The IRS allows residents of some states to deduct the tax they pay when they renew their vehicle registration each year. However, this only applies in states where the fee is an actual tax on the value of the vehicle itself. If you live in Minnesota, you might get a little relief on the money you pay each year in the form of a tax deduction. You must have paid the vehicle tax in the current tax year and it must be a fee you’re charged annually to qualify for the deduction. You also must itemize your deductions rather than take the standard deduction. If you qualify, you’ll then need to know where to input the information, as well as exactly which part of the fee you can claim.
If you are eligible to itemize your deductions on your annual tax return, you will likely be able to deduct the registration fee you pay on your car in Minnesota.
About Minnesota Vehicle Registration
In Minnesota, residents pay a series of fees to renew their vehicle registration each year. Those charges include a filing fee, the cost for your license plate if you need a new one, a wheel tax and an annual tax based on the value and age of your car, truck, SUV or other type of vehicle. If your car is more than 10 years old, you’ll pay a minimum of $35, no matter what your vehicle is worth today. The Minnesota Tax Manual has a tax due calculator that can help. For example, if you purchased a $10,500 vehicle in 2017 with a 2017 model year, you’ll pay $138 in taxes that you can then deduct when you file with the IRS.
Federal Law on Vehicle Tax Deductions
It’s important to note that even though your vehicle tax is state-specific, the tax deduction only applies to your federal return. It won’t come into play when you file your Minnesota state taxes. You also can deduct only the tax portion, not the filing fee, license plate cost or wheel tax. The IRS also requires Minnesota residents to deduct $35 from the amount of tax they’re claiming. You’ll only be able to claim the deduction if you itemize your deductions on Schedule A. Since the standard deduction is now up to $12,000 for individuals and $24,000 for couples filing jointly, chances are you won’t even need to itemize and the vehicle tax deduction won’t mean anything.
Determining Your Fee
You should have all the information you need to claim your vehicle tax on the receipt the county clerk provided when you registered your vehicle. If you can’t find the information, you can also visit the Minnesota Driver and Vehicle Services website. Simply enter your driver’s license number, license plate number or vehicle identification number and click “search” to find out how much registration you paid in the currently applicable tax year.
Claiming Your Fee
You’ll insert your property tax on Schedule A. Under “Taxes You Paid,” you’ll see a line that reads, “Personal property taxes.” Make sure you only include the amount you paid in taxes, eliminating all other fees, and also subtracting $35 from the total. You can only claim the tax on passenger vehicles, whether they’re cars, trucks or vans.
- DMV.org: Car Registration in Minnesota
- Credit Karma: How do I know if my vehicle registration fees are tax deductible?
- Minnesota Department of Revenue: Deducting Vehicle License Fees
- Forbes: New: IRS Announces 2018 Tax Rates, Standard Deductions, Exemption Amounts And More
- Minnesota Department of Revenue: 2017 Registration Tax Paid
Stephanie Faris has written about finance for entrepreneurs and marketing firms since 2013. She spent nearly a year as a ghostwriter for a credit card processing service and has ghostwritten about finance for numerous marketing firms and entrepreneurs. Her work has appeared on The Motley Fool, MoneyGeek, Ecommerce Insiders, GoBankingRates, and ThriveBy30.