Small Business Tips

Are vehicle registration fees deductible?

Manasa Reddigari

Vehicle registration fees pose casual drivers and road warriors alike an annual hassle. But, they also hold the potential for an annual reward. Depending on where you live, your vehicle registration fees may be deductible. Find out how auto registration can be tax deductible

When are vehicle registration fees deductible?

The IRS classifies vehicle registration fees as personal property tax. Namely, a state or local tax charged on personal property, based on the value of the personal property. This fee is deductible in certain circumstances but you can't just deduct the total amount of the fee.

Instead, the vehicle registration fee should be calculated as a percentage of the car's value. Higher value cars with higher registration fees can thus garner a higher value deduction. Driver's license fees and penalty fees imposed for late registration are not eligible for deduction.

Different states assess vehicle registration fees based on different factors. You can only deduct the car registration fee if it's based on value, not car weight. If your fee takes both into account, you can deduct the part related to value.

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How do you identify the value-based part of the auto registration fee?

Consult your state's Department of Motor Vehicles if you don't know if it's based on weight or value. Iowa even provides worksheets and online calculators to figure out this deduction. Many states charge based on the car's worth, but others don't.

How do you claim vehicle registration fees deduction?

Figure out which part of your registration fee is eligible. From there, itemize the deduction on federal Schedule A, on the line where personal property taxes are specified. Then, transfer the total onto Form 1040. You can't take the standard deduction and afterward deduct the vehicle registration fee.

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