So I want to purchase a vehicle through a business loan. The loan would increase my liabilities this I understand. My question is, if I were to use the extra capital to buy a vehicle, would that be considered a business expense and by extension lower my net income and thereby lower the amount of taxes I have to pay? (Trying to pay less taxes)

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    Country, please ????
    – DumbCoder
    Commented Jul 22, 2015 at 18:53

1 Answer 1


You don't say what country you live in. If it's the U.S., the IRS has very specific rules for business use of a car. See, for starters at least, http://www.irs.gov/publications/p463/ch04.html.

The gist of it is: If you use the car 100% for business purposes, you NEVER use it to drive to the grocery store or to your friend's house, etc, then it is a deductible business expense. If you use a car party for business use and partly for personal use, than you can deduct the portion of the expense of the car that is for business use, but not the portion that is for personal use. So basically, if you use the car 75% for business purposes and 25% for personal use, you can deduct 75% of the cost and expenses. You can calculate the business use by, (a) Keeping careful records of how much you spent on gas, oil, repairs, etc, tracking the percentage of business use versus percentage of personal use, and then multiplying the cost by the percentage business use and that is the amount you can deduct; or (b) Use the standard mileage allowance, so many cents per mile, which changes every year.

Note that the fact that you paid for the car from a business account has absolutely nothing to do with it. (If it did, then everyone could create a small business, open a business account, pay all their bills from there, and all their personal expenses would magically become business expenses.)

Just by the way: If you are going to try to stretch the rules on your taxes, business use of a car or personal computer or expenses for a home office are the worst place to do it. The IRS knows that cars and computers are things that can easily be used for either personal or business purposes and so they keep a special eye out on these.

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    Regardless, you are only able to deduct loan interest and depreciation. That's why businesses or individuals with a business may opt to lease as you can deduct lease payments up to a point. Commented Jul 22, 2015 at 18:28
  • If by "only loan interest and depreciation" you mean that you can't deduct the purchase price or payments on a loan, yes, absolutely. (Well, you may be able to claim it as a section 179 expense. I've never tried to claim that on a car, it doesn't appear to be specifically excluded. I'll gladly yield to someone who knows.) If you mean that you can't deduct operating expenses, like gas and oil changes, I'm quite sure that the tax instructions explicitly say you can.
    – Jay
    Commented Jul 22, 2015 at 20:55
  • Yes, I meant purchase/payments. Operating expenses can be deducted. Commented Jul 22, 2015 at 20:56
  • In that case I'll upvote your comment. Quite true and important.
    – Jay
    Commented Jul 22, 2015 at 21:15

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