Can I Claim a Car Loan?
Car loans are a major expense in many Americans' lives. Some customers live with a car payment consistently. In addition to car loan payments, other auto expenses, like insurance, tolls, gasoline and maintenance, they can strangle a consumer's ability to save money each month. There are a number of ways to deduct parts of your car loan, and get back some money from your taxes.
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Personal Cars
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If you are employed by a company and you use your car for commuting and personal activities, you are ineligible to claim your car or any auto expenses on your taxes. The IRS clearly explains that a car used only for such purposes is the responsibility of the taxpayer.
Business Use
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The IRS does allow certain taxpayers to deduct part of their car expenses. These consumers use their car as part of a home business. In order to figure the expense, car owners need to keep track of their mileage each year. Consumers must clearly distinguish between personal miles and business miles. For example, a salesperson on a sales call can deduct the miles traveled to and from a call, but not to and from the grocery store.
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How to File
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Consumers must use the IRS standard mileage rate to figure their auto expense deduction. First, figure the total mileage traveled over the year. Then calculate the percentages of personal and business use. Using the IRS mileage rate, calculate your deduction. The 2008 mileage rate is 58.8 cents per mile. For example, if you traveled 10,000 miles, and 75 percent of your mileage was for business purposes, you can deduct $4,410.
American Reinvestment and Recovery Act
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The 2009 Stimulus package, signed into law by President Obama in 2009, allows certain consumers to deduct interest and fees from car loans. Individual borrowers who make less than $125,000 and families making less than $250,000 are eligible for this program. This program allows qualified consumers to deduct the interest charges for one year as well as any sales tax on a vehicle.
Cash for Clunkers
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Similarly, the American Recovery and Reinvestment Act of 2009 allows a tax credit to certain vehicle owners. This program, dubbed Cash for Clunkers, is designed to help consumers purchase new, more fuel efficient cars by exchanging their fuel-guzzling cars for a tax credit.
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