Do you use your personal vehicle partly or wholly for business? If you are leasing this vehicle, the interest you’ve paid throughout the year might be tax deductible.
Here are some guidelines to consider when taking this interest deduction:
- Your car must be used for your business or work.
- You have to be leasing the vehicle and your name has to be on the loan.
When claiming this deduction (or any deduction), always be prepared to show proof on paper that you are eligible for the deduction. If you use the services of a tax preparer, show up with your receipts, paperwork with the amount of interest paid over the course of the year, and proof that you use your vehicle for business or work.
To be eligible for this deduction, you must already be deducting other vehicle expenses on an itemized deduction plan. These other vehicle expenses include the gas, parking, repairs, and even depreciation expenses associated with your use of this vehicle for business. If you aren’t using an itemized deduction plan on your taxes, you won’t be eligible to deduct your interest.
Using Your Car for Another’s Business
If you are an employee and you are using your car for another individual’s business (i.e. your employer), you first have to make sure that operating expenses aren’t being claimed by that person.
One way to tell whether your employer is already claiming operating expenses is if your employer is reimbursing you for operating costs, mileage, or other expenses. If so, then there’s a good chance that your employer is already claiming and deducting those costs from the use of your vehicle. In this case, you would not be eligible for a tax deduction on your vehicle loan interest.
We know that taxes can be confusing. For questions and advice, call Taxation Solutions, Inc. We’re more than happy to help taxpayers in Cincinnati and surrounding areas!