Taxes have long been a complicated enough subject for most people. Unless you spend hours digesting the tax code, you would not even know you could deduct half the things that you can. To make matters worse, the things you can deduct or cannot deduct often make little sense. Then, to make the issue even more convoluted, legislators are constantly making changes to the tax code that confuse even the brightest tax professionals as to what is going on; yet, somehow you are supposed to be intimately aware of all this to keep up with tax rules.
Carry this over into the business world, and it is no surprise that you never knew that there were tax advantages associated with taking out a business car loan. You have long known you could deduct the standard mileage rate for a car used in a business capacity, but your business car loan comes with tax deductible perks too.
Getting a Car Loan for a Business Car
Before you can take advantage of any business car loan tax advantages, you must first have a business car loan. The car loan companies you approach for a car loan will not likely come right out and talk about the tax implications related to the purchase of your car. In fact, it might be a good idea to ask the loan officer you are working with, in order to get your business car loan, to discuss the tax deductions associated with taking out a business car loan. This is important in case there is ever any immediate change to the tax code governing deductions in this area that you should be made aware of as a business car owner.
Deducting Car Loan Interest
When you purchase a car for business use, the tacked on interest for the loan is often treated like an expense that you can write off on your business taxes. It is extremely important to understand that the same is not true for a car purchased for personal use. When you learn that there is something new that you can write off on your taxes, you may have a tendency to imagine that such rules within the tax code apply across the board to a lot of other similar situations too. Unfortunately, this is not often the case.
The legal jargon in the federal tax code governing such situations is often specific enough to restrict the contextual use of such tax laws to a very specific idea. This is what tends to cause a lot of confusion, making people wonder why they cannot write off the car loan interest associated with their personal car loan too. The simple reason is because the car loan interest on your personal car loan is not a business expense. Consequently, it helps to understand that businesses get special tax perks because certain tax deductions are granted to help a business reduce its overall operating costs. So, even if you deduct the standard mileage rate for your business car, you may still be eligible for deducting the following items as well: the interest on your business car loan, tolls and fees associated with parking when on a business trip and any Personal value-based property tax you were charged for, out of pocket, when you bought the vehicle.
Tax deductions for the accumulation of certain business expenses are often found to be legitimate write offs at the end of the year. Unfortunately, unless you are a tax code guru, you may not know they even exist. On the bright side, you now know that business car loan interest is one tax deduction that you can take advantage of and should definitely plan to do so.
About the Author:
“This article was written by Dixie Somers. Dixie is the proud mother of three girls and wife to a wonderful husband. She is a part-time blogger and freelance writer, and she enjoys writing for several niches, including business, family, and finance.”
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