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Income & Expenses
Question: Are excise taxes for a vehicle deductible?
The federal government charges a wide variety of item specific taxes referred to as excise taxes, to users on a wide variety of products.
- An excise tax is not deductible if it is for a personal expense.
- You can deduct as a business expense excise taxes that are ordinary and necessary expenses of carrying on your trade or business.
- Taxes on gasoline, diesel fuel, and other motor fuels that you use in your business are usually included as part of the cost of the fuel. Do not deduct these taxes as a separate item.
- State and local sales tax, or any excise tax paid on the purchase of a vehicle is included as part of the cost of the vehicle. If the vehicle is used by you in your business, you may recover the cost of the vehicle as a section 179 deduction or by taking annual depreciation deductions. Both the section 179 deduction and depreciation deductions for the vehicle may be subject to annual limitations.
- Form 4136 (.pdf), Credit for Federal Tax Paid on Fuels
- Publication 535, Business Expenses
- Publication 946 (.pdf), How to Depreciate Property
- Publication 510, Excise Taxes
- Form 720 (.pdf), Quarterly Federal Excise Tax Return
Category: Small Business, Self-Employed, Other Business
Subcategory: Income & Expenses