Question

I have question about deducting car loan interest from my tax return. Can I deduct car loan interest if I use my car for business?

Answer

Typically, deducting car loan interest is not allowed. But there is one exception to this rule. If you use your car for business purposes you may be allowed to partially deduct car loan interest as a business expense.

If you use your car for business purposes, you may be able to deduct actual vehicle expenses. But you will need to keep accurate records of your business expenses to show proper use of the vehicle. Actual vehicle expenses that may be deducted, when used for business, may include but is not limited to:

Automobile loan interest
Vehicle maintenance
Insurance
Tolls and parking fees
Gasoline
Oil Change

To determine the amount of each actual vehicle expense that may qualify for a tax deduction you will need to calculate the percent of time that the vehicle is used for business. Typically, this calculation is determined by the number of miles driven for business purposes only.

You will have to determine if it is more beneficial to you to use the standard mileage rate deduction or actual vehicle expense deduction. You cannot use both methods.

Related Topics

Related Resources

Filing for a Deceased Taxpayer

If you need help handling an estate, we're here to help. Learn how to file taxes for a deceased loved one with H&R Block.

Don’t Overlook the 5 Most Common Tax Deductions

From retirement account contributions to self-employment expenses, learn more about the five most common tax deductions with the experts at H&R Block.

New Baby, New House or New Spouse? How Major Life Changes Affect Your Taxes

Getting married? Having a baby? Buying a house? Go through your life events checklist and see how each can affect your tax return with the experts at H&R Block.

Spring Cleaning: Your Household Goods, Your Tax Deductions

Donating household goods to your favorite charity? Learn the ins and outs of deducting noncash charitable contributions on your taxes with the experts at H&R Block.