Most taxpayers know they can deduct certain kinds of loan interest on their taxes, such as mortgage interest and student loan interest. That might make you wonder if you can deduct other kinds of interest, including interest paid on your vehicle loans. Unfortunately, the answer is more complicated than just a simple yes or no.
To determine whether you’re eligible to deduct your vehicle loan interest on your tax return, you’ll need to answer the following questions:
- Is the vehicle used for business purposes? If the vehicle is operated 100% for personal use, the loan interest is not deductible. If the vehicle is used partially or entirely for business, a portion of the loan interest may qualify as a deduction.
- Is the business use of the vehicle as an employee? If you are self-employed, you can deduct vehicle loan interest on your self-employed business schedule (Schedule C). You may deduct the portion of the interest that aligns with the percent of business use of the vehicle. If you use the vehicle for business as an employee, the interest is not deductible as an itemized deduction.
Not sure if your vehicle qualifies for a loan interest deduction? Just ask. At Taxation Solutions, Inc., we have 40+ years of experience working with tax problems simple and complex. We’re happy to answer your questions and help you get your taxes done right. Call now!