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(image: http://i1.ytimg.com/vi/pMGkUW1534Y/maxresdefault.jpg)Is car loan interest tax deductible? Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make smarter financial decisions by offering interactive financial calculators and tools as well as publishing independent and objective content. We also allow you to conduct research and examine information for no cost to help you make financial decisions with confidence. Bankrate has agreements with issuers, including but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The deals that are displayed on this website are provided by companies that pay us. This compensation may impact how and where products appear on this site, including for instance, the order in which they appear within the listing categories in the event that they are not permitted by law for our mortgage or home equity products, as well as other products for home loans. However, this compensation will have no impact on the content we publish or the reviews that you read on this site. We do not include the vast array of companies or financial deals that might be available to you. SHARE Luis Alvarez/Getty images
2 min read 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. Written by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since the beginning of 2021. They are passionate about helping readers gain the confidence to manage their finances by providing concise, well-studied information that breaks down complicated topics into bite-sized pieces. The Bankrate guarantee
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If you have questions about money. Bankrate has the answers. Our experts have been helping you master your money for over four years. We continually strive to give our customers the right guidance and the tools necessary to succeed throughout life's financial journey. Bankrate adheres to a strict code of conduct , so you can trust that our information is trustworthy and reliable. Our award-winning editors and journalists produce honest and reliable information to assist you in making the best financial decisions. Our content produced by our editorial staff is objective, truthful, and not influenced by our advertisers. We're honest regarding how we're able to bring quality content, competitive rates, and helpful tools to you , by describing how we earn our money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for the promotion of sponsored goods andservices or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order the products are listed within categories, except where prohibited by law for our mortgage and home equity products, as well as other products for home loans. Other factors, such as our own website rules and whether a product is available within your region or within your own personal credit score can also impact 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 every credit or financial item or product. Owning a car that you use for some or all of the time to run your business can provide tax benefits. Perhaps the most well-known benefit can be the mileage deduct, a amount set by the IRS that small entrepreneurs and those who are self-employed can use to write off some of the costs associated with operating a vehicle for business purposes. However, that's not the only write-off that is available to owners of a vehicle for business needs. If you own a car , you might also be able to deduct the interest when making Federal tax return. Are the costs of an auto loan deductible?
Car loan interest is tax deductible in certain instances where you use your vehicle for business purposes.
You can take deductions for car loan interest from your taxes Only those who are self-employed, or who own a business and purposes may take advantage of a tax deduction for car loan interest. If you're an employee of someone else's business, you can't claim this deduction. In addition, interest paid on the loan to purchase a car solely for personal use is not deductible. If the vehicle is used for personal and professional requirements, then claiming the tax deduction can be a bit more difficult. You need to determine how much time the vehicle is used for personal needs and apply that calculation in your loan interest deduction you are claiming on tax returns. If, for instance, you use your vehicle 50 percent of the time to fulfill business needs it is only possible to deduct 50 percent of loan interest on your tax returns. If you pay $1,000 in interest on your car loan every year, you are able to only claim a deduction of $500. If, on the other hand the car is being used entirely for business purposes and you are a business owner, the entire amount of the interest may be written off. Documentation to keep When of any kind on your tax returns, it is best to keep detailed documents and records. It is important to be able to confirm all expenses should there be any questions or audits arise. A few records you should keep when claiming the tax deduction of the auto loan interest deduction on your tax returns include the following: A record or log of all trips taken by the vehicle to work, and the log of the odometer mileage. The car loan payments records that verify the interest paid. Though you cannot claim tolls or parking in the context of the auto loan expense, it is possible that you might want to keep these types of receipts if they help support your claim that the vehicle was used for business reasons. Bankrate tip
Keep supporting documentation for a minimum of three years from the time when you file your tax return.
If you're uncertain, you can hire an expert consult a professional if: There's a question about whether you're eligible for the car loan interest deduction You're unsure about the best method to determine the exact amount of the deduction to claim on your tax returns A professional can guide you through the process and determine whether the deduction makes sense in your particular situation. For example, if you use your car for both personal and business uses, it may not be a good idea to take advantage of deduction for deduction for auto loan interest deduction if the business use of the vehicle is minimal. Bankrate's tip
The deduction you claim could be more effort than it is worth if you only use the vehicle to conduct business less than 50% of the time.
Bottom line Deducting the car loan interest on tax returns can be an excellent write-off for you if either self-employed or self-employed. However, 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 may 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. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since late 2021. They are enthusiastic about helping readers gain confidence to control their finances through providing precise, well-researched and well-written details that cut complicated subjects into bite-sized pieces.
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