Checkmark iconCan I Write This Off?

Can I write off my car payments?

TL;DR

Car payments are not generally tax-deductible for personal use, but portions may be deductible if the vehicle is used for business purposes.

Detailed Answer

If you use your car for business purposes, you may be able to deduct car expenses. If you use your car for both business and personal purposes, you must divide your expenses based on actual mileage. You can deduct the business portion of your car lease payments as a business expense. However, if you use the car for both business and personal purposes, you may need to divide the lease payment between personal use (which is not deductible) and business use (which is deductible). For example, if you use your car 60% of the time for business, you can deduct 60% of the lease payment. If you own the car, you can't deduct your car payments, but you may be able to deduct depreciation, which is a measure of how much of a car's value you've used over time.

Where to Put It on the Tax Form

Schedule C (Profit or Loss from Business), Line 9 (Car and truck expenses)

Real World Example

A freelance photographer uses her car 50% of the time for business purposes, driving to shoots and meeting with clients. She leases her car for $300 per month. She can deduct $150 per month, or $1,800 per year, as a business expense on her tax return.

Calculation Required

A calculation is required for this deduction.

To calculate the deductible portion of your car payment, you need to determine the percentage of time the car is used for business. Multiply this percentage by the total car payment for the year. For example, if you use the car 50% for business and your annual car payments are $3,600, your deduction would be $1,800.

Audit Risk & Documentation Tips

To minimize audit risk, keep detailed records of your business mileage, including dates, miles driven, and the purpose of each trip. Also keep a copy of your lease agreement and payment receipts.

IRS Reference

IRS Publication 463, Travel, Gift, and Car Expenses

Relevant Industries

FreelancersSmall BusinessSales ProfessionalsReal Estate Agents

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Disclaimer: This is for informational purposes only and should not be construed as tax or legal advice. Always consult your tax advisor.

Page created on July 3, 2025

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