State or local personal property taxes are deductible only if the tax is based on value alone and is charged on a yearly basis. A tax that is called a registration fee and is charged for exercising a privilege, such as registering motor vehicles and using them on the highway, would qualify as a deductible personal property tax, for the amount that is based on the value of the property. Any other part of the tax or registration fee, that is based on the weight of the vehicle, for example, would not be deductible.
Taxes You May Not Deduct
The following taxes are not allowed as an itemized deduction.
Federal income tax
Estate, inheritance, legacy, or succession taxes are generally not deductible unless you, as the beneficiary, must include the corresponding income in your gross income when you file your personal income tax return. In that case, you can deduct the estate tax as a miscellaneous deduction not subject to the 2% of adjusted gross income limit.
Gift tax
Social security, Medicare, Federal unemployment (FUTA), and railroad retirement (RRTA) taxes
Customs duties
Gasoline and other excise taxes
Car inspection fees
License fees (driver’s license, marriage license)
Fines or penalties
Per capita taxes
Local assessments for sidewalks or other improvements (These would normally be added to your basis in the property.)
Expenses for Business or Income Producing Activity
Certain taxes and fees that cannot be taken as an itemized deduction may qualify as ordinary and necessary expenses of a business or income producing activity. In that case, they would be reported on Schedule C (for a business), Schedule E (for rental property), Schedule F (for farming), or another appropriate schedule, depending on the activity.