[misa]

I purchased a car at the end of 2007. The dealership included state taxes but neglected to include city and county taxes, which I paid when I registered the car in 2008. Can I only deduct the state taxes for my 2007 tax returns and, if so, can I deduct the city and county taxes from my 2008 tax return? I live in the state of Colorado.

[ebaines]

You can deduct sales tax for big ticket items like cars, but only if you chose to take the sales tax deduction on Schedule A instead of the state and local income tax deduction - you can not deduct both sales tax and state income tax. Most people will find it more advantageous to deduct income taxes rather than sales taxes. However, if in your case you decide to deduct sales taxes, you must have paid the sales tax in 2007 to deduct it on your 2007 taxes. In your case if the city and county taxes are sales taxes, you will deduct them on your 2008 tax return (beware - if the taxes you paid to the city and county are not sales taxes, but rather are motor vehicle registration fees, they are not deductible). See the instructions for schedule A:
http://www.irs.gov/pub/irs-pdf/i1040sa.pdf