How a new car purchase is treated for income tax purposes will depend on the intended use of the car (business
or personal), as well as on the type of car you bought. Please allow us
to explain further, as there is a quite a bit of information you should know.
If
you are using the car for business (income generating) purposes, such
as a self-employment activity like being an Uber cab driver, or an
independent house painter, for example, then you may be entitled to a
tax deduction (called an IRC Section 179 expensing deduction) for the automobile
purchase (but there are lots of rules and "what ifs" that go along with
this). Ongoing expenses, such as annual costs of operation, can also be
tax-deductible as ordinary business expenses.
If you are using
the car as a personal
vehicle, then the only active and current federal tax credit of which we are aware
that applies to purchasing a new car is the Electric Vehicle Tax Credit.
You can learn more about that tax credit here, at the following IRS webpage. And in the TurboTax software itself, you can use the search words "electric car tax credit" to transport yourself to the appropriate section of the program:
https://www.irs.gov/businesses/plug-in-electric-vehicle-credit-irc-30-and-irc-30d
If you live in a state where you paid sales tax on your new car,
and if you also itemize your tax deductions (on Form 1040, Schedule A)
rather than taking the standard deduction, then the sales tax cost of
the car can be separately added to the rest of your sales taxes paid, in
order to calculate your allowable sales tax deduction. So that could
be a tax benefit.
You would find this section, in TurboTax, among
the Deductions & Credits portion of the interview. Please see the
attached screen-capture images below this text for an illustration. You can also type the words "sales tax car" into the Find / Search box on your TurboTax screen, and then click the Jump To
link that should appear beneath -- that will take you to the
appropriate TurboTax page. Alternatively, you can find the sales tax
section under the main Federal -> Deductions & Credits ->
Estimates and Other Taxes Paid sub-menu (again, please see
screen-capture below).
That is pretty much what there is to know,
with respect to the purchase of a new car and income taxes. Beyond that which
is described here, the act of purchasing an automobile itself is not something
that needs to be reported to the IRS, nor would it benefit you
financially to do so, even if there were a place to disclose the
purchase on your personal tax return (again, business use and ownership
of a car is treated differently than personal use and ownership).
Finally, please also bear in mind that this discussion addresses federal tax benefits only, as certain states (like
California) or even some local taxing jurisdictions, may also offer tax
benefits or breaks on their own (including, perhaps reduced registration
or licensing fees) for purchasing and driving certain types of cars.
If you have further
questions, encounter any difficulties, or just want to speak with a live tax
expert who can walk you through your TurboTax entries (including the ability to
screen-share with your computer), please feel free to contact us. We
would be happy to help you (and as a TurboTax online Deluxe customer, the call is free to
you). Here is a link where you can create a support ticket and reach us:
https://support.turbotax.intuit.com/contact/
