Car owners are required to register their new or used vehicles in their state of residence within a legally defined period of time. The laws regarding vehicle registration vary from one state to the next. In California, when you register your vehicle, you pay a number of fees, such as the registration fee, weight fee and air quality fee, in addition to the vehicle license fee. According to the California Department of Motor Vehicles, for individuals, only the vehicle license fee is tax deductible.
Look at your Vehicle Registration Billing Notice. You may have received it by mail from the Department of Motor Vehicles or have accessed it online at the agency website. The notice lists the various fees you must pay to register your vehicle.
Find the vehicle license fee listed on the notice.
Deduct this fee as a personal property tax deduction on Schedule A of Form 1040.
Business owners who use the actual expense method of calculating their car usage deduction can deduct the percentage of the entire vehicle registration bill that corresponds to percentage of business use. For example, if you use your vehicle only for business -- that is 100 percent for business -- you can deduct the entire amount of your registration bill on Schedule C of your tax return, according to IRS Enrolled Agent John Moore. If, on the other hand, only 50 percent of vehicle usage is business-related, you can deduct 50 percent of the total registration bill amount.
- Franchise Tax Board: How Much Can I Deduct for Vehicle License Fees?
- John Moore, Enrolled Agent; Moore Financial Services; Fremont, California
- California DMV: Vehicle Registration Fee Calculator
- RITA: California Vehicle License Fees: Incidence and Equity
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