Posts Tagged ‘Car Tax’

Is Your Car Tax-Deductible?

When tax preparation season comes around people naturally begin looking for ways to deduct any and all possible living expenses to minimize the amount of taxes they pay on their earnings for the prior year.  One of the first items that comes to mind is the family automobile or truck.  Deciding whether its use is deductible is not as easy as it may seem.  Tax codes change frequently, and keeping up with those changes is imperative.  How can you do it?   This is one of the questions that you can answer when you use Turbo Tax to prepare your income taxes.  One thing is for sure, if you’re going to buy Turbo Tax, use a Groupon coupon to make the purchase.  You can save as much as 20% off when you do.  With Turbo Tax software it is easier to determine whether you auto use can truly be considered a tax-deductible item.

But a more fundamental question exists.  If a person must have an automobile to get to and from his or her place of employment, is that auto a requirement of the job?  And if it is, then it is not a “pleasure” possession but something necessary for work (even if it is just to get to work and back) then doesn’t that make it an “employment expense” and therefore a legitimate tax deduction?  That question varies depending upon your principal source of income, your lifestyle, and the primary use you make of your vehicle.  Sports cars may not seem to qualify as items to fit in that category, but – if they are an essential part of one’s way of making a living they might qualify after all.  It is therefore advisable to document expenses you incur if you plan to take this course.

Of course, the answer to this question can be debated – and it can become exceedingly complicated when you factor in the type of vehicle (SUV, coupe, sports car. etc.), the amount of use that is work-related vs. that which is for personal purposes, and the age and make of the vehicle.  If you can deduct a significant portion of your monthly car operation expenses, coupled with part of the amount you pay for your car payment, then that might significantly impact your taxes.  When you are self-employed, and if that employment requires the use of your personal vehicle then using Intuit tax preparation software can make it easier for you to determine what expenses can be included in calculating your taxes.