Sales Tax - Auto Registration/License Fees

You will need to determine how much you can deduct for auto registration/license fees.

You may not deduct an auto license fee based on weight, model, year, or horsepower. Auto registration fees that qualify as personal property taxes are an itemized deduction and are reported on Line 7 of Schedule A Itemized Deductions.

  1. From within your TaxAct® return (Online or Desktop) click Federal. On smaller devices, click in the upper left-hand corner, then select Federal.
  2. Click Itemized or Standard Deductions in the Federal Quick Q&A Topics menu to expand the category and then click Taxes paid
  3. Continue to the screen titled Enter your deductible personal property taxes and enter the amount of your auto registration fees in the box titled Personal property taxes

Fees based on the value of the car are deductible if they meet the IRS criteria listed below.

Per IRS Publication 17 Your Federal Income Tax, page 166:

Personal Property Taxes

Personal property tax is deductible if it is a state or local tax that is:

  • Charged on personal property;
  • Based only on the value of the personal property; and
  • Charged on a yearly basis, even if it is collected more or less than once a year.

A tax that meets the above requirements can be considered charged on personal property even if it is for the exercise of a privilege. For example, a yearly tax based on value qualifies as a personal property tax even if it is called registration fee and is for the privilege of registering motor vehicles or using them on the highways.

If the tax is partly based on value and partly based on other criteria, it may qualify in part.

Example. Your state charges a yearly motor vehicle registration tax of 1% of value plus 50 cents per hundredweight. You paid $32 based on the value ($1,500) and weight (3,400 lbs.) of your car. You can deduct $15 (1% × $1,500) as a personal property tax because it is based on the value. The remaining $17 ($0.50 × 34), based on the weight, isn’t deductible.