Question

Is financing for purchasing a car qualified to "major purchase" for the sales tax deduction?

Forum|Forum|2 years ago
March 28, 2024
2 replies
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We bought a new car (Not qualified as clean vehicle) in 2023. Traded in, down payment paid, and financing the rest. Is this situation worth trying to enter information for "major purchase" or "major item" for the sales tax deduction? Turbo Tax says "State and Local deduction is better so far" before entering any information about the car. Thank you!

TurboTax Online

SharonD007

Yes, purchasing a car through financing is considered a major purchase. Refer to the TurboTax article How do you define "major purchase" or "major item" for the sales tax deduction? When you live in a state that you pay sales taxes and the sales taxes that you paid are more than the state income tax that you paid, it may be more beneficial for you to use the sales taxes as the SALT deduction. The most you can deduct is $5,000 if you use Married Filing Separately (MFS) filing status. For all other filing statuses, the cap is $10,000 for the State and Local Tax (SALT) deduction.

For more information, review the TurboTax article Which deduction should I choose, state and local income tax or sales tax?

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R

rpm

TT will not accept the major purchase sales tax information that i have inputted. TT keeps changing the sales tax rate that i know is accurate.

KrisD15

If you paid more than your local and state tax rate, you can only get credit for the amount at your tax rate.

Is your sales tax rate the same as the rate of sales tax you paid on the vehicle?

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O

Opus 17

There is no such thing as a "major purchase" and I hate that Turbotax uses this terminology.

IF you are using the sales tax deduction with the standard amount method, you can add to the standard amount, sales tax paid for the purchase of a motor vehicle, airplane, or a home or major improvements to a home. Those are the only "major purchases" that count.

Yes, if you finance the car, you can still claim the entire sales tax amount in the year you bought the car. You do not spread the sales tax out over time.