Anyone in California know if the sales tax on the car is tax deductible? I know the hybrid tax credit is gone....But we can deduct sales tax on large items, I think, though I'm not sure. Anyone? I just paid $2000 in tax on my new 2008. (Wouldn't it be nice to live in a state that doesn't gouge us at every turn????)
You can deduct sales tax in states where there is no income tax. Since you can deduct your income tax, you don't get to deduct sales tax too. In NV, we have no income tax, so we get to deduct sales tax.
When completing your federal income tax return, you have the option to deduct either state and local income taxes, or state and local general sales taxes. See pages A-2 and A-3 of 2007 Form 1040 Instructions for Sch. A & B. http://www.irs.gov/pub/irs-pdf/i1040sa.pdf Most Californians will pay more in state/local income tax than in sales tax, hence it would make sense to deduct the state/local income tax. However if you do not fall into that category (perhaps you are retired and don't have much current income, but are drawing down your savings to purchase a new Prius) you are free to deduct sales tax instead.
