Boston Business Daily

How do you calculate the sales tax deduction on leased vehicles?

The IRS publications just say you can deduct "sales tax paid on leased vehicles," but doesn't say how to calculate that. Does that mean to take the sum of the sales tax on all of the payments for the tax year, or figure out the sales tax on the amount that used used for calculating the lease? If the former, does that mean you can do it every year, or only the year in which you leased the vehicle?

Public Comments

1. I'm not sure how they compute sales tax on leased vehicles, you should contact the place you are leasing it from and figure that out. If you paid a lump sum sales tax when you first leased the car that thats the only deduction you can take, but if they compute sales tax on each lease payment than you can deduct each months payment towards the sales tax in the year paid.
2. When you lease a vehicle, the sales tax is applied to each payment (you pay sales tax with each monthly lease payment). If the monthly statement from the lessor does not break down the payment between the lease payment and the sales tax, you can take the lease payment and divide it by 1 + your sales tax rate to determine the lease payment BEFORE sales tax. The difference between your regular lease payment and the calculated lease payment before sales tax will be the amount of sales tax. It doesn't matter whether you do the calculation from month to month, or add up the payments for the year. Since the lease payment is the same each month, the amount of sales tax will be the same each month as well. You can only deduct the sales tax that you actually paid during the tax year, so you need to work it out using your lease payments that you actually paid during the tax year.