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2 min read Published 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 editing and writing for Bankrate since late 2021. They are committed to helping readers gain the confidence to take control of their finances with clear, well-researched information that reduces complicated subjects into digestible pieces. The Bankrate promises
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If you have questions about money. Bankrate has answers. Our experts have been helping you manage your finances for more than four years. We are constantly striving to provide consumers with the expert guidance and tools required to be successful throughout their financial journey. Bankrate adheres to a strict code of conduct policy, which means you can be confident that our information is trustworthy and reliable. Our award-winning editors, reporters and editors provide honest and trustworthy information to assist you in making the right financial decisions. The content created by our editorial team is factual, objective and uninfluenced from our advertising. We’re transparent about the ways we’re able to bring quality content, competitive rates and useful tools to you by explaining how we earn our money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for the placement of sponsored products or services, or by you clicking on specific links on our site. This compensation could influence the manner, place and when the products are listed within categories, except where it is prohibited by law for our mortgage, home equity and other home loan products. Other elements, like our own website rules and whether or not a product is available within your region or within your own personal credit score may also influence the way and place products are listed on this website. We strive to offer the most diverse selection of products, 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 benefits. The most well-known benefit is the standard mileage deduction, which is a rate set by the IRS which small-scale business owners and self-employed individuals are able to use to deduct certain expenses associated with running a car for business use. But that’s not the only deduction that is available to owners of a vehicle for business use. If you have a you might also be able to deduct the interest when making your federal tax returns. Are the costs of the car loan deductible?
Car loan interest is tax deductible in certain circumstances when you are using your car for business purposes.
If you are able to deduct interest on a car loan interest from your taxes Only individuals who are self-employed or have an enterprise and have the right to take advantage of a tax deduction for the car loan interest. If you are an employee of a different company, you are not eligible for this deduction. Additionally, the interest you pay on a loan to purchase a car solely to use for personal reasons is not tax-deductible. If the vehicle is used for personal and professional requirements, then claiming the tax deduction is slightly more complicated. It is necessary to calculate the amount of time that the vehicle is used for business needs versus personal requirements and then apply that figure to the loan interest deduction you are claiming on your tax returns. For instance, if you use your vehicle 50 percent for business reasons then you are able to claim only 50 percent of loan interest on tax returns. If you have to pay $1,000 interest on your vehicle loan each year, you can only claim a $500 deduction. If, on the other hand the vehicle is solely used for business that is, then the whole amount of interest could be deducted. Documentation to document any kind on your tax returns, it’s best to keep accurate files and supporting documents. It is important to be able to check all expenses should there be any questions or an audit ever arise. Certain records to keep in mind in order to claim an deduction for auto loan credit on tax returns include an account or log of all the trips you make within the vehicle used for business purposes, including a log of the odometer mileage. Car loan payment records verifying the amount of interest that was paid. Although you can’t take the tolls or parking fees in the context of the automobile loan interest deduction, you may also be required to keep these kinds of receipts if they help in proving that the vehicle was used for business reasons. Bankrate tip
Keep supporting documentation for at least three years from the date you file the tax return.
If you’re not sure, consult an expert consult a professional if: You’re uncertain about whether you qualify for the car loan interest deduction You’re unsure of how to calculate the exact amount of the deduction that should claim on your tax filing A can help you navigate the process and decide if this deduction is appropriate for your unique situation. For instance, if you use your vehicle for business and personal uses, it may not be appropriate to claim the car loan interest deduction when the business use of the vehicle is minimal. Bankrate’s tip
Claiming this deduction may be more work than it’s worth if you only use the vehicle for business purposes less than 50 percent per month.
Bottom line Deducting the car loan interest from your tax returns is a valuable write-off if you’re a or you’re self-employed. However, before you can take advantage of this deduction, make sure you qualify. Talk to a tax expert if you’re uncertain about how to determine the exact amount you could be eligible for.
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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. Written by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since the end of 2021. They are dedicated to helping readers gain the confidence to take control of their finances through providing concise, well-researched, and clear facts that break down complicated subjects into bite-sized pieces.
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