Purchase of New Vehicle Used for Personal, Side Hustle & Ministry

[shareintl]

How does purchasing to a new vehicle (with auto loan) vs very old vehicle (NO loan for many years) impact Fed and Wisconsin tax reporting & deductions?  It's a (main/only) Personal Vehicle used % for personal/regular employment, and % for small side hustle business & ministry.  Main income is actually W2 for 2023, but that may also change in 2024. 

[Cindy4]

Hi @shareintl !

Purchasing a vehicle for personal use will only impact your tax reporting if you have enough items to take the itemized deduction instead of the standard deduction.  You would then be able to include the sales tax paid as part of your itemized deductions.  It wouldn't matter if the vehicle was new or used.

A vehicle used for business can be depreciated and any loan interest can be take as an expense.  You may also choose to use the standard mileage deduction rather than use the actual expenses including depreciation.  

Wisconsin bases their tax form on the information from your federal tax form 1040, so there is no special or additional Wisconsin tax impact.

Here is a great resource regarding business use of vehicles:

https://turbotax.intuit.com/tax-tips/small-business-taxes/business-use-of-vehicles/L6hi0zzzh

Hope this helps!

Cindy

[KochuK]

Hi shareintl, thanks for posting an event question.

Under the two distinctive scenarios:

• New car driving experience, initial cash down payment, sales tax and expenses, auto loan interest payments vs.
• driving an older car, no major cash outflow but higher repair and maintenance.

You indicated that you main income is from W-2 wages. Un-reimbursed employee business expenses/job costs are currently suspended in Itemized Deductions (Sch A) through 2025. The portion that is deductible on your side hustle and ministry (Schedule C) is limited.

Consider $65.5 cents per mile for business purposes, you receive same auto standard mileage deduction with the old car without cash outlay. With the new car, you can use actual expenses method with potential larger deduction (due to auto depreciation) but with cash outlay and interest expense pro-rated based on the business usage.

Hope the above helps. Thank you.