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 unless the car is used in business.

Not a Deductible Tax

If you don't use your car for business purposes, 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.

Business Expenses

If you 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.

Reporting Employee Business Expenses

Where you claim the expenses for the business use of your car depends on whether you're an employee or sole proprietor. If you're an employee, the deduction goes on Schedule A as an unreimbused employee expense. It's a miscellaneous deduction subject to the 2 percent of adjusted gross income floor, which means only the portion that exceeds 2 percent of your AGI actually reduces your taxable income. So, if you're not itemizing, or your total miscellaneous deductions don't exceed 2 percent of your AGI, the deduction won't do you any good.

Reporting Sole Proprietor Expenses

The deduction for vehicle expenses, including inspection fees, is much more favorable for sole proprietors. The deduction goes on Schedule C and it's not subject to any AGI restrictions. In addition, it reduces not only your income taxes, but also your self-employment taxes. However, you can't claim your vehicle inspection, or any other specific vehicle costs, as a tax write-off if you're claiming the standard mileage deduction.

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About the Author

Mark Kennan is a writer based in the Kansas City area, specializing in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."

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