If you are buying the car for a business purpose (e.g. a taxi or limo), the interest is a deductible expense. But a lease might be more tax efficient. 227 views
the deduction for business interest expense, which is figured on new Form 8990, is capped at the total of: Business interest income 30 percent of adjusted taxable income for the year (defined below).
How to Make Canadian Interest Tax Deductible – dummies – Many tax payers in Canada pay interest on personal borrowing, such as mortgage interest, car loans, lines of credit, and credit cards, but few Canadians can deduct that interest on their tax returns. A way exists, however, for some tax payers to convert that non-deductible interest.
Car loan interest would be deductible if the vehicle was used for self employment, or in the service of an employer, but it is not deductible for personal use.
It is fairly clear that the interest paid on home loan is allowed as a deduction in all cases. However, the interest paid on car loan is not allowed as an expense in all cases. It is only allowed to be treated as an expense where the Car is being used for Business purposes. If a Salaried person takes a Car Loan, then he cannot claim the Interest on Car Loan as an expense. Therefore, there would no treatment of the interest paid on Car Loan by the Salaried Employee.
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You can’t claim a car tax deduction for any part of a car loan if you use the vehicle solely for personal driving, but you can deduct a portion of the interest on Schedule C if you’re self-employed and use the vehicle at least in part for purposes related to your business.
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.
Taxpayers that claim interest payments for car loans as a deduction on their income taxes are frequently targeted as candidates for an audit. If you are selected for an audit, you will have to provide proof of not only the validity of any deductions made, but prove you are eligible to claim the deductions to begin with.