Maryland Excise Tax - deductible?

[josrulz]

I'm just making sure I'm clear on this. I think it fits in the General Discussion (sailing related) forum, since it is about boat ownership. When we purchased our boat in 2009, we paid that standard 5% excise tax in MD. It appears to me now that this is not deductible on my Federal return, because it's viewed as a sales tax.

Am I right about this? I just want to make sure we don't miss out on a deduction that we can use.

I searched on this, but didn't find much info, and what info I found was conflicting.

Thanks,
J

[speciald]

You can deduct sales tax on your federal return. You are allowed a std deduction but if you can document excess tax paid then that amount can be deducted. Ask an accountant.

[ewingengr]

As the above poster said. Yes you can, but only if you itemize on schedule A.

[jcalvinmarks]

I am a tax accountant, and I'll go ahead and ditto and confirm what the previous posters have said. But remember that you can deduct state income taxes OR state sales taxes, but not both, so be careful to pick the one that gives the greater deduction. And as stated, you can only take one or the other if you itemize your deductions.

[josrulz]

Well, I am itemizing our deductions. But here's what I'm seeing. 1) It's not property tax, because it's not paid yearly. 2) It's not a vehicle registration fee because Maryland doesn't charge it yearly. The info I'm seeing shows that you can't deduct these fees for MD vehicles. 3) It could be deducted as part of the General Sales Tax deduction, but only if you choose that option instead of deducting your income tax. For us, this would not work out to our advantage.

Am I missing something?
-J

[josrulz]

Originally Posted by jcalvinmarks

I am a tax accountant, and I'll go ahead and ditto and confirm what the previous posters have said. But remember that you can deduct state income taxes OR state sales taxes, but not both, so be careful to pick the one that gives the greater deduction. And as stated, you can only take one or the other if you itemize your deductions.

Sorry, I was already replying and didn't realize you'd posted.

So you're saying that, as I mentioned in #3 above, that it can be deducted as part of the general sales tax deduction, but only of course if that works out to your advantage. For us, I don't think it would. And that besides that option, there's no way to deduct that excise tax. Correct?

[jcalvinmarks]

Actually, you couldn't even deduct it under general sales taxes, because it isn't a tax on general retail sales, it is a specific excise tax. The phrase "sales tax" in the original post stuck in me head, and I didn't even think about the fact that it is an excise tax.

So unfortunately, you can't deduct it after all. It would be a business deduction if you were in the business of sailboat brokerage or chartering or teaching sailboat lessons, but not if it's just a pleasure craft. And even if you were in the sailboat [fill in the blank] business, the case law seems to be very leery of deductions related to sailboats, and so I would imagine that IRS would look at anything that says "yacht" or "sailboat" on it very carefully.

[josrulz]

OK, thanks for your help. I just wanted to be sure I wasn't missing something. I'm not attempting to use the general sales tax option anyway, so no worries.

Thanks again!
-J

[PalmettoSailor]

So the personal property taxes I'd pay in VA are deductable, but the excise tax I'll pay when I move to MD is not?

I bought the boat over a year ago and paid VA sales tax at that time. When I move to MD, they want the difference in their 5% sales/use tax and the 2% Va sales tax I've already paid.

[jcalvinmarks]

Originally Posted by midlifesailor

So the personal property taxes I'd pay in VA are deductable, but the excise tax I'll pay when I move to MD is not?

I bought the boat over a year ago and paid VA sales tax at that time. When I move to MD, they want the difference in their 5% sales/use tax and the 2% Va sales tax I've already paid.

If the VA Property taxes are assessed annually and based on value, then they are deductible under "Other Taxes" on Schedule A. But since the MD tax is only assessed once, it does not qualify.

Use Tax poses a consistent problem for States. When you buy something from out of state and no Sales Tax is collected (like from Amazon.com), you are supposed to remit Use Tax to the state (in lieu of the sales tax that was not collected). But who completes a Use Tax Return for books and DVDs you bought an amazon? And proving that you bought something out of state and didn't pay sales tax is next to impossible for most items, even if you were to be targeted for a Use Tax audit (which is virtually never). The one big break for states is items that are documented: automobiles, firearms, boats, &c. And with the budgets they way they are in pretty much every state in the Union, you can bet they are going to try to get every Use Tax dollar out of you that they can.