Now that tax season, many people start asking car related questions regarding their return. Can I write off my expenses? Should I use my return for a new purchase? We are not tax experts and suggest you seek the advice of a professional before making any financial decision. First, for those of you who have not finished your long form, let’s look at your potential write-offs.
If you are self-employed or regularly use your car for work, this is a no-brainer. However, what some may not know, even if you rarely use your car for business, there may be money in it for you. The first issue is you need to prove the amount you use your vehicle for business purposes. If you have receipts or made deliveries during work hours, this is relatively easy to verify. Remember, if you are planning on writing off car expenses, it helps to keep everything logged and for easier tracking. If you use your car for personal use, you usually cannot deduct for repairs unless you qualify to claim expenses on your car under the Actual Expense Method. For any of the above, again we remind you to check with your accountant or tax professional on exactly which methods are best.
Write off expenses
Another often overlooked write off idea is charity. People are often willing to write off the goods and money they donated but tend to forget also to write off the mileage collecting, delivering and any repairs needed for damages while working or volunteering for the charity.
Second, we move into using your return on your car. Most people get a tax return and do not include it in their budget. Buying a new car with your tax return can be a wise choice if you play your cards right. The two best things you can do to invest in your car with a tax return is to pre-empt repairs or buy a new vehicle.
Budgeting your tax refund
The smart way to use your return is to not treat it as found money. If you are going to need tires and brakes soon, or if scheduled maintenance is coming up, no better time to do it then when you have a few extra bucks in your pocket. It is better to get expenses on the horizon out of the way before that day comes and an emergency emptied the bank account.
Another thing people do is use their return to buy a new car using their return as their down payment. A more substantial down payment holds many benefits; if your credit is less than stellar, a down payment hedges the bank’s liability, a more significant down payment can substantially reduce your monthly payments. Additionally, you can just use your return for a large lump sum payment on your current car or to refinance freeing up some monthly income for yourself.
Finally, do not just show up at a dealership ready to sign over your check. Deposit it in the bank, carefully and responsibly weigh your options. Be patient, do your homework, and as with all financial advice, we can not say it enough, run your idea by a financial professional. Good luck and happy shopping for your new car or upgrades! Speaking of which, take a look at what we currently have in stock!