Can a Vehicle Registration Fee be a Tax Deduction?

Here's some potentially happy tax news: That pesky little fee that you pay (probably annually) to register your vehicle may be tax deductible. But whether it is or isn't depends on the state that you live in and a few other factors.

The State to State Difference

Different states calculate vehicle registration fees in different ways. Some states will base your fee on how much your car weighs, while others charge a flat rate for all vehicles. And there are several states that take the value of your car into consideration to determine how much you will pay to register the vehicle. Flat fees and weight-based fees are not tax deductible, but if the amount that you pay is based on a Kelley Blue Book value, this fee may be a valid deduction on your federal tax return.

Other Stipulations to Consider

• Split Calculations: There are a few states in the U.S. that combine both value and weight factors to determine the cost of registration fees. If you live in one of these states, you may only claim the value based portion of your fee as a deduction.
• Must Be Itemized: When you prepare your tax return, you must decide whether you want to itemize your deductions or take the standard deductions, but you cannot do both. Generally, tax payers will base their decision on which option will save them the most money. And your vehicle registration fee may only be deducted if you choose to itemize your taxes.
• Business Vehicles: If your car is used for business purposes, the registration fee is counted among other vehicle related costs as a business expense. And one of two methods may be used to do this. On Schedule C, if using the standard mileage rate, simply tack the amount of the registration fee on top of your mileage deduction. If, however, your car is only partially used for business (again, on Schedule C), you can prorate the registration between your personal miles and your business miles.

Expecting a Tax Refund?

If you're anticipating a substantial check from the government during tax season, and it's time to replace your current vehicle with something that's a little newer and more reliable, you may want to consider using your tax return as a down payment on a car. And if this is an option that you're considering, let Auto Credit Express help you find the dealer who can get you financed. Just fill out our fast and secure application to get started today.