Deduction Amount

• You can deduct any state and local sales taxes that you pay on a car purchase. The car purchase can be either a new car or a used car. When you make the purchase, be sure that your receipt notes the amount of sales taxes paid and that you keep the receipt. Although the IRS does not require you to submit copies of your receipt when you file your income taxes, you must produce documentation of your sales tax expenses in the event the IRS audits your return.
  
  

Keep Your Other Receipts

• If you plan to write off your sales tax paid on your car, you should also be sure to keep your other receipts from the year because the general sales tax deduction allows you to write off all of your state and local sales taxes paid during the year rather than just your car sales taxes. If you do not keep your other receipts to verify your sales taxes paid, you can still write off your sales taxes paid on your car but cannot include other sales taxes paid.
  
  

Cannot Use Estimated Sales Tax

• When you claim your car sales tax paid, you cannot use the IRS's estimated sales taxes paid for the year. The IRS gives taxpayers the option of claiming either the total sales taxes they can account for paying during the year, or the estimated amount based on the sales tax rates for where they live, the amount of exemptions claimed on taxes and their adjusted gross income. If the estimated amount exceeds your car sales tax plus any other sales taxes you can account for pay, you should use the estimated amount instead.
  
  

Must Itemize Deductions

• Before you can claim car sales taxes on your tax return, you must itemize your deductions. Itemizing requires that you give up your standard deduction. Accordingly, you should only claim your car sales taxes if your total itemized deductions exceeds your standard deductions. In addition, you should also compare your sales taxes paid to your state and local income taxes paid during the year because you can only claim either the state and local sales tax deduction or the state and local income tax deduction.