Research Tax Credit
June 25th, 2008
Question: Can anyone give me any information about car and tax?
So if I go and buy a car for that I would use a lot for my job isn’t there some sort of tax credit thing that I can file when I do my taxes do they usually give back how much you paid or what? I researching into real estate and I need a better car to take clients to go see homes
Answer: If your employer “requires” you to use your personal vehicle for business, then you can claim mileage IF you have enough other deductions to itimize.
You need to keep a detailed log of how many business miles you have driven each day. You need to keep that long in case your tax return is audited, as this would be used to substantiate the mileage you claim. You needed to have MORE THAN $8,450 in deductions if you were single last year in order for it to benefit you to itimize (almost $17,000 if married filing jointly). If you exceed that in deductions, remember that the amount you get to claim for mileage is limited when you file. You take credit on Schedule A for the mileage amount that exceeds 2% of your adjusted gross income. You can also claim either state income tax OR sales tax, but not both. If the tax paid on a vechicle + the total of other sales tax you pay annually is more than the state income tax you pay, then you can claim the sales tax amount whether or not you use a car in your business.
If you are in business for yourself, then you can purchase a vehicle to use in that business and amortize the price over a number of years where you figure your profit/loss from your business. You can select a couple of methods to expense the car/mileage. You would probably need to read up on this in Publication 17 which is available on line from the IRS if you’re going to do your own taxes. The link below is for the tax year 2006. The new one that will be used when you file this year’s taxes (2007) has not been released yet.
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