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June 1, 2019
Question

Got a new vehicle the registration fees were in the loan can i claim them?

  • June 1, 2019
  • 1 reply
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The state is iowa.

1 reply

Employee
June 1, 2019

Yes, you can claim allowable Iowa vehicle excise taxes as a deduction on your income tax return; the fact that they were included, or financed, by an auto loan does not matter to this analysis.  However, for several important cautions, please continue reading.

The amount eligible for the vehicle registration fee deduction, for Iowa registered vehicles, is simply the excise tax itself, not the whole amount of the registration invoice.

The legal reasoning is as follows.  The IRS only allows that portion of the registration fee that is based on the value of the vehicle to be included toward your other itemized deductions.  Any flat fee portion doesn't count.  This is why there are some 20+ states whose residents can potentially benefit from the deduction (including Iowa), but the remainder cannot:  their states do not charge vehicle registration fees by value, and instead charge flat fees only.

In addition to the vehicle excise tax, you may be also to, separately, deduct the Iowa sales tax paid on the vehicle at purchase.  That is a separate, but related, matter.

Finally, it is also important to keep in mind that you (or anyone claiming this deduction) may or may not actually see any net tax benefit from including this item on your tax return.  The reason for this is that you must have enough itemized deductions (in total) to exceed the standard deduction available to all taxpayers.  This is true of the sales tax deduction as well.  Since more than 2 in 3 taxpayers do not have "enough" itemized deductions, most people end up taking the (more valuable) standard deduction, rather than itemizing deductions.  If you input all your data carefully, including the Iowa vehicle excise tax and sales tax, however, the TurboTax software will make that determination for you.

Thank you for asking your question, and hopefully you will find this answer helpful.