USA Capitalizable Amount for New Car Purchase

[Ofelia]

Purchase a new car which include the following costs which I think should not be capitalized.

• document processing charge
• optional service contract
• vehicle license fees
• registration/transfer/titling fees
• CA tire transfer fees

The costs that I will capitalize are the cash price of the vehicle plus sales tax less manufacturer's rebate.

Please confirm my understanding.

Thanks!

 

[Drmdcpa]

I do not believe you have a good understanding of this transaction.

You need to separate expenses from capital items. Expenses are often deductible on tax returns like sales tax or recurring like license fees. The rest are capital expenditures.

I know it is common practice to wrap sales tax on purchases into the cost of a purchase, but if the tax is otherwise deducted, for example on Fed Schedule A, it cannot also be capitalized.