When itemizing your deductions on Form Schedule A, you’re allowed to deduct state or local personal property taxes (also known as ad valorem tax) as long as the taxes you deduct meet three criteria:
- The property is used (at least partly) for personal use and not used fully for business use.
- The tax is based only on the value of the property.
- The tax is charged on an annual basis, even if it's collected more than once a year or less than once a year.
Usually, you can deduct personal property taxes paid for vehicles, boats, or other property that’s taxed annually at the state or local level. But you’re only allowed to deduct the portion of the tax or registration that corresponds with the value of the property.
For example, if you want to deduct the vehicle registration fees paid to your state’s Department of Motor Vehicles, you need to pinpoint the portion of your fees based on the car’s value. Let’s say your state charges fees based on both the value and the weight: 1% of the car’s value and 50 cents for every 100 pounds of weight. You paid $70 total: $50 for the value of your $5,000 car and $20 because of the weight (4,000 pounds x 50 cents). In this case, you can only deduct $50 out of the total $70 you paid in fees because that’s the only part that corresponds to the car’s value.