the annual vehicle registration. This can vary greatly from state to state, but if you have a vehicle, then you’re probably aware of this expense.

The good news is that you may be able to get some of that money back in the form of a tax deduction. That’s right, if you itemize your deductions on Schedule A and your registration fee is based on vehicle value (not weight), you can itemize that deduction. This is an often overlooked deduction, but given the value of some vehicles, it could be worth checking into.

I know this is helpful for us because we have two vehicles that each cost roughly $125 a year for registration and it’s based entirely on value. That’s a quick and easy $250 tax deduction each year.

The IRS states:

It has to be a personal property tax, not an excise tax, in order to be deductible. Deductible personal property taxes are only those based on the value of personal property such as a boat or car. The tax must be charged to you on a yearly basis, even if it is collected more than once a year or less than once a year. To be deductible, the tax must be charged to you and must have been paid during your tax year. Taxes may be claimed only as an itemized deduction on Form 1040, Schedule A, Itemized Deductions.

So, you will want to check with your state to determine whether your vehicle registration fee is calculated by value, weight, or a combination. If all or part of the fee is based on value, you should be able to deduct that portion on line 7 of Schedule A.

For more information: IRS Publication 17 – Personal Property Tax Section

Author: Jeremy Vohwinkle

My name is Jeremy Vohwinkle, and I’ve spent a number of years working in the finance industry providing financial advice to regular investors and those participating in employer-sponsored retirement plans.

0 comments