Are State Vehicle Inspection Fees Tax Deductible?
Though it's a pain to get your car inspected, in most states it's a requirement just to be allowed to drive it. Worse, you're usually not going to get any sympathy from Uncle Sam: unless the state vehicle inspection fee is a misnomer, it's usually not deductible on your taxes. If you're self-employed or run your own business, though, you may be able to claim the fees as a business expense.
You can only claim the vehicle inspection fee if you're self-employed or run your own business, and only then if you use the vehicle for business use.
Deducting the Vehicle Inspection Fee
At one time, you could write off your vehicle inspection fees for business use. However, tax changes took away the miscellaneous deduction option for those who were salaried or hourly employees. If, however, you own your own business or work as an independent contractor, you may be able to claim the fee at tax time. If you don't use your car for business purposes, though, there's no way to write off your state vehicle inspection fees. Though it might sound like a car tax, the IRS specifically rejects it as being deductible on Schedule A, classifying it as a tax you cannot deduct.
If you're self-employed or a business owner and use your car as part of your business, you have the option to either deduct the standard mileage rate for every mile you drove during the year or your actual expenses. If you choose the actual expenses, you can include the vehicle inspection fees along with your other costs like gas, oil, license fees and depreciation. If you use your car for both business and personal use, the deductible portion equals the percentage of the miles you drive the car for business. For example, if you drove the car 20,000 miles total, of which 12,000 was for business, 60 percent of your inspection fee is deductible as a business expense.
Claiming Exceptions for Sole Proprietors
For sole proprietors, the deduction goes on Schedule C. In addition, it reduces not only your income taxes, but also your self-employment taxes. However, you can't claim your state inspection fee, or any other specific vehicle costs, as a tax write-off if you're claiming the standard mileage deduction.
Changes Under 2018 Taxes
For 2018, those who are employed cannot claim car expenses or any other miscellaneous deductions. However, the standard deduction has nearly doubled to compensate for the loss.
Claiming on 2017 Taxes
If you're still filing 2017 taxes, you can claim the car inspection cost whether you're self-employed or employed by a business. The expense must exceed 2 percent of your adjusted gross income and you'll need to itemize on Schedule A.
- Internal Revenue Service: Topic 510 - Business Use of Car
- Internal Revenue Service: Schedule A Instructions
- Forbes: New: IRS Announces 2018 Tax Rates, Standard Deductions, Exemption Amounts And More
- IRS: Publication 529 (2018), Miscellaneous Deductions
- IRS: Can I Claim My Expenses as Miscellaneous Itemized Deductions on Schedule A (Form 1040)?
Based in the Kansas City area, Mike specializes in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."