is sale tax on a new car deductible on federal income taxes?

Answer 1

Maybe.

If you itemize, you are given the choice of deducting the state sales tax that you paid throughout the year or the state income tax you paid but not both.

The IRS has developed tables to calculate what the average person spends in each state on sales tax. Take this number, and how much tax you paid on the car and if that number is higher than your state income tax AND you itemize, you will get a deduction.

Answer 2

The answer from zudmelrose is correct. The sales tax deduction expired at the end of 2005, but Congress just this past week reinstated and extended it (along with other measures) for this year. President Bush just signed it.

The change came after all the 2006 forms had been printed. The IRS is not going to change the forms but will issue instructions on how to claim it.

If you live in a state with no income tax (Florida or Texas to name two), and you can itemize deductions, you would be wise to include the sales tax.

However, if you live in a state with an income tax (most of them), then you need to compare the higher of the amount of state income tax you paid and the standard sales tax deduction plus the sales tax on the car. Again, only if it is to your benefit to itemize deductions.

Answer 3

Income taxes (state) have always been deductible. For the last few years, you have been given the choice between claiming state/local income taxes or sales taxes - but not both. This usually works out when you have purchased a big ticket item such as a new car. However, in order to get the deduction, you have to itemize.

Answer 4

Wayne Z's answer is the most accurate. Congress reestablished the sales tax deduction in late legislation in December. President Bush recently signed it. You can itemize the greater of your sales tax or state income tax. As mentioned there is a generic table based on your gross income. To that you can add the sales tax paid for major purchases such as automobiles.

The legislation was passed so late in the process, the 2006 IRS forms will NOT have the deduction listed. Check the IRS' website for more info.

Answer 5

if you live in a state with no income tax yes ( or if for business use )

no income tax states have a sales tax deduction when you itemize or a standard deduction if you don't ( for a business it counts as an expense )

Answer 6

I noticed that some of your answered said that yes it may be deductible. However the IRS has changed the sales tax write off if you itemize it is no longer available it will only be state and local income taxes that you can itemize.

Answer 7

This year they are not allowing general sales taxes to be taken instead of actual state taxes on your federal taxes(if you itemize). However, if the tax is based on the total value of the vehicle, then yes you can put it on a Schedule A as personal property tax.

Answer 8

There are energy credits for certain kinds of makes and models of cars but for the most part, sales tax is not deductible unless that financing was done through a home equity loan.

Answer 9

Sales taxes are now deductable on new car purchases.

Here is a link to the publication.

http://www.irs.gov/pub/irs-pdf/p600.pdf

Answer 10

No. Sales taxes are no longer deductible. But interest on home equity loans still is. So if you have a home and can go that route, you can at least deduct the interest on the loan you are making payments for. DO NOT accept dealer financing - !