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New Member

New vehicle bought in 2016

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New Member

New vehicle bought in 2016

How you treat a new vehicle purchase on your income tax return will depend on the intended purpose of the car (business or personal), as well as on the type of car you bought.  Please allow us to explain further.

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 a Section 179 deduction) for the automobile purchase (there are lots of rules and "what ifs" that go along with this).  Ongoing expenses, such as 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 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:

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 image 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 you need to know, with respect to the purchase of a new car and income taxes.  Beyond what is described here, the act of purchasing an automobile 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).

Finally, please also bear in mind that this answer 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 cars.

Thanks for asking your question, and please drive safely.
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