Tax Breaks and Your Car

Tax Breaks and Your Car
  • Opening Intro -

    Owning a car does have its privileges. Tax privileges, that is.

    Cars driven for personal use can offer important tax breaks, while those used for business incur even more extensive tax breaks.

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Business and personal use tax deductions are available.

Let’s take a look at how you can make IRS regulations work for you this tax year for your personal vehicle:

Business Use of Your Car

— If you use your car in business, the IRS allows you to deduct your car expenses. You can deduct the miles you drove when using your car for business. That rate is adjusted annually by the IRS — for 2011 it has been pegged at 55.5 cents per mile. Other expenses such as insurance, registration, oil changes and maintenance may also be deductible if you use your car extensively for business.

Qualified Plug-In Electric Drive Motor Vehicle Tax Credit

— Buying a plug-in electric vehicle has advantages to it that go beyond your gas savings and emissions reductions. The IRS allows consumers to take a tax credit of up to $7,500. Eligible vehicles from Nissan, General Motors, Fisker Automotive, Tesla Motors, Mitsubishi and other manufacturers can help you net a credit. See the IRS’ list of qualified vehicles to determine your credit.

Sales Tax Deduction

— Did you purchase a new vehicle between February 17, 2009 and December 31, 2009? If so, the IRS offered taxpayers a way to take a deduction for state and local sales taxes and excise taxes paid on the purchase of passenger vehicles, motorcycles and motor homes. You can amend your 2009 return and still take that deduction. Read the related IRS publication to determine whether you’re eligible for tax savings.

Car Donation

— If you’re planning to donate a car to a recognized charity or have done so in the past year, you have a tax deduction available if you itemize your taxes. You’ll need to calculate the fair market value of your car and provide documentation that the car was donated and give its fair market value. New IRS rules in place since Jan. 1, 2005, have changed how such deductions are handled — follow IRS guidelines to find out how you should handle your donation.

Some states and local governments also offer tax breaks on your car. For example, if you live in California, Colorado or Georgia, those states offer an additional tax credit or deduction for people who purchase certain electric vehicles. Check with your state to see what programs are available.

Money Management reference:

lowering transportation costs

 
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Last update on 2019-06-04 / Affiliate links / Images from Amazon Product Advertising API

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Categories: Tax Tips