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Sales Tax on CarFrom: Harrisburg PA Dear TaxMama, Is the tax paid on my new car deductible? Chad
Hi Chad, I don't know? I know nothing about you or the structure of your tax return. Are you itemizing your deductions? If you are, you can test to see if your state income taxes paid are lower than the sales tax on your car, plus your standard sales tax in IRS Publication 600. If your sales taxes are higher this year, check the box on Schedule A next to state taxes, for sales tax - and then, YES, the taxes on your car purchase will be deductible. TAXMAMA ALERT: Incidentally, if the amounts are close, but the sales tax is a little bit lower, you may still want to choose the sales tax. Why? Because if you're getting a state income tax refund, that refund will be taxable on your IRS return, IF you deducted your state income taxes. It won't be if you deducted sales taxes. Isn't that a kick? Now, if you bought a Hummer....odds are pretty good that you'll be able to take that deduction. Best Wishes,
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