Hi everyone --Can I write off the interest paid on a car loan, if I am a sole proprietorship and use the vehicle for business?I am in the middle of incorporating, but will be buying this vehicle in the next day or so. (The incorporating may not be done for 6 months.) So, the vehicle will be bought when the company is a sole proprietorship.Thanks for any advice. I appreciate it.Footsox
Can I write off the interest paid on a car loan, if I am a sole proprietorship and use the vehicle for business?Yes. It will have to be prorated for the percentage of time you use the car for business, but it is a perfectly fine deduction on your schedule C.(The incorporating may not be done for 6 months.)I trust that this is at your choosing. The process of forming a corporation is pretty trivial. It can get done in a day - sometimes on the same day if your willing to pay the "rush" fees. All of the extraneous stuff to get your corporation up and running can take another day or two. But there is no reason I can think of for it to take 6 months.Unless, of course, you are choosing to wait 6 months for some reason.--Peter
Hi Peter --Thanks for the info. I figured I could write off the car loan interest, just wanted to make sure.As for the incorporating, we are getting a new company name and changing it from my husband's name to mine, new business licenses, etc. That is the reason it will take me 6 months, because I don't know when we will get it all done. :-) Thanks for the input, though.Thanks!Footsox
You might find that you'll receive a bigger tax deduction if you write off the mileage instead. I'm in real estate, and everybody I know writes off the mileage. Of course, my interest rate was very low, on a very low balance, but my associates likely pay much higher rates, and they still write off the mileage.Years ago I leased vehicles because I could write off the entire lease payment. So you might want to ask your accountant if there is a way that your corporation can lease the vehicle from you, and then you could write off the lease payments (if the tax laws haven't changed). For example, a lease payment of $500 per month would give you a tax deduction of $6,000 against corporate income. Whereas interest at 5% on a $40,000 loan is about $2,000 a year. Mileage at 37.5 cents a mile on 15,000 miles is $5,625. (The mileage rate changes every year, and I'm not sure what it is for this year.) So I would think you would need to figure out if you need the deduction against corporate income or personal income.elizabeth
For example, a lease payment of $500 per month would give you a tax deduction of $6,000 against corporate income. Whereas interest at 5% on a $40,000 loan is about $2,000 a year. There's a whole lot more to it than just interest and lease payments. Along with the interest goes depreciation expense. And that is another whole bag-o-worms. Congress keeps mucking around with vehicle depreciation. So some cars have limits on the annual depreciation expense, light trucks have different limits, heavy trucks have a third set of rules, and SUV's have a fourth set of rules.I'm surprised your agent friends haven't all flocked into purchases of SUV's for driving your homebuyers around in. At the moment, those have become very popular vehicles.--Peter
I'm surprised your agent friends haven't all flocked into purchases of SUV's for driving your homebuyers around in. At the moment, those have become very popular vehicles.Oh, but they have. Many drive the higher-end SUVs. I drive a two-seater Mercedes, and everybody says "How do you drive buyers?" Ha, ha, ha. Easy, I drive with them. LOL.elizabeth
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