Is Vehicle Sales Tax Deductible? What the IRS Allows in 2026

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You can deduct vehicle sales tax if you choose to itemize deductions. However, if you opt for the standard deduction, you won’t be able to deduct vehicle sales tax. This deduction is also subject to the state and local tax (SALT) deduction, which has its own limits. Read on to learn more about how the vehicle sales tax deduction works.

Vehicle Sales Tax Deduction: At a Glance

• You must itemize your deductions to claim the vehicle sales tax deduction.
• You can choose to deduct either state income tax or sales tax, but not both. 
• The deduction applies to new and used vehicles.
• The deduction is subject to the SALT cap. 
• You can use only the sales tax portion. 

Who Can Deduct Vehicle Sales Tax

Here’s a look at who can deduct vehicle sales for their personal and business use: 

For Personal-Use Vehicles

You can deduct sales tax if the following applies: 

• You purchased a truck, car, motorcycle, SUV or RV.
• You choose to itemize your deductions.
• You were charged the tax by the state or local government. 
• You include the amount using Internal Revenue Service (IRS) tables, plus add your sales tax for large purchases.

For Business-Use Vehicles

Business owners tend to deduct the sales tax through tax rules. Here’s what you need to know: 

• Must be for business use: The vehicle must be used for business purposes only, or a portion of the business use must be calculated. 
• Calculate the business expense deduction: Your sales tax on a vehicle used for business purposes can be deducted as a business expense on your tax return. Either deduct the full vehicle cost with sales tax in the year purchased or calculate the depreciation cost over time.
• Can deduct sales tax for business use only: If the vehicle is used for both personal and business uses, you can only deduct the portion of the sales tax related to the business use. 

What Vehicles Qualify

According to the IRS, only certain types of vehicles qualify for a sales tax deduction. This includes:

• Any vehicle bought for personal use, like passenger vehicles, boats, motorcycles, trucks or SUVs.
• RVs, campers, trailers and motorhomes are also included, as long as it’s for personal use. 
• Leased vehicles — if you’re responsible for paying the sales tax as a part of your lease agreement, you can deduct the sales tax.

Itemizing Is Required — Here’s Why It Matters

Taxpayers have the choice of taking the standard deduction or itemizing deductions. You can take the vehicle sales tax deduction only if you choose to itemize. However, the standard deduction is $31,500 for a married couple filing their taxes jointly in 2025. The deduction is $32,200 for a married couple filing their taxes jointly in 2026. 

Most people don’t have enough itemized deductions from mortgage interest, medical/dental expenses, sales tax, etc., to exceed the standard deduction threshold. The itemized deductions only help if collectively they surpass the standard deduction. 

How the $20,200 SALT Cap Expands This Deduction

Under the One Big Beautiful Bill Act (OBBA), the SALT cap has substantially increased from $10,000 to $20,200. In previous years, since the cap was limited to $10,000, it would make the vehicle sales tax deduction accessible in high tax states like California, New York and/or New Jersey. 

The property taxes alone would fill the SALT cap bucket. But now, since the limit has increased, there is a possibility that individuals may consider itemizing their deductions since they could get tax savings from the vehicle sales tax deduction. 

How To Calculate Your Vehicle Sales Tax Deduction

1. Find the amount of sales tax you paid: You can find this information on your bill of sale or purchase agreement. 
2. Choose to deduct either income/local tax or income/local sales tax: If you’re choosing to deduct sales tax, then you can use the IRS vehicle sales tax deduction calculator. It will allow you to estimate general sales tax based on income and location. Make sure you add the vehicle sales tax on top of this deduction. 
3. Stay within the SALT cap: The total deduction for state and local taxes, including vehicle sales tax, is capped at $20,200 per year.

Documents You’ll Need

• Purchase agreement or bill of sale: Either document should list the amount of sales tax paid. 
• Dealership receipts: These receipts help prove the vehicle purchase and sales tax were paid.
• Registration documents: While not always required, registration paperwork can help verify that sales tax was paid. 
• Proof of payment: A canceled check or credit card statement can show that you paid for your vehicle. 
• IRS Schedule A form: To claim the deduction, you need to fill out Schedule A.

When This Deduction Makes Sense — and When It Doesn’t

To decide whether the vehicle sales tax deduction makes sense for you, you need to evaluate whether you have enough itemized deductions that can beat the standard deduction.

Common Mistakes That Cost Taxpayers This Deduction

• Not itemizing deductions: A vehicle sales tax deduction can only be claimed if you itemize deductions, not if you use the standard deduction. 
• Not keeping all the documentation: To qualify for the deduction, you must keep your purchase agreement, proof of payment, canceled checks or credit card statements and, in some cases, vehicle registration documents.
• Using the wrong deduction: You must choose either the state and local income tax deduction or the state and local sales tax deduction, but you cannot claim them both.  
• Confusing personal and business uses: If a car is used entirely for business purposes, it cannot be claimed as a personal deduction. If it is used for both personal and business use, you may claim the sales tax deduction only for the business portion.
• Not paying attention to state-specific rules: Some states have caps on vehicle sales tax deductions, so it’s important to check your state’s tax laws.

Key Takeaways

• To claim this credit, you must itemize your deductions.
• Determine whether itemizing is more beneficial than using the standard deduction.
• You can deduct either local sales tax or state income tax, but not both.
• The deduction is subject to the SALT cap.
• Most people use the standard deduction because their itemized deductions do not exceed it.

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