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How the New Car Tax Deduction Works


To encourage purchases that can help to stimulate the economy, a new car tax deduction is in place to help cover the costs of buying a new car. Whether you're filing small business taxes and you've bought a business vehicle or individual taxes for your own personal car, learn how to get the tax deduction that you deserve on your new car to save money.

Purchase in Time

There are deadlines for when new car purchases must be completed in order to be tax deductible. Generally, this is the last day of the calendar year before the tax cycle is completed. Make sure your purchase has been completely processed by this time.

Check Income

Not all purchasers will be eligible for a deduction. You'll have to qualify based on your income levels and/or based on the size of your business. Double check with the IRS that you qualify before you make the car purchase.

Ensure That the Car is Eligible

Some cars are not eligible for the tax deduction. Generally, fuel efficient and environmentally friendly cars are encouraged via a tax deduction, so this may be a good place to begin your search for a new vehicle. Double check that the car you're interested in qualifies before you purchase it. The price of the car must also qualify for the deduction as well; ensure that the car is neither too expensive nor too inexpensive to qualify.

Mark the Deduction Properly

When you file your taxes, mark down the cost of the car and file it as a deduction so that it will be properly included in your tax filing.

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