How to Claim Interest on a Vehicle for Taxes

by Stephanie M. Davis

Overview

The IRS permits self-employed taxpayers to deduct motor vehicle loan interest by recording the appropriate amount on Schedule C of Form 1040. The deduction is based on the percentage of business miles driven relative to total miles. Consult an experienced tax professional for advice specific to your individual situation.

Step 1

Compute the vehicle's business use by dividing the total miles driven for business by the total miles driven. For example, if the total miles driven for business is 900 and the total miles driven is 13,000, the deductible business percentage is 6.9 percent.
Step 2

Calculate the deductible loan interest amount by multiplying the deductible business percentage by the loan interest paid. If the loan interest statement amount is $700, the deductible portion would equal $48.30 (6.9 percent times $700).
Step 3

Enter the deductible interest calculation onto line 16b of Schedule C, Form 1040. Always remember to use the form that corresponds to the tax year being filed.

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Vehicle mileage log Statement of vehicle loan interest IRS Schedule C
Vehicle mileage log
Statement of vehicle loan interest
IRS Schedule C
Maintain precise written records of all business-related tax deductions, particularly those related to a motor vehicle.
Maintain precise written records of all business-related tax deductions, particularly those related to a motor vehicle.