Can a Car's License Plate Fee Be Deducted on Federal & State Taxes?

by Steve Lander
Plates are deductible, but the deduction could cost you.

If you pay your car's license plate fees every year, they might be deductible. Before the Internal Revenue Service lets you take them off of your taxes, though, it's going to make you follow a bunch of rules and it might make you give up other deductions. Because of these rules, you might end up deciding not to claim the deduction for yourself.

Deductible Fees

Your car's registration fee might fit into the IRS's definition of personal property tax, and if it does, it could be deductible. According to the IRS, you can write off the portion of your car's license fee that is tied to your car's value. For instance, if your state charges you $148 for your registration, which includes a $45 tab fee, a $10 registration fee, a $3 technology surcharge and $90, which comes from multiplying your car's $9,000 value by 1 percent, the $90 would be tax-deductible. The remaining $58 of the total $148 bill wouldn't be.

Claiming the Deduction

To write off the deductible portion of your license plate fee, you have to itemize your deductions. When you itemize, you list all the things you spent money on that the IRS lets you subtract from your taxes. Then, you add them up and take them out of your income. Itemized deductions don't just include your deductible license plate fees. They also include mortgage interest, job expenses, state income taxes and money that you give to approved charities.

Itemized vs. Standard

When you itemize your deductions, you don't get to claim the standard deduction. For the 2013 tax year, the standard deduction for a single person is $6,100, and it's $6,200 for 2014. This means that if your only deduction is $90 for a portion of your license plate fee, you'd be much better off claiming the standard deduction. It only makes sense to itemize if those deductions add up to more than your standard deduction.

State Taxes

Every state can set its own tax laws and determine what is and isn't deductible. If your state doesn't have an income tax, you won't be able to deduct your license plate fee. Research from the Institute on Taxation and Economic Policy for 2011 shows that 31 states and the District of Columbia either follow federal rules or are close to them, while 10 states don't have any deductions. If you live in a state with an income tax, it's likely that you will be able to take the deduction on your state tax if you took it on your federal tax.

About the Author

Steve Lander has been a writer since 1996, with experience in the fields of financial services, real estate and technology. His work has appeared in trade publications such as the "Minnesota Real Estate Journal" and "Minnesota Multi-Housing Association Advocate." Lander holds a Bachelor of Arts in political science from Columbia University.

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