This Tax Tip Spotify Podcast and/or WordPress Blog Post is in response to inquires regarding the deductibility of state and local taxes on personal property.
A personal property tax is deductible if it is a state or local tax that is:
(1) charged on personal property;
(2) ad valorem (that is, based only on the value of the personal property); and
(3) charged on a yearly basis, even if it is collected more or less than once a year.
A tax based on criteria other than value does not qualify as ad valorem. For example, a motor vehicle tax based on weight, model year, and horsepower, or any of these characteristics is not an ad valorem tax. However, a tax that is partly based on value and partly based on other criteria may qualify in part. For example, in the case of a motor vehicle tax of 1 percent of value plus 40 cents per hundredweight, the part of the tax equal to 1 percent of value qualifies as an ad valorem tax and the balance does not qualify.
A tax that meets these requirements can be considered charged on personal property even if it is for the exercise of a privilege. For example, a yearly tax based on the value of a motor vehicle qualifies as a personal property tax even if it is called a registration fee and is for the privilege of registering motor vehicles or using them on the highways.
Personal property taxes are deducted on the line labeled “Other taxes” in the “Taxes You Paid” section of Schedule A (Form 1040), unless they are paid on property used in your business. In that case, they are deducted on Schedule C, Profit or Loss from Business (Sole Proprietorship); Schedule C-EZ, Net Profit from Business (Sole Proprietorship); or Schedule F, Profit or Loss from Farming. Taxes on property that produces rent or royalty income are deducted on Schedule E, Supplemental Income or Loss.
Please call me at your convenience so that we can discuss the rules for deducting personal property taxes as they apply to your particular situation.
Please contact the office of Don Fitch Accountancy at (760)567-3110 or Email Don.Fitch@CPA.com if you have any questions or would like additional information.
DON FITCH, CPA
74478 Highway 111 #3
Palm Desert, CA 92260
Toll Free: (877)CPA-Help or (877)272-4357
P.S. My firm is based upon referrals. Please feel free to refer my firm to anyone you know that is looking for a new CPA and/or tax preparer. Thank you in advance.
(Updated 05012021-1 320-296)