When it comes to purchasing your next vehicle, you could be leaving money on the table. The truth is that savings on your next car are not only dependent on special deals offered by the dealership. There are also savings to be had in the form of a tax break.
Around the country, many well-off Americans know how to get money back on their car purchases through car-related tax breaks. What are some of their strategies, and how can you benefit? These 4 tips can help you maximize your tax breaks.
The Electrical Vehicle Tax Break
This tax break is well-known, but it is still worth mentioning as it has not been discussed much recently. Depending on the car model and battery capacity, you can receive a tax credit between $2,500 and $7,500 from the Federal Government if you purchase a new electric vehicle. However, beware, some manufacturers are coming up on their maximum tax credit quotas. Be sure to confirm the program for the electric car you want to purchase is still active.
Deduct Gas Mileage to and from a Rental Property
Do you own a rental property of any kind? Well, you are in luck. You may be able to write-off the cost associated with gas mileage from driving to and from your rental property. This tax break is only applicable if you are going to check on the property or complete a project to maintain it. You must keep good records of how much you have driven and the standard gas prices in the area. Also, be sure to keep all gas-related receipts.
Skip the Luxury Vehicle and Instead Invest in an SUV
Do you own a small business? Well, you may want to invest in an SUV instead of that two-door luxury coupe. The “SUV Tax Loophole” or Section 179 allows small business owners to deduct the full purchase price of equipment used for a small business. This tax break is often used by small business owners to write-off the purchase of an SUV or another large vehicle. The deduction has decreased a bit over the years, but every bit helps.
Keep an Eye on Your Car Sales Tax
Did you know that you can deduct sales taxes during tax time, and this includes sales taxes from cars? Here is one stipulation to keep in mind.
During tax time, you can either deduct state and local taxes or write off the sales taxes that you paid throughout the tax year, but not both. You want to compare the state and local taxes with this number and choose the larger of the two.
This process requires you to keep an accurate record of all receipts and proof of purchases. It’s recommended that you use an app to keep track of everything you buy so you can fully take advantage of this tax break.
Can You Take Advantage of a Vehicle Tax Break?
While your car is a depreciating asset that will lose value over time, the Federal Government offers many beneficial tax breaks. Whether you’re investing in a car you can use for your business, deducting your sales taxes, deducting gas mileage or using any of the other tax breaks available to you, developing a strategy can save you big bucks over time.
Before you know it, you’ll be taking advantage of the same tax breaks as the country’s most well-off Americans.
Since choosing the right tax deductions is very specific to your needs, it’s best to speak to someone well versed on this topic. I’ve helped many clients strategize their tax deductions, and if you desire the same support, you can schedule a 1-on-1 financial coaching session.