Can You Write off a Car Purchase at Tax Season?

Did you know that nearly 46% of Americans say that they pay too much in taxes? This is partly because they want to have a fat payoff during tax refund time. But it could also be because they didn’t calculate all their deductions and credits properly and ended up giving an ‘interest-free’ loan to the government until tax refund time.

If you have recently purchased a car, you might be wondering about it in regards to taxes. Can you write off a car purchase? If you can, how would that work exactly?

Read on to find out more about a car tax deduction and how you can take advantage of it this upcoming tax season.

Write Off Not the Entire Purchase but Part of It

Are you going to use your new car for business purposes? IF that’s the case, then you could potentially write off part of the purchase price. You can deduct some of the cost of the purchase price from your gross income.

It depends entirely on what the business use percentage is. For example, if you use your car for business purposes 70% of the time, then you can write off 70% of the cost.

There are also some other rules you have to abide by:

• The vehicle cannot be heavier than 6000 pounds
• It has to be financed and used before December 31st
• And it has to be used for business purposes at least 50% of the time or more

If your new car purchase qualifies, then hurray, you are ready for a car write-off.

You Can Potentially Deduct Car Sales Tax

Firstly, there’s a limit of $10,000 on the amount of sales tax that you can claim until the year 2025. This includes the amount you claimed in taxes from real property taxes, personal property taxes, and state and local income taxes.

Secondly, you can deduct sales tax on a vehicle purchased, but only the state and local sales tax. Make sure to save all sales receipts throughout the year, for any vehicles purchased, and for all other vehicles like airplanes, motorcycles, boats, and motorhomes.

Get more information about a RAM 1500 tax deduction.

Write Off Part of the Loan Interest

If you are financing your new vehicle, then you can’t write off the entire cost of the vehicle, because you haven’t paid that yet. BUT, you can write off part of the loan interest.

The same thing applies here like your purchase price if used for business purposes. If you only use your vehicle for business 70% of the time, then you can only write off 70% of the vehicle interest as well.

Can You Write Off a Car Purchase? – Yes You Can

But it depends on a wide variety of factors. No one said that the IRS made it easy for us to do our taxes. But if you can get it right, you will get a huge chunk of that purchase price back, which is well worth the time and effort you spend on it.

And if someone asks you, ‘Can you write off a car purchase?’ you will be able to answer their question easily.

Keep browsing through other articles on our website, so you can keep learning more about tax deductions.