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What Happens If you Don't File Taxes For Your Small Business

As a small business owner or entrepreneur, you should take advantage of every opportunity to claim tax deductions, which reduce your taxable income. You’ll then pay the IRS this lowered income tax amount. Small business owners and other self-employed individuals may be familiar with better-known tax deductions relating to health insurance, property taxes, travel, and home office usage. <a href="https://1800accountant.com/blog/car-small-business-tax-deduction">But what about car loan interest</a>? Sure, you've heard that costs associated with vehicle use, such as mileage, can help reduce your taxable income. But car loan interest? If you took out a loan for a vehicle used partially or exclusively for your business, that loan interest is tax deductible. Key takeaways about deductible car loan interest include:&nbsp;<ul><li>The conditions that make car loan interest eligible to be deducted.&nbsp;</li><li>The forms and paperwork you'll need to claim this deduction.&nbsp;</li><li>What to do if you need extra help reducing your taxable income.&nbsp;</li></ul><h2>When Is Car Loan Interest Tax Deductible?</h2>It's essential to understand your eligibility before pursuing this deduction. If you've purchased a vehicle solely for personal use, the loan interest associated with that purchase is ineligible. Small business owners, entrepreneurs, and self-employed individuals can deduct loan interest for a vehicle registered to be used exclusively or partially for business purposes. <a href="https://1800accountant.com/blog/10-often-overlooked-business-deductions">Claiming a tax deduction for car loan interest</a> associated with a vehicle used fully for your business is slightly less complicated than claiming this deduction for a mixed-use vehicle. If your vehicle is used entirely for business purposes, you can write off 100% of the auto loan interest. If your car is used for personal and business reasons, which is common, you must determine how much it is used for your business. Two methods will help you determine business usage:<a href="https://www.irs.gov/taxtopics/tc510" target="_blank"> the standard mileage rate or the actual expense method</a>. Keeping detailed records will help ensure you make an accurate calculation.&nbsp;<h3>Standard Mileage Rate</h3>The standard mileage rate is 70 cents per mile in 2025. To use this method, you must select it in the first year, with an option to use the actual expense method later. You must also own the business vehicle and cannot:&nbsp;<ul><li>Operate five or more vehicles, considered a fleet, simultaneously&nbsp;</li><li>Have claimed a Section 179 deduction on the business vehicle</li><li>Have claimed the special depreciation allowance</li></ul>This guidance is similar to that for leased business vehicles, although in that scenario, you must use the standard mileage deduction <a href="https://1800accountant.com/blog/rideshare-driver-tax-guide">since the actual expense method cannot be used</a>.<h3>Actual Expense Method&nbsp;</h3>Determine what it actually costs to operate your vehicle for business while excluding personal use via the actual expense method. <a href="https://1800accountant.com/blog/small-business-tax-deductions-checklist">Costs you’ll itemize to determine business-related usage include</a>:&nbsp;<ul><li>Fuel</li><li>Oil changes&nbsp;</li><li>Repairs and maintenance&nbsp;</li><li>Tires</li><li>Registration fees and insurance&nbsp;</li><li>Depreciation</li></ul><h3>The Future of Deductible Vehicle Loan Interest</h3>While write-offs for car loan interest exclusively apply to business use, that could change over the next few years and apply to all taxpayers. During the 2024 presidential campaign,<a href="https://www.cbsnews.com/news/trump-car-tax-interest-on-auto-loans-fully-deductible/"> CBS News reported</a> on comments from then-<a href="https://money.com/car-loan-interest-tax-deductible-trump/?__cf_chl_tk=cnb6QKcUahY6B8sigR9yOHnxVNmcBLs3mePMfpGLMQ8-1729673211-1.0.1.1-5aAr75QH8W7ZaX1ZEgHGRDtMZNuv18_tNCDp4RsgvKs">former President Donald Trump</a>: "'We're going to make it fully deductible, the interest payments, that's going to revolutionize your industry,' Trump said Thursday during a nearly two-hour speech at the Detroit Economic Club. 'This will stimulate massive domestic auto production and make car ownership dramatically more affordable for millions and millions of working American families.'"<a href="https://1800accountant.com/blog/electric-vehicle-tax-credit-explained"> It's unclear whether deductions for new cars</a> for personal use would follow the same rules as those for business use. If implemented, personal tax filers wouldn’t be able to take advantage of tax benefits, tax credits, or tax cuts related to their car expenses for the 2024 tax year.<h2>Deducting Car Loan Interest on Taxes: Required Documentation &amp; Paperwork</h2>Keeping detailed supporting records and documentation is essential to <a href="https://1800accountant.com/blog/rideshare-driver-tax-deductions">ensuring successful loan interest write-offs</a>. Retain the following for your annual records including:&nbsp;<ul><li>Vehicle maintenance logs</li><li>Loan payment records</li><li>Logbook for your business mileage</li><li>Receipts for fuel, oil changes, tires, tolls, and parking fees</li></ul>Record and manage your documentation and paperwork by entering figures in a physical ledger, creating a bookkeeping spreadsheet, or using a bookkeeping software platform. This way, <a href="https://1800accountant.com/blog/self-employed-tax-write-offs">you can easily claim write-offs</a> when you’re preparing your tax return.&nbsp;&nbsp;Maintaining accurate and current financial records requires time and attention to detail. If you're struggling with your books, our<a href="https://1800accountant.com/services/bookkeeping"> full-service bookkeeping solution can help</a>.&nbsp;<h2>Writing Off Vehicle Expenses: Get Expert Help</h2>Small business owners and entrepreneurs should take advantage of the numerous vehicle write-offs for which they're eligible, even if issues, such as past tax filing methods, undermine the viability of their approach. However, not claiming these business expenses can hamper their <a href="https://1800accountant.com/blog/truck-driver-tax-deductions">ability to invest in their businesses, hire employees, and compete</a>. With help from the tax professionals at 1-800Accountant, America's leading virtual accounting firm, you can effortlessly sidestep tax issues and stay focused on growth. Save time and achieve your annual financial goals with our suite of affordable, tax-deductible financial services. Schedule a quick consultation–usually 30 minutes or less—to learn how<a href="https://1800accountant.com/services/small-business-taxes"> business tax preparation</a> and<a href="https://1800accountant.com/services/business-tax-advisory"> </a><a href="https://1800accountant.com/services/income-taxes">personal income tax preparation</a> will help you maintain full compliance with maximum tax savings.

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