When you register a new car in North Carolina, you'll pay several fees. One fee is based on the total cost of your car, and is a percentage of your car's value. North Carolina also charges additional road fee taxes, and some counties charge a regional transportation authority registration tax. A portion of these fees is tax-deductible.
Highway Use Tax is Tax-Deductible
When you register a car for the first time in North Carolina, you must pay a Highway Use Tax, which is 3 percent of the vehicle's estimated value. You'll also pay additional annual registration and titling fees based on the vehicle class you're registering. The Highway Use Tax is a one-time tax that must be paid every time a title changes hands, and it is tax-deductible. Additionally, the annual tax you pay based on your vehicle class is also tax-deductible.
In addition to the Highway Use Tax, some portions of North Carolina also charges flat fee taxes when you register your car. Residents of Wake, Durham and Orange counties must pay an additional $8 Regional Transport Authority Registration Tax, which is not deductible on your federal tax return. Other road fees, such as the $25 or $15 road fee charged in some parts of North Carolina, are not tax-deductible. The only portion of your registration that is tax-deductible is the percentage amount based on the car's value.
How to Determine Your Tax Deduction
When you register your vehicle in North Carolina, you'll receive an itemized receipt or breakdown of costs for registration. Keep a copy of this document for your tax records. It lists the percentage of vehicle cost separately from the other flat fees, and that is the portion you can claim on your taxes. Disregard the remaining flat fees for tax purposes. Some counties, such as Wake County, maintain databases online where you can look up your eligible tax-deductible amount.
Standard Deduction May Be Advantageous
While you can claim the portion of your registration based on the value of your vehicle, it may be more advantageous to claim a standard deduction. When you claim your car registration deduction, you must itemize your federal tax deductions. If you have few other expenses to itemize, you may pay less tax by using the standard deduction instead of itemizing. Calculate your tax liability using a standard deduction and using itemized deductions (including the car registration tax deduction) to determine which provides you with more tax savings.
- North Carolina Division of Motor Vehicles; Vehicle Registration
- North Carolina Division of Motor Vehicles: Highway Use & Property Taxes
- North Carolina Division of Motor Vehicles: Wake County Vehicle Registration Fees Rise July 1, August 1
- IRS: Your Federal Income Tax for Individuals (2010); December 2010