Three women have placed a bet, just two days before tax day.
They're betting on whether they can deduct their car tag renewals on their tax returns.
It has to do with the deduction of AD VALOREM TAX or tax based on the assessed value of personal property.
"Sandra" of Raleigh writes:
"Two friends say we can deduct the annual registration for car tags...One used TurboTax...(It) allowed her to deduct the full amount she paid...Friend #3 filed with H&R Block, who did not take the deduction. Who is correct?"
Friend Number 3, the one who did NOT get the deduction, got it right.
Car tag renewals in Tennessee are not ad valorem tax, so in Tennessee, your car tags are NOT tax deductible.
In Mississippi, however, they ARE deductible. Mississippi car tag renewals are indeed ad valorem tax, so deduct away, you folks in North Mississippi!
Sorry, Arkansas taxpayers. Your car tag renewal, just like Tennessee, is NOT deductible.
So why did TurboTax allow one of Sandra's Tennessee friends to deduct her TN car tag?
A CPA source of mine tells me if the deduction is less than $130, the IRS will likely not audit the deduction, so some people in Tennessee are taking their chances with the deduction on TurboTax and other tax software.
I, for one, do not recommend playing Russian Roulette with the IRS, no matter what the deduction.