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2 minutes read. Published on March 8, 2023.
Written by Mia Taylor Written by Contributing Writer Mia Taylor is a contributor to Bankrate and an award-winning journalist who has two decades of experience and worked as a staff reporter or contributor for some of the nation’s leading newspapers and websites including The Atlanta Journal-Constitution, the San Diego Union-Tribune, TheStreet, MSN and Credit.com. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the beginning of 2021. They are committed to helping readers gain the confidence to manage their finances with precise, well-studied and well-researched data that breaks down complicated subjects into digestible pieces. The Bankrate promise
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There are money-related questions. Bankrate has the answers. Our experts have been helping you manage your money for over four years. We continually strive to give our customers the right advice and tools needed to be successful throughout their financial journey. Bankrate adheres to strict standards policy, which means you can be confident that our information is trustworthy and accurate. Our award-winning editors and reporters provide honest and trustworthy content to help you make the right financial choices. The content we create by our editorial team is objective, factual and uninfluenced from our advertising. We’re transparent about the ways we’re in a position to provide quality information, competitive rates and helpful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We receive compensation for placement of sponsored products and, services, or when you click on certain links posted on our website. So, this compensation can influence the manner, place and in what order the products are listed within categories, unless it is prohibited by law for our mortgage and home equity products, as well as other home lending products. Other factors, like our own website rules and whether or not a product is available within the area you reside in or is within your own personal credit score can also impact how and when products appear on this site. While we strive to provide an array of offers, Bankrate does not include specific information on each credit or financial product or service. The ownership of a vehicle that you use some or all the time for your business could provide tax advantages. Perhaps the most well-known benefit is the standard mileage deduction, which is a amount set by the IRS which small-scale entrepreneurs and those who are self-employed are able to use to deduct some of the costs associated using a vehicle for business purposes. But that’s not the only deduction that is available to those who own a car to meet business requirements. If you have a you may also be able to deduct interest on the loan when filing your federal tax returns. Is interest on an auto loan deductable?
Car loan interest is deductible in certain situations in which you make use of your vehicle for business purposes.
If you are able to deduct car loan interest from your taxes Only those who are self-employed, or who own an enterprise and have the right to claim a tax deduction for car loan interest. If you’re an employee of another’s company, you are not eligible for this deduction. Additionally, the interest you pay on an loan used to purchase a car solely for personal use isn’t deductable. If the vehicle in question is used for personal and business needs, claiming this tax deduction can be a bit more difficult. You must determine the percentage of time the vehicle is used to meet business needs and apply that calculation to your loan interest deduction that you claim on your tax returns. For example, if you use your vehicle for 50 percent to fulfill business needs, you can only deduct 50 percent of loan interest on tax returns. If you pay $1,000 in interest on your vehicle loan every year, you are able to only claim a deduction of $500. If however, the car is used entirely for business purposes and you are a business owner, the entire amount of interest could be written off. Documentation to keep When of any kind on your tax returns, it is best to keep accurate documents and records. You want the ability to verify all expenses should questions or audits ever occur. Some records to maintain when claiming an auto loan interest deduction on your tax return include the following: A record or log of every trip you take by the vehicle for business purposes, including a log of the odometer mileage. The car loan payments records that verify the amount of interest you paid. Although you can’t take the tolls or parking fees in the context of the automobile loan interest deduction, you may also need to keep these types of receipts if they prove your vehicle is used solely for commercial reasons. Bankrate tip
Keep supporting documentation for at least 3 years from the date when you file your tax return.
If you’re uncertain, you can hire an expert consult a professional if: Aren’t sure if you’re eligible for the car loan interest deduction You’re unsure about the best method to calculate the exact amount of deduction to get on your tax filing A can help guide you through the procedure and help you determine if the deduction is suitable depending on your specific circumstances. For instance, when you use your vehicle for personal or business uses, it may not be a good idea to take advantage of deduction for auto loan interest deduction if the business usage of the vehicle is minimal. Bankrate tip
The deduction you claim could be more work than it’s worth if you use the vehicle to conduct business less than 50 percent all the time.
The bottom line: Deducting car loan interest on your tax returns could be an excellent write-off for you if either self-employed or self-employed. Before you can claim this deduction, you must be sure you qualify. Consult a tax professional If you’re unsure of how to determine the exact amount you’ll be able to claim.
Written by Contributing Writer Mia Taylor is a contributor to Bankrate and an award-winning journalist who has two decades of experience and worked as a staff reporter or contributor for some of the nation’s leading newspapers and websites including The Atlanta Journal-Constitution, the San Diego Union-Tribune, TheStreet, MSN and Credit.com. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the end of 2021. They are passionate about helping readers gain confidence to control their finances with precise, well-researched and well-written information that breaks down otherwise complex topics into manageable bites.
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