Tax season is upon us, and many people are anxious to find ways to catch a tax break while they work on their income tax returns. There are so many deductions available to claim, but unfortunately, many of these do not apply to the common tax payer. While doing taxes can be a daunting task, and searching for deductions can make it even more difficult, you should definitely look into any deductions that may apply to you. Looking for tax deductible items is complicated, but if you want to save some money this tax season, search for any and all that have to do with your situation, and you will feel much better about dealing with Uncle Sam this year.
One question that may come up when working on your taxes is about the interest on your car loan. Is car loan interest available for tax deduction? Unfortunately, there is no easy answer to that question because when dealing with the Internal Revenue Service, you rarely get a straight answer to any tax related question. However, there are two ways that you might be able to get some money back when it comes to your auto loan. As long as you do not falsify any items on your tax return, or claim a deduction falsely, you should be able to carry these out without a problem.
Your Car as a Business Expense
One way you can deduct your car loan interest is by claiming your car as a business expense. In order to do this, you must keep very detailed records on the use of your car, in case the IRS gets suspicious and decides to audit you this year. In order to avoid an audit by the IRS, you should have a legitimate reason to claim your loan interest as a deduction, like owning a real business. Owning a small business and driving your car frequently while doing business related tasks will give you an airtight reason to use your car loan interest as a tax deduction on your income tax return this year. You would also be able to deduct expenses incurred for maintaining your car, such as oil changes and repairs.
Your Car Financed by Your Home Equity Loan
If you used your home equity line of credit to pay for your car, you should be able to claim your car loan interest on your tax return. However, you should definitely be aware of the risks that come with using your home equity line of credit to finance your vehicle. If you have issues with paying your car payment on time, you could risk losing your house. This is why, if you do choose to use your home equity line of credit in this manner, you must be very prompt and even early with your payments, so you do not wind up losing your home.
Be very careful when you decide to attempt using your car loan interest as a tax deduction. If you go into this not knowing every detail about how to handle a deduction like this, you could end up in major trouble with the IRS, a company that you would rather never hear from.