Tax season is upon us once again, and for many people that means stress and worry. Gathering together all the year’s finances can be enough to drive you up the wall. Luckily there are always some silver linings, and in the case of buying a car, they may be more significant than you thought. As a matter of fact, you may not know that there are a number of tax deductible vehicle expenses that will save you money on your tax return. But there are!
Particularly if you own a small business and you use your car for business purposes, you may be entitled to significantly more tax deductible vehicle expenses than you are aware of. Here is a short list of potential tax deductions you may be able to take.
1. State Sales Tax
If you bought a new car this year, chances are you paid a big chunk of state sales tax upon purchase. That’s the bad news, but the good news is this: your small business has the choice of deducting either state sales tax or state income tax from the return, so you may have the opportunity to deduct a significantly larger amount, depending on your business.
2. Title and Registration Fees
If your vehicle is exclusively used for business purposes, you can deduct all the title and registration fees that you may be required to pay by your state. If you use the vehicle partly for business and partly for personal use, you can still deduct the portion of the fees that relates to the percentage you use it for your business. You will have to be able to document this usage, which can be a bit of a nuisance.
3. Mileage in Certain Situations
In many cases, the mileage your car accumulates during business-related trips may be able to be deducted. If you move, in certain situations the mileage accrued during your move may be deductible. If you use your car for charitable donations, or travel to and from other charity work, those costs may also be deductible. Consulting an expert is the best way to know for sure if your mileage costs can be deducted from your tax return.
4. Fuel Costs
The fuel costs of using your car to help run your business are also deductible. Fuel costs are part of a subset of tax deductible vehicle expenses called “actual expenses.” This category includes things like property taxes, insurance, and depreciation.
5. Maintenance and Repair Costs
Maintenance and repair costs are another “actual expense” that you are able to deduct. Your car may undergo more stress and wear in service of your business than it would as a personal vehicle, and that is taken into account.
In order to claim these deductions, you need to have records of all purchases and expenditures. It is important to keep accurate records for your own personal finances. Keep track of all your receipts in a file and be prepared to get the maximum refund this year.
How will you save on your taxes this year?