Personal Property Tax Included in Vehicle Registration Fee

Part of your vehicle's registration fee may include a personal property tax depending on the state in which you live.

Generally, most states base the registration fee for a vehicle on the vehicle's weight, model, year, or horsepower.

However, some states base a portion of the registration fee on the vehicle's value. When the registration fee (or part of the fee) is based on value, it is considered a personal property tax.

States that assess a personal property tax on vehicles include:

AL, AZ, AR, CA, CO, GA, IN, IO, KY, LA, MI, MN, MS, MO, MT, NE, NV, NH, SC, WA, WY

Deducting Personal Property Tax

If you live in one of the states that base a portion of the registration fee on the vehicle's value, you deduct the business-related portion of the fee on Schedule C.

If you itemize your deductions and use your vehicle less than 100% for business, you deduct the nonbusiness portion of the fee that is based on value on Schedule A, (Form 1040) on the line for "Personal property taxes".

Any portion of the registration fee that is not based on value is a nondeductible personal expense.

Example:

  • Your vehicle's total registration fee is $250.
  • $200 of the fee is based on value.
  • The remaining portion of the fee, $50, is not based on value.
  • You itemize your deductions.
  • You use your vehicle 80% for business during the year and 20% for personal use.
  • You are a Schedule C filer.

Result:

  • Deduct $160 (80% x $200) on Schedule C .
  • Deduct $40 (20% x $200) on Schedule A (the personal use portion of the fee that is based on the vehicle's value).
  • Since the remaining $50 of the fee is not based on value, it is not deductible (it is a nondeductible personal expense).

QuickBooks Self-Employed
For Freelancers and independent Contractors

- Organzie your financial data into one central accounting system on the cloud
- Software kept up to date.
- Your data kept secure
- Anytime, anywhere data access.
- Pay your quarterly estimated taxes online.
- Export Schedule C to TurboTax at year-end for faster filing.
- Save up to 50% off QuickBooks Self-Employed. Track every deduction! Start your free trial now!

Have an accounting or bookkeeping question? Email it to me.