Don’t you just wish you can write off taxes on new car purchases? In buying a brand new vehicle, whether for personal or business use, one has to shell out a huge amount of money due to the expensive price and its accompanying taxes. But there’s good news: one may ease the financial burden in owning a vehicle by availing a car purchase tax deduction. Read more to learn how you can get a new car tax deduction.
Write Off Taxes On New Car | Things You Need To Know
In this guide:
- Who May Qualify To Write Off Taxes On New Car Purchase?
- What Taxes Can I Write Off On A New Car Purchase?
- How Can I Write Off Taxes on Personal-Used Vehicles?
- What Should I Do If My State Has No Sales Tax?
- How Can I Write Off Taxes on Business-Used Vehicles?
Who May Qualify To Write Off Taxes On New Car Purchase?
Taxpayers who acquired a brand new vehicle for personal use may qualify for a tax deduction if they purchased any of the following: a passenger car, light truck, or motorcycle — as long as it weighs 8,500 pounds or less. Also, only vehicle sales taxes of up to $49,500 would be considered for deduction.
Taxpayers who also bought vehicles for business purposes may also avail tax deduction. The vehicle should weigh anywhere between 6,000 and 14,000 pounds.
What Taxes Can I Write Off On A New Car Purchase?
The government allows taxpayers to get a new car tax deduction on the following tax declarations:
- Sales tax, for states that collect state and local sales and excise taxes
- Income tax, for states that do not collect state and local sales and excise taxes
- Business property tax, for vehicles purchased for business operation purposes
How Can I Write Off Taxes on Personal-Used Vehicles?
The most basic method is through deduction on state and local sales and excise taxes paid in buying new vehicles. This is in accordance with the American Recovery and Reinvestment Act. The Internal Revenue Service allows taxpayers to deduct sales tax paid on a vehicle purchase by itemizing on Schedule A on Form 1040.
This method, however, is only possible in US states that mandate state and local sales and excise tax.
What Should I Do If My State Has No Sales Tax?
There are 5 states in the US that do not impose or mandate sales tax, such as:
- Alaska
- Delaware
- Montana
- New Hampshire
- Oregon
For taxpayers in these states, the Internal Revenue Service permits them to write off in their state or local income tax when itemizing deductions on Schedule A on Form 1040. Just make sure to gather receipts from the vehicle purchase.
How Can I Write Off Taxes on Business-Used Vehicles?
If the vehicle to be declared is being used for business, writing off tax is possible via Section 179 deduction. To qualify, the vehicle must be used for business purposes, and it shouldn’t be primarily used as a personal vehicle.
This is possible since Congress provides special tax incentives in buying vehicles for business. The first year write-off for business cars is around $12,000, but you can get more when you buy a pick-up.
For proper compliance, the Internal Revenue Service requires that a businessman maintains a logbook or written record of the business use of the vehicle to qualify for the Section 179 deduction.
For owners of small businesses, watch this video by Entrepreneur to know more about how to write off taxes on new car purchases:
Buying a new vehicle need not be a financial burden for taxpayers. One may simply take advantage of any of the methods for a new car purchase tax deduction to help him avail a vehicle with ease.
Do you have other questions on how to write off tax on new car purchases? Let us help you by posting your questions in the comments section below.
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