Sometimes you can write off a portion of registration fees.
The federal tax code of the United States is a massive and complex document that is always in flux. Before taking any deductions on your federal income tax return, it is always a good idea to check out the What's New section of the Form 1040 instruction booklet provided by the Internal Revenue Service (IRS) each year. One common question among taxpayers is whether they can write off fees paid for registering their vehicles. This is a question without a simple yes or no answer.
Personal Property
To deduct any specific item, a taxpayer must choose to itemize her deductions on Form 1040 Schedule A. Line 7 of Schedule A, Personal Property Taxes, allows the taxpayer to deduct personal property tax, including the registration paid on her car, if the registration fee was based on the value of the car only and was imposed on an annual basis. Therefore, if the registration fee was based at least in part on the car's value and must be renewed each year, the percentage of the fee that was attributable to the car's value can be included in the taxpayer's itemized deductions.
Sales Tax
Sales taxes paid on vehicles purchased during the calendar year can be deducted on Line 5 of Form 1040 Schedule A as long as the taxpayer has the receipt as proof of payment. However, because registration is typically paid separately from sales tax, it may not be deducted on Line 5, although it may qualify under Line 7 (see Step 1).
Mileage
A taxpayer who uses his vehicle 100 percent for business purposes may deduct the cost of operating that vehicle. The IRS offers two methods of determining the amount of the deduction. The first method is the standard mileage deduction. In this method, the taxpayer must keep a written record of the number of miles driven during the calendar year. The total number of miles is multiplied by a per-mile rate determined by the IRS each year. The resulting amount is the deduction the taxpayer may take on Form 1040 Schedule C. If the taxpayer chooses to use the standard mileage deduction method, she may not deduct registration fees.
Actual Expenses
A taxpayers who uses his vehicle 100 percent for business purposes may elect to deduct actual expenses for the business use of his car. To use this method, the taxpayer must keep a written record, including receipts, of all expenses, such as the purchase price of the vehicle, oil and fuel, insurance, licenses, repair and registration fees. These items are deducted on Form 1040 Schedule C.
Business Use
A taxpayer who uses her vehicle for both business and personal use may deduct the percentage of expense related to the business use of her vehicle. For example, if a taxpayer uses her car 40 percent of the time for business and 60 percent of the time for personal use, she could deduct 40 percent of her expenses, including 40 percent of the registration fees, on Form 1040 Schedule C.
Tags: Form 1040, 1040 Schedule, Form 1040 Schedule, registration fees, each year
