Buying a vehicle for your business always involves considerable cost and expense; however, there are several parts of the car buying experience that can save you money through tax deductions. If you are using a vehicle for business use, there are many costs associated with the purchase of a commercial vehicle that can help you save money on your business income taxes.
New Car Depreciation
In most cases, you'll be able to use depreciation of a vehicle to help offset the cost of a business use vehicle. The depreciation is the declining value of a vehicle over its useful life. There are several ways in which to compute depreciation; however, any one of them will usually allow you to deduct the amount of depreciation from your income tax return. Depending on the original purchase price of the vehicle, this may help you save thousands of dollars on your income taxes.
Most small businesses can also deduct the amount of interest paid on business car loans - as long as the vehicle is used for business and not personal use. By deducting the finance charges, or interest charges, that you pay on commercial vehicle loans: you can also save a lot of money on your income taxes.`
Deduct Sales and Registration Taxes
Most of the time, you'll be able to deduct the amount that you paid in sales tax or vehicle registration tax to the state that your business operates in. Generally speaking, if a vehicle is used for business purposes, the IRS will allow you to deduct the entire amount that you paid in these types of state taxes from your federal income tax return.
Deduct Insurance Expenses
If you use your car or truck for business use, you will generally be allowed to deduct the entire amount that you pay in car insurance premiums on commercial vehicles. Insurance premiums add a significant amount to the operating cost of a commercial vehicle, and being able to deduct them from your federal income tax will help your business.
Use of the above type deductions assumes that you are itemizing expenses and claiming them on your either your corporate income tax return or small business income tax return (if you are an S Corporation or sole proprietorship). However, in order to determine if vehicle expenses are actually deductible for you or your business, seek out the advice of a certified public accountant. Only he/she can help you accurately gauge what types of expenses are tax deductible, and if you are legally eligible to claim them.