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Question
Can I write off as business expenses the interest on buying a car on credit, which is used for work, as well as sales tax on its purchase?
AI accountant’s answer:
Yes, you can generally deduct the interest on a car loan if the vehicle is used for business purposes. The business use portion of the interest expense is deductible. To claim this deduction, you must keep a log of the miles driven for business and the total miles driven. The business use percentage is calculated by dividing the business miles by the total miles.
In addition to the interest expense, you can also deduct sales tax on a vehicle used for business purposes. The deduction for sales tax is usually claimed as part of the vehicle's cost when calculating depreciation. If you're using the actual expense method to determine your vehicle costs, you can include the sales tax as part of the basis for depreciation. If you are using the standard mileage rate to deduct vehicle expenses, the sales tax is not separately deductible, as it's included within the standard mileage rate.
Keep in mind that these deductions will usually need to be pro-rated based on the percentage of business use of the vehicle. Remember to maintain accurate records of your vehicle's expenses and usage to support your deductions.
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