Can I deduct car loan interest from my taxes?
Every year it seems I'm looking for new ways to save money on my taxes. Where does car loan interest fall in terms of deductions?
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Answered on Apr 08, 2021
Jim Donaher is a freelance writer and manager with over 35 years' experience in the insurance, banking, and investment management businesses. He provides expertise on a range of topics and is able to explain complex industry information in layman's terms. Jim is the author of two books, including Call Him, He's Home: A Guide to Prayer for Regular People and Then Larry Smiled, a novel about life, death, accountability, and salvation. Taormina, Sicily is his happy place!
“Unfortunately, the answer to this question is almost always no. Uncle Sam isn’t interested in subsidizing your new ride.
The one exception is if you use your car for business purposes. And if you use it for business, you can deduct not only the interest on the loan, but also things like gasoline, maintenance, repairs, and anything else that keeps the car running.
To do this, you have to keep detailed records of these expenses and the miles you drive for business. So if you drive your car 50,000 miles and 25,000 of these miles are for business, you can deduct 50% of your car-related expenses, including 50% of the interest you pay on your car loan.
Now, you may be wondering, is driving to work considered a business purpose? Unfortunately, the answer here is also no. Uncle Sam isn’t interested in subsidizing your commute, either. “
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