Tax Deductions Involving Your Car
It’s tax season, and you’re scouring the internet looking for ways to maximize your tax return by increasing your deductions. Your vehicle can be a useful resource when it comes to saving you money on your federal taxes. Here are the most common ways that people utilize their cars to save money on their taxes.
Note: We at The News Wheel are not financial advisers nor tax experts. The following are merely based on our experiences filing our own taxes. Please contact a tax adviser for guidance or research IRS guidelines if you’re considering any of the following options.
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Electric Vehicle Credit: Buyers of new electric vehicles can receive a certain amount of money credited to their taxes (at least, for the time being…).
Donating Your Car: If you donate your vehicle to charity through the channels, you’re able to lump the vehicle’s market value with the rest of your charitable contributions within your itemized deductions.
Sales Tax Deduction: In states that don’t have a state tax, you have the option of including sales tax payments on your itemized deductions instead. If you live in a place where this is an option, you could include the sales tax you paid on your vehicle purchase with your total paid sales tax.
Business Use: If you use your own vehicle for your small business or self-employment, and it’s not a luxury model or equipment vehicle, you can write off your vehicle expenses on your taxes. Use the standard mileage rate provided by the IRS and track vehicle expenses like maintenance, registrations, and parking fees. Just make sure you keep detailed records for proof.
Car Loan Interest: This takes some fancy footwork, but if you establish a home equity line of credit and use it to purchase a car, you can deduct the payment interest under the home mortgage interest of your itemized deductions.
Registration Taxes: If your state requires you to pay a tax when you register your vehicle, you can deduct that tax from your Schedule A itemization under the personal property taxes.
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