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