Can I Claim Vehicle Excise Tax on My Federal Return?

Some car taxes are deductible.
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As of the 2014 tax year, some types of vehicle excise taxes are deductible, and some aren't. It all depends on how you -- or your local government agency -- defines excise taxes. You won't be able to deduct any taxes on a personal vehicle if you choose to claim the standard deduction instead of itemizing your deductions.

Car Taxes

Buying a car opens you up to at least two different taxes. When you purchase a car, you typically pay sales tax as you would for any other taxable purchase. Buying a $21,000 car in a state with 6 percent sales tax costs you $1,260. If the sales tax is specifically tied to the value of a car, it can be referred to as an excise tax. In addition, many localities have registration taxes that are tied to the value of your car; these are paid when you register your car. For example, Hull, Massachusetts, charges a tax of 2.5 percent of your car's value, adjusted for its age. It refers to that tax as an excise tax.

Excise or Sales Taxes

Through the 2013 tax year, the Internal Revenue Service gave you a choice of deducting either your state income tax or your state sales tax as a part of your itemized deductions. If you bought a car, it's possible that you could have spent more money in sales tax than you did in state income tax. This is especially true if you lived in a state with no income tax. While this tax break can be used for 2013 tax returns filed on April 15, 2014, it expired for the 2014 tax year. As of January 2014, no action has been taken to renew it.

Registration Excise Taxes

As long as you itemize your deductions, the IRS allows you to write off property taxes. This includes the property tax you pay on your house and registration taxes that are tied to the value of your car. Depending on where you live, these taxes could be called wheelage taxes, vehicle license fees, personal property taxes, ad valorem taxes or motor vehicle excise taxes. You cannot, however, deduct flat registration fees that are not tied to your car's value.

Itemizing Deductions

To be able to deduct your car excise taxes -- whichever type -- you also need to itemize your deductions. When you itemize your deductions, you list all of them on Schedule A, add them up and subtract them from your income. By doing so, you give up the ability to claim your standard deduction. In 2013, the standard deductions were $6,100 for singles and $12,200 for married couples filing jointly. They increase to $6,200 and $12,400 for the 2014 tax year. Generally, it only makes sense to itemize if your itemized deductions add up to more than your standard deduction.

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